Chapter ETF 20

ETF 20.35(8) (8) compliance with section 415 (b) of the internal revenue code.

ETF 20.35(8)(a) (a) The aggregate benefits paid to the participant and alternate payee shall not exceed the benefit limits under Section 415 (b) of the Internal Revenue Code. The department shall make any necessary adjustments to the participant’s and alternate payee’s benefits on an equitable pro rata basis to assure compliance with Section 415 (b) of the Internal Revenue Code. Benefits derived from employee contributions that are actually paid by the employee shall not be subject to the benefit limitations under this subsection.

ETF 20.35(8)(b) (b) If the participant’s retirement annuity has been divided per a QDRO under s. 40.08 (1m) (b) 2., Stats., any subsequent adjustments necessary for compliance with Section 415 (b) of the Internal Revenue Code that result from either post-retirement annuity adjustments under s. 40.27 (2) or 40.28 (2), Stats., or from increases in the compensation limits specified in Section 415 (b) of the Internal Revenue Code, shall be prorated based on the percentage of the participant’s account that was awarded to the alternate payee in the QDRO.

ETF 20.35(8)(c) (c) If the participant’s account is divided as provided in sub. (3), any benefit adjustments required under Section 415 (b) of the Internal Revenue Code shall be applied as follows:

ETF 20.35(8)(c)1. 1. If the alternate payee’s benefit becomes effective prior to the participant’s benefit effective date:

ETF 20.35(8)(c)1.a. a. If the aggregate benefits that would be payable to both the alternate payee and the participant on the alternate payee’s benefit effective date do not exceed the maximum benefits that would be payable to the participant under Section 415 (b) of the Internal Revenue Code if the account had not been divided, the alternate payee’s benefit will not be reduced.

ETF 20.35(8)(c)1.b. b. Any subsequent benefit adjustments necessary for compliance with Section 415 (b) of the Internal Revenue Code will be applied solely to the participant’s benefits and shall not affect the benefit amount payable to the alternate payee.

ETF 20.35(8)(c)2. 2. If the participant’s benefit becomes effective prior to the alternate payee’s benefit effective date, or the participant’s and alternate payee’s benefits become effective on the same date:

ETF 20.35(8)(c)2.a. a. If the aggregate benefits that would be payable to both the participant and alternate payee on the participant’s benefit effective date exceed the maximum benefits that would be payable to the participant under Section 415 (b) of the Internal Revenue Code if the account had not been divided, the adjustment to participant’s annuity shall be prorated based on the percentage of the participant’s account that was not awarded to the alternate payee in the QDRO.

ETF 20.35(8)(c)2.b. b. When a benefit is subsequently paid to the alternate payee, the portion of the total adjustment necessary for compliance with Section 415 (b) of the Internal Revenue Code that is applied to the alternate payee’s benefits shall be prorated based on the percentage of the participant’s account awarded to the alternate payee in the QDRO.

ETF 20.35(8)(c)3. 3. If the participant’s benefit effective date is on or after the alternate payee’s benefit effective date as specified in subd. 2., and as a result of either post-retirement annuity adjustments under s. 40.27 (2) or 40.28 (2), Stats., or of increases in the compensation limits specified in Section 415 (b) of the Internal Revenue Code, subsequent benefit adjustments are necessary for compliance with Section 415 (b) of the Internal Revenue Code, such adjustments shall be prorated based on the percentage of the participant’s account that was awarded to the alternate payee in the QDRO.

ETF 20.35(8)(d) (d) For the purposes of determining the aggregate benefits payable to the participant and alternate payee under par. (b), the department shall:

ETF 20.35(8)(d)1. 1. First calculate the present value of what the participant’s benefit would be as of the benefit effective date of the participant’s or alternate payee’s benefit effective date, whichever is earlier, as though the participant’s account had never been divided by a QDRO.

ETF 20.35(8)(d)2. 2. If that total aggregate benefit amount is higher than the maximum benefits permitted under Section 415 (b) of the Internal Revenue Code, the department shall reduce the aggregate benefits to the maximum amount payable under Section 415 (b) of the Internal Revenue Code. The present value of that maximum benefit payable shall be divided between the participant and alternate payee in proportion to the percentage of the participant’s account that was awarded to the alternate payee. The benefits payable to the participant and alternate payee shall then be adjusted as follows:

ETF 20.35(8)(d)2.a. a. If the alternate payee has received a lump sum benefit under s. 40.25 (1) or (2), Stats., the gross amount of the alternate payee’s lump sum payment shall be subtracted from the present value of the participant’s maximum benefit payable under Section 415 (b) of the Internal Revenue Code calculated under par. (d). The present value of the benefit paid to the participant shall not exceed the remainder of the present value of that maximum benefit payable under Section 415 (b) of the Internal Revenue Code.

ETF 20.35(8)(d)2.b. b. If the alternate payee has previously taken a monthly retirement annuity, the present value of the alternate payee’s annuity as of the alternate payee’s annuity effective date shall be subtracted from the present value of the participant’s maximum benefit payable under Section 415 (b) of the Internal Revenue Code. The present value of the benefit paid to the participant shall not exceed the remainder of the present value of that maximum benefit payable under Section 415 (b) of the Internal Revenue Code.

ETF 20.35(8)(d)2.c. c. If the participant’s benefit becomes effective prior to the alternate payee’s benefit effective date, the present value of the benefit paid to the participant shall not exceed the maximum aggregate benefit calculated under this paragraph minus the present value of the benefit payable to the alternate payee as of the participant’s annuity effective date.

ETF 20.35 History History: Cr. Register, July, 1999, No. 523, eff. 8-1-99; CR 07-062: am. (3) (d) 2. Register June 2008 No. 630, eff. 7-1-08; CR 11-040: am. (2) (b) Register July 2012 No. 679, eff. 8-1-12; CR 11-041: am. (1) (b), (c), (2), (3) (a), (b), (c) 1. to 3., cr. (c) 5., am. (4) (c) 3., (5), (6), (7) (a), (8) (b), (c), cr. (8) (d), (9), (10) Register July 2012 No. 679, eff. 8-1-12; CR 14-055: am. (3) (d) 4., r. (9) Register May 2015 No. 713, eff. 6-1-15; CR 19-126: r. and recr. Register May 2021 No. 785, eff. 6-1-21; correction in (1) (c) made under s. 35.17, Stats., and correction in (3) (b) made under s. 13.92 (4) (b) 7., Stats., Register May 2021 No. 785.

ETF 20.37 ETF 20.37 Death benefits.

ETF 20.37(1) (1) Termination prior to death. If employment with a participating employer actually terminated prior to the death of the participant, then the participant may not be treated as a participating employee for purposes of s. 40.71, Stats., regardless of when notice of the termination is filed with the department.

ETF 20.37 Note Note: If the termination of employment occurs on the last day on which the employee actually performs services for the employer, and the death occurs on the same day, the participant will be treated as an employee through the end of that day, as provided by s. 40.02 (25), Stats.

ETF 20.37(2) (2) For purposes of applying s. 40.74 (6), Stats., when determining beneficiaries of a death benefit, reasonable efforts to locate a potential beneficiary of a participant shall consist of all of the following actions:

ETF 20.37(2)(a) (a) Search on the department’s internal information technology systems for information regarding the participant and any potential beneficiary.

ETF 20.37(2)(b) (b) Utilize an appropriate Internet program for locating people.

ETF 20.37(2)(c) (c) Contact a person who may be a beneficiary, if the department learns the name of that person.

ETF 20.37(2)(d) (d) Contact the employer of a person who may be a beneficiary, if the department learns the name of the employer.

ETF 20.37 Note Note: 2007 Wisconsin Act 131 created s. 40.74 (6), Stats. This provision allows the department, when determining beneficiaries of a death benefit, to presume that a beneficiary who cannot be located within 12 months actually died before the participant. The language in the statute is permissive. This rule (CR 09-057) establishes what will be considered to be reasonable efforts by the department to locate the potential beneficiary.

ETF 20.37 History History: CR 07-068: cr. Register March 2008 No. 627, eff. 4-1-08; CR 09-057: cr. (2) Register May 2010 No. 653, eff. 6-1-10; CR 14-055: r. (2) (e) Register May 2015 No. 713, eff. 6-1-15.

ETF 20.39 ETF 20.39 Delinquent state tax obligations.

ETF 20.39(1) (1) Payments subject to attachment. As provided by s. 40.08 (1r), Stats., in order to satisfy delinquent tax obligation of a person, the Wisconsin department of revenue may attach any one of the following types of payment being made by the Wisconsin retirement system to that person:

ETF 20.39(1)(a) (a) Monthly payments of a regular annuity under s. 40.23 or 40.24, Stats.

ETF 20.39(1)(b) (b) Monthly payments of a disability annuity under s. 40.63, Stats.

ETF 20.39(1)(c) (c) The continued monthly annuity payments of a joint-and-survivor annuity that are paid to a named survivor after the death of the annuitant, regardless of whether the annuity is a regular annuity under s. 40.23 or 40.24, Stats., or a disability annuity under s. 40.63, Stats.

ETF 20.39(1)(d) (d) Monthly payments of an annuity from the annuitant’s additional contributions.

ETF 20.39(1)(e) (e) A lump sum paid in lieu of an annuity under s. 40.25, Stats., regardless of whether the payment is required or is made at the request of the participant.

ETF 20.39(1)(f) (f) A lump sum separation benefit paid under s. 40.25 (2), Stats.

ETF 20.39(2) (2) Limitations and WRS payments not subject to attachment.

ETF 20.39(2)(a) (a) Attachment under s. 40.08 (1r), Stats., and this section applies only to benefits in pay status. The department of revenue may not compel the payment of benefits for which a person has not applied or apply for benefits on behalf of any person.

ETF 20.39(2)(b) (b) Section 40.08 (1r), Stats., and sub. (1) do not apply to lump sum payments of additional contributions made under s. 40.25 (4), Stats., or to death benefits paid under s. 40.73, Stats., including but not limited to remaining guaranteed monthly annuity payments, regardless of whether the death benefits are paid in the form of an annuity.

ETF 20.39(3) (3) Notice and continued withholding from annuities.

ETF 20.39(3)(a) (a) The department shall transmit amounts withheld under s. 40.08 (1r), Stats., to the department of revenue and notify the payee of the amount withheld.

ETF 20.39(3)(b) (b) The withholding from annuity payments subject to sub. (1) shall continue until the earlier of the following:

ETF 20.39(3)(b)1. 1. The department has withheld the total amount the department of revenue identified as attached to satisfy a delinquent tax obligation.

ETF 20.39(3)(b)2. 2. The department is instructed otherwise by the department of revenue or a court of competent jurisdiction.

ETF 20.39 Note Note: 2007 Wis. Act 131 moved the authorization for the department of revenue to attach benefits for delinquent state tax obligations from s. 40.08 (1), Stats., into a new s. 40.08 (1r), Stats. The authorization was also amended to limit the authority of the department of revenue to attaching only lump sum payments and annuities paid under ss. 40.23, 40.24, 40.25 (1) or (2), or 40.63, Stats. This rule (CR 09-057) therefore states that a tax attachment does apply to joint-and-survivor annuities being paid to a named survivor but does not apply to certain lump sum benefits and death benefits payable under statutes not cited in the new s. 40.08 (1r), Stats. The rule would also state that the attachment of an annuity will result in continued monthly withholding until the entire delinquent tax amount has been withheld, or the department is instructed to stop withholding. The rule also provides that the statutory authority to attach a payment does not confer any right for the department of revenue to ask the department of employee trust funds to pay out a benefit for which the person has not applied.

ETF 20.39 History History: CR 09-057: cr. Register May 2010 No. 653, eff. 6-1-10; correction in numbering of (3) (b) made under s. 13.92 (1) (b) 1., Stats., Register May 2010 No. 653.