1. (a) In general. Upon request, the plan administrator shall authorize the distribution of a participant's deferrals and investment income in accordance with the applicable distribution agreement so long as:

   1. (1) the participant has attained age 70.5;
   2. (2) the participant has died;
   3. (3) the participant's employment with the State of Texas has terminated other than through death; or
   4. (4) the participant has complied with subsection (l) of this section relating to the one-time election of distribution that does not exceed the dollar limit under Internal Revenue Code of 1986, §457(e)(9).

2. (b) Definitions.

   1. (1) In subsections (m)-(o) of this section, the term ~participant's deferrals and investment income~ means the cash value of the participant's deferrals and investment income after considering all surrender charges, costs of insurance, forfeitures, and other similar charges.
   2. (2) In this section, a beneficiary or secondary beneficiary ~survives~ another person only if the beneficiary or secondary beneficiary is alive on the day after the person's death.

3. (c) Content of a distribution agreement.

   1. (1) A distribution agreement must contain, but shall not be limited to:

      1. (A) identifying information concerning the participant, including the date of birth and social security number of the participant;
      2. (B) the name of the qualified vendor covered by the agreement;
      3. (C) the type of qualified investment product from which distributions will be made, including policy/certificate/or account number;
      4. (D) the date on which the participant separated from service, attained age 70.5, or died, whichever is applicable;
      5. (E) the balance of the participant's deferrals in the qualified investment product from which distributions will be made;
      6. (F) the beginning date of the distributions;
      7. (G) the frequency of distribution;
      8. (H) the amount to be distributed during each time period or the method for calculating the amount to be distributed during each time period; and
      9. (I) beneficiary information, including date of birth(s) and social security number(s).
   2. (2) The person filing the distribution agreement must attach a properly executed Form W-4 to the agreement.
   3. (3) A distribution agreement must be consistent with the distribution options available for the qualified investment product covered by the agreement. The vendor agent/representative signature on the distribution agreement signifies that the distribution option is available and can be implemented as requested.

4. (d) Commencement of distributions. Notwithstanding anything in a distribution agreement:

   1. (1) the earliest a participant or beneficiary may begin receiving a distribution is the 51st day after the occurrence that entitles the participant or beneficiary to the distribution, except this paragraph does not apply to an emergency withdrawal or a one-time election distribution; and

   2. (2) the latest a participant may begin receiving a distribution is the later of:

      1. (A) April 1st of the calendar year following the calendar year in which the employee attains age 70.5; or
      2. (B) April 1st of the calendar year following the calendar year in which the employee's employment with the State of Texas terminates.

5. (e) Filing of distribution agreements by participants.

   1. (1) This subsection applies when a participant becomes entitled to a distribution because:

      1. (A) the participant has attained age 70.5; or
      2. (B) the participant's employment with the State of Texas has terminated other than through death.
   2. (2) A participant must file a distribution agreement for each qualified investment product in which the participant's deferrals are invested.

   3. (3) A distribution agreement must be filed:

      1. (A) with the participant's agency coordinator; and
      2. (B) no later than the 50th day after the occurrence that entitles the participant to the distribution.
   4. (4) If a participant complies with paragraphs (2) and (3) of this subsection, the relevant agency coordinator shall review the distribution agreement for compliance with the sections in this chapter.
   5. (5) If the distribution agreement complies with the sections in this chapter, the agency coordinator shall sign and send the agreement to the plan administrator. The agency coordinator shall ensure that the plan administrator receives the signed distribution agreement no later than the 60th day after the occurrence of the event that entitles the participant to the distribution.
   6. (6) If a participant does not comply with paragraphs (2) and (3) of this subsection, the relevant agency coordinator shall submit a written request to the plan administrator for an immediate lump-sum distribution to the participant of all the participant's deferrals and investment income. Proof that the agency coordinator notified the participant concerning the necessity to file a distribution agreement must accompany the written request. The agency coordinator shall ensure that the plan administrator receives the request and proof no later than the 60th day after the occurrence that entitles the participant to the distribution.
   7. (7) Notwithstanding anything to the contrary in this subsection, a participant who has not separated from service and who has reached age 70.5 must file a distribution agreement only if the participant wants distributions to begin. The distribution agreement must be filed with the participant's agency coordinator. The agency coordinator shall review and forward the distribution agreement in accordance with paragraphs (4) and (5) of this subsection. A participation agreement to stop deferrals effective no later than the distribution begin date must also be filed with the participant's agency coordinator.

   8. (8) Notwithstanding any other plan provision, amounts deferred by a former participant of the plan not yet payable or made available to such participant may be transferred to another eligible plan of which the former participant has become a participant, if:

      1. (A) the plan receiving such amounts provides for their acceptance;
      2. (B) a participant separates from service with the participant's agency and accepts employment with another entity maintaining an eligible deferred compensation plan; and
      3. (C) a participant has not yet begun receiving plan distributions.

6. (f) Filing of distribution agreements by beneficiaries.

   1. (1) This subsection applies only when:

      1. (A) a participant has died;
      2. (B) the participant named a beneficiary in a participation agreement, change agreement, or distribution agreement; and
      3. (C) the balance of the participant's deferrals and investment income is greater than zero at the time of the participant's death.
   2. (2) The beneficiary named in a participant's participation agreement, change agreement, or distribution agreement must ensure that the participant's agency coordinator receives the beneficiary's distribution agreement by no later than the 88th day after the participant's death.
   3. (3) The requirements in subsection (e) of this section apply to the distribution agreements of beneficiaries except an agency coordinator must ensure that the plan administrator receives a distribution agreement by no later than the 90th day after the participant's death.

7. (g) Minimum distributions during the life of a participant.

   1. (1) This subsection applies to distributions to a participant during the life of the participant, notwithstanding anything to the contrary in the participant's distribution agreement.

   2. (2) The amount distributed to the participant must be calculated so that the distributions:

      1. (A) will be made in substantially non-increasing amounts;
      2. (B) will be made annually or more frequently than annually after the first distribution;
      3. (C) will be distributed over a period not exceeding the life expectancy of the participant or the life expectancy of the participant and the participant's named beneficiary; and
      4. (D) will satisfy the minimum distribution requirements of the Internal Revenue Code of 1986, §457(d)(2), and associated statutes and regulations.
   3. (3) The plan administrator shall reject a proposed distribution agreement that does not comply with paragraph (2) of this subsection. The plan administrator shall require the amendment of an existing distribution agreement that does not comply with paragraph (2) of this subsection.
   4. (4) For the purpose of paragraph (2) of this subsection, life expectancies may not be recalculated annually.

8. (h) Review of distribution agreements by the plan administrator. The plan administrator shall review each distribution agreement received from an agency coordinator to ensure that:

   1. (1) a distribution would be in compliance with the sections in this chapter; and
   2. (2) the minimum distribution requirements of this section have been satisfied.

9. (i) Amendments of distribution agreements.

   1. (1) Beginning date for a distribution. The beginning date for a distribution may be deferred only one time after the plan administrator has received the distribution agreement. A participant may elect to defer commencement of distributions under the plan if such election is made after amounts may be made available under subsection (a) of this section and before commencement of such distributions; and the participant may make only one such election. To change the beginning date, the amended distribution agreement must be received by the plan administrator no later than the 30th day before the original distribution begin date.
   2. (2) Frequency of distribution. The frequency of distribution may be amended only if the plan administrator receives an amended distribution agreement no later than the 30th day before the beginning date of the first distribution.
   3. (3) Amount of distribution. The amount to be distributed during each time period may be amended only if the plan administrator receives an amended distribution agreement no later than the 30th day before the beginning date of the first distribution.

   4. (4) Beneficiaries.

      1. (A) The primary and secondary beneficiaries named in a distribution agreement may be changed at any time by filing a change agreement with the agency coordinator of the state agency at which the participant was employed.
      2. (B) Upon receipt of the change agreement, the agency coordinator shall send the agreement to the plan administrator.
      3. (C) The change agreement is effective upon receipt by the plan administrator.
   5. (5) Emergency withdrawals. Notwithstanding anything to the contrary in this subsection, a distribution agreement may be amended to relieve a financial hardship caused by a sudden and unforeseeable emergency.

   6. (6) Transfers after a distribution has begun.

      1. (A) This paragraph applies when a participant or beneficiary has begun receiving a distribution and the participant, beneficiary, or plan administrator initiates a transfer of deferrals and investment income from one qualified investment product to another.
      2. (B) The distribution agreement of the participant or beneficiary may be amended only to change the name or type of qualified investment product or qualified vendor listed in the agreement, except that certain annuity options may not be transferable.
      3. (C) Unless previously approved by the plan administrator in accordance with subparagraph (D) of this paragraph, deferrals and investment income may not be transferred from one qualified investment product to two or more qualified investment products. In other words, deferrals and investment income that have been invested in a single qualified investment product may not be separated into two or more qualified investment products. If a distribution has begun and a change agreement form is completed to transfer funds into more than one product, a new distribution agreement form must be completed for each corresponding product change agreement form. The distribution amounts must be in the same proportion as the amounts transferred. The total combined amount of the disbursements must be the same as the original total distribution amount.
      4. (D) A participant may apply for approval from the plan administrator to transfer funds from one qualified investment product to two or more qualified investment products prior to the transfer. Upon approval, the participant and the vendor must follow all instructions and procedures prescribed by the plan administrator. The plan administrator may not grant such approval unless distributions continue in essentially the same manner as prior to the transfer and in accordance with subsections (g), (h), and (i) of this section and with federal regulations relating to distributions.

   7. (7) Procedures for amending a distribution agreement.

      1. (A) A participant or beneficiary who wants to amend the participant's distribution agreement must file an amended distribution agreement with the participant's agency coordinator. The amended distribution agreement must contain the word ~Amended~ at the top of the agreement.
      2. (B) Upon receipt of the amended distribution agreement, the agency coordinator shall promptly review the agreement for compliance with the sections in this chapter.
      3. (C) If the amended distribution agreement does not comply with the sections in this chapter, the agency coordinator shall promptly return the agreement to the participant or beneficiary for corrections.
      4. (D) If the amended distribution agreement complies with the sections in this chapter, the agency coordinator shall immediately sign the agreement and send it to the plan administrator.
      5. (E) After the plan administrator receives a signed distribution agreement from an agency coordinator, the plan administrator and the qualified vendor covered by the agreement shall take the steps specified in subsections (h) and (j) of this section.
   8. (8) Effective date of amended distribution agreements. An amended distribution agreement is effective with the first distribution.

10. (j) Procedure for making distributions.

    1. (1) After the plan administrator has approved a distribution agreement, the plan administrator shall send a letter of authorization to the qualified vendor covered by the agreement.
    2. (2) Upon receiving a letter of authorization, the qualified vendor shall issue checks payable to the participant or beneficiary and mail the checks as instructed in the letter of authorization.
    3. (3) The plan administrator may not complete any forms provided by a qualified vendor in connection with a distribution. A qualified vendor may not require the plan administrator to submit periodic letters of authorization beyond the initial letter of authorization for a participant unless the plan administrator agrees in writing to the contrary after May 7, 1990. A qualified vendor may not impose any requirements as a prerequisite to a distribution that are not specifically mentioned in the sections in this chapter.
    4. (4) The plan administrator shall provide each qualified vendor with the names and signatures of the individuals who are authorized to sign letters of authorization.
    5. (5) A qualified vendor shall confirm each letter of authorization as instructed in the letter.

11. (k) Emergency withdrawals.

    1. (1) A participant may request an emergency withdrawal regardless of whether a distribution to the participant has already started.

    2. (2) The participant must request the emergency withdrawal by filing a completed emergency withdrawal application with the plan administrator. An emergency withdrawal application:

       1. (A) must show that the prerequisites for making an emergency withdrawal have been fulfilled; and
       2. (B) must be accompanied by two copies of a Form W-4 specifically tailored to the withdrawal.

    3. (3) The plan administrator shall approve the emergency withdrawal if the plan administrator determines that:

       1. (A) an unforeseeable emergency has occurred;

       2. (B) the severe financial hardship caused by the unforeseeable emergency cannot be relieved:

          1. (i) through reimbursement or compensation by insurance or otherwise;
          2. (ii) by liquidating the assets of the participant to the extent the liquidation of the assets would not itself cause severe financial hardship;
          3. (iii) by cessation of deferrals under the plan; or
          4. (iv) through a combination of the actions specified in clauses (i)-(iii) of this subparagraph; and
       3. (C) the emergency withdrawal would satisfy the federal regulations for emergency withdrawals under the Internal Revenue Code of 1986, §457.
    4. (4) If the plan administrator approves an emergency withdrawal, the plan administrator shall determine the amount of the withdrawal. The amount may not exceed the amount reasonably needed to overcome the severe financial hardship, after considering the federal income tax liability resulting from the withdrawal.

    5. (5) The term ~unforeseeable emergency~ means a severe financial hardship to a participant caused by:

       1. (A) a sudden and unexpected illness or accident of a participant or of a participant's dependent (as defined in the Internal Revenue Code of 1986, §152(a));
       2. (B) the loss of the property of a participant because of a casualty; or
       3. (C) a similar extraordinary and unforeseeable circumstance arising from events beyond the control of a participant.

    6. (6) The term ~unforeseeable emergency~ excludes:

       1. (A) the necessity to send a child to college;
       2. (B) the purchase of a home; and
       3. (C) other similar circumstances.
    7. (7) The plan administrator may rely on the information provided by a participant in connection with the participant's request for an emergency withdrawal. The participant is solely responsible for the sufficiency, accuracy, and veracity of the information.
    8. (8) If the plan administrator denies a participant's request for an emergency withdrawal or if the participant disagrees with the amount of the approved emergency withdrawal, the participant may appeal to the Employees Retirement System of Texas in accordance with §87.23 of this title (relating to the Grievance Procedure).
    9. (9) If the plan administrator approves a participant's request for an emergency withdrawal, the participant must agree to cease all deferrals, except deferrals to life insurance products, to both this plan and the Texa$aver 401(k) plan for a twelve month period following the approval.
    10. (10) The plan administrator may not approve an emergency withdrawal request from a primary or secondary beneficiary.

12. (l) One-time election of distribution that does not exceed the dollar limit under Internal Revenue Code of 1986, §457(e)(9). A participant may elect to receive a distribution of the total account balance if:

    1. (1) such amount does not exceed the dollar limit under Internal Revenue Code of 1986, §457(e)(9) as of the date of the election;
    2. (2) no amount has been deferred under the plan with respect to such participant during the two-year period ending on the date of distribution;
    3. (3) there has been no prior distribution under the plan to such participant to which this subsection applied; and
    4. (4) a one-time election form is completed and submitted to the plan administrator through the participant's state agency coordinator.
13. (m) Naming of beneficiaries. When a participant or beneficiary files a distribution agreement, the participant or beneficiary may name one or more primary and secondary beneficiaries. The naming of beneficiaries in a distribution agreement supersedes any previous naming of beneficiaries in a participation agreement or change agreement.

14. (n) Death of a participant when the participant has named a beneficiary.

    1. (1) This subsection applies only if a participant has named a beneficiary in a participation agreement, change agreement, or distribution agreement.
    2. (2) When this subsection requires the plan administrator to order a distribution, the plan administrator shall order the distribution on the 90th day after a participant's death.

    3. (3) The plan administrator shall order a distribution to a primary beneficiary if the beneficiary:

       1. (A) survives the participant; and
       2. (B) is alive on the date of the order.

    4. (4) The plan administrator shall order a distribution to a secondary beneficiary if:

       1. (A) the secondary beneficiary survives the participant;
       2. (B) the secondary beneficiary is alive on the date of the order; and
       3. (C) no primary beneficiaries survive the participant.
    5. (5) The plan administrator shall order a distribution in accordance with subsection (p) of this section if a primary or secondary beneficiary survives the participant but is not alive on the date of the order.
    6. (6) This paragraph applies if a participant designates more than one primary beneficiary and more than one primary beneficiary survives the participant. The plan administrator shall order the distribution of the participant's deferrals and investment income to the surviving primary beneficiaries in equal shares unless the distribution agreement provides otherwise. The estates and heirs of the primary beneficiaries who did not survive the participant and the surviving secondary beneficiaries, if any, may not receive any benefits.
    7. (7) This paragraph applies if a participant designates more than one secondary beneficiary, more than one secondary beneficiary survives the participant, and no primary beneficiary survives the participant. The plan administrator shall order the distribution of the participant's deferrals and investment income to the surviving secondary beneficiaries in equal shares unless the distribution agreement provides otherwise. The estates and heirs of the primary and secondary beneficiaries who did not survive the participant may not receive any benefits.

    8. (8) The plan administrator shall order the lump-sum payment to the participant's estate of the balance of the participant's deferrals and investment income if:

       1. (A) the participant named a primary and a secondary beneficiary but neither survived the participant; or
       2. (B) the participant named a primary beneficiary but did not name a secondary beneficiary and the primary beneficiary did not survive the participant.

    9. (9) The plan administrator shall order the lump-sum distribution of a participant's deferrals and investment income to the person entitled to receive the distribution if the person is alive on the date of the order and either:

       1. (A) the person files a distribution agreement requesting a lump-sum distribution; or
       2. (B) the person does not file a distribution agreement before the 90th day after the participant's death.
    10. (10) When the plan administrator orders a distribution to a primary or secondary beneficiary, the plan administrator's order must be in accordance with the beneficiary's distribution agreement so long as the agreement complies with the sections in this chapter.

    11. (11) This paragraph applies when the plan administrator orders other than a lump-sum distribution to a primary or secondary beneficiary and distributions to the participant did not begin before the participant's death. Notwithstanding a primary or secondary beneficiary's distribution agreement, the amount distributed must be calculated so that the distributions:

        1. (A) will begin not later than the first anniversary of the participant's death;
        2. (B) will be made over the life of the person receiving the distributions or over a period not extending beyond the life expectancy of the person, not to exceed 15 years;
        3. (C) will be made in substantially non-increasing amounts;
        4. (D) will be made annually or more frequently than annually after the first distribution; and
        5. (E) will satisfy the minimum distribution requirements of the Internal Revenue Code of 1986, §457(d)(2), and associated statutes and regulations.

    12. (12) This paragraph applies when the plan administrator orders other than a lump-sum distribution to a primary or secondary beneficiary and distributions to the participant began before the participant's death. Notwithstanding a primary or secondary beneficiary's distribution agreement, the amount distributed to the primary or secondary beneficiary must be calculated so that the distributions:

        1. (A) will be made at least as rapidly as under the method of distribution selected by the participant; and
        2. (B) will satisfy the minimum distribution requirements of the Internal Revenue Code of 1986, §457(d)(2).

    13. (13) If a participant dies before distributions to him began and the beneficiary or secondary beneficiary entitled to receive the participant's deferrals and investment income is the participant's surviving spouse, this paragraph applies.

        1. (A) Paragraph (11) of this subsection applies to the distributions to the surviving spouse except as specified in this paragraph.
        2. (B) Notwithstanding paragraph (11) of this subsection, the surviving spouse may delay the start of the receipt of the deferrals and investment income until a date not later than the date when the participant would have attained age 70.5.
        3. (C) Notwithstanding paragraph (11) of this subsection, after a distribution to the surviving spouse begins, the entire amount must be paid over a period not exceeding the spouse's life expectancy.
        4. (D) If the surviving spouse dies before distributions to the spouse begin, then the surviving spouse is a participant for the purpose of paragraph (11) of this subsection.
    14. (14) The plan administrator shall reject a proposed distribution agreement that does not comply with paragraphs (11)-(13) of this subsection. The plan administrator shall require the amendment of an existing distribution agreement that does not comply with paragraphs (11)-(13).
    15. (15) For the purpose of paragraphs (11)-(13) of this subsection, life expectancies may not be recalculated annually.

15. (o) Death of a participant when the participant has not named a beneficiary.

    1. (1) This subsection applies only when a participant has not named a beneficiary in a participation agreement, change agreement, or distribution agreement.
    2. (2) On the 90th day after the participant's death, the plan administrator shall order the immediate lump-sum distribution to the participant's estate of the balance of the participant's deferrals and investment income.

16. (p) Death of a beneficiary.

    1. (1) This subsection applies if:

       1. (A) a participant named a beneficiary in a participation agreement, change agreement, or distribution agreement;
       2. (B) the participant died;
       3. (C) the beneficiary survived the participant but has since died;
       4. (D) the plan administrator has ordered, in accordance with subsection (n) of this section, a distribution to the beneficiary or would have ordered a distribution to the beneficiary if the beneficiary had not died; and
       5. (E) the beneficiary did not receive all the participant's deferrals and investment income before the beneficiary's death.
    2. (2) On the 90th day after the beneficiary's death, the plan administrator shall order the lump-sum payment of the balance of the participant's deferrals and investment income if the primary beneficiary did not file a distribution agreement.

    3. (3) If the deceased beneficiary filed a distribution agreement and the agreement names a primary beneficiary, the plan administrator shall:

       1. (A) allow the primary beneficiary to have a distribution which will be made at least as rapidly as under the method of distribution selected by the participant, and which will also satisfy the minimum distribution requirements of the Internal Revenue Code of 1986, §457(d)(2); or
       2. (B) order a lump sum payment to the primary beneficiary's estate if the primary beneficiary survived the beneficiary who filed the distribution agreement but is not alive on the date of the order.

    4. (4) If the deceased beneficiary filed a distribution agreement and the agreement names a secondary beneficiary, the plan administrator shall order a lump-sum payment to:

       1. (A) the secondary beneficiary if:

          1. (i) the secondary beneficiary is alive on the date of the order; and
          2. (ii) no primary beneficiary survived the deceased beneficiary;

       2. (B) the secondary beneficiary's estate if:

          1. (i) the secondary beneficiary survived the deceased beneficiary;
          2. (ii) the secondary beneficiary is not alive on the date of the plan administrator's order; and
          3. (iii) no primary beneficiary survived the deceased beneficiary.

    5. (5) The lump-sum payment must be made to the estate of the deceased beneficiary if:

       1. (A) the deceased beneficiary's distribution agreement does not name a beneficiary;
       2. (B) the deceased beneficiary did not file a distribution agreement; or
       3. (C) no beneficiary named in the deceased beneficiary's distribution agreement survived the deceased beneficiary.
    6. (6) When more than one primary or secondary beneficiary of a deceased beneficiary is entitled to a lump-sum distribution, the distributions must be made in equal shares unless the deceased beneficiary's distribution agreement provides otherwise.

17. (q) Distributions to minors and incompetents.

    1. (1) The plan administrator may authorize the payment of a distribution to a person or entity other than the participant or beneficiary otherwise entitled to receive the distribution if satisfactory evidence is presented to the plan administrator that the participant or beneficiary is:

       1. (A) a minor; or
       2. (B) has been adjudicated by a court of law as mentally incompetent and unable to provide a valid release for the payment.
    2. (2) If the conditions of the preceding paragraph are satisfied, the plan administrator shall make the distribution payable to the guardian of the participant or beneficiary.

    3. (3) If no guardian has been appointed and after having obtained a proper release, the plan administrator shall make the distribution payable to:

       1. (A) the person or entity maintaining custody of the participant or beneficiary;
       2. (B) the custodian of the participant or beneficiary under the Texas Uniform Gifts to Minors Act (Texas Property Code, §141.002 et seq.) if the participant or beneficiary resides in the State of Texas;
       3. (C) the custodian of the participant or beneficiary under a law similar to the Texas Uniform Gifts to Minors Act if the participant or beneficiary resides outside the State of Texas; or
       4. (D) the court of law with jurisdiction over the participant or beneficiary.

18. (r) Distributions to missing persons.

    1. (1) This subsection applies when the plan administrator is unable to determine the location of a participant or beneficiary who is entitled to a distribution.
    2. (2) When the plan administrator does not know the location of a participant or beneficiary, the agency coordinator for the participant or beneficiary must send a certified letter to the last known address of the participant or beneficiary.
    3. (3) If the certified letter does not result in the discovery of the location of the participant or beneficiary, the agency coordinator shall inform the plan administrator and provide proof to the plan administrator that the certified letter was sent.
    4. (4) Upon receiving the notification and proof from an agency coordinator, the plan administrator may direct that all benefits due the participant or beneficiary be deposited in a qualified investment product that the plan administrator has specifically designated for this purpose.
19. (s) Processing of distributions and emergency withdrawals. A qualified vendor shall process distributions and emergency withdrawals and resolve administrative problems with the plan administrator within a reasonable length of time, not to exceed the 30th day after receiving a letter of authorization for distributions and not to exceed the 15th day after receiving a letter of authorization for emergency withdrawals.

20. (t) Loans to participants.

    1. (1) The plan administrator may not loan or authorize the loan to a participant of all or part of the participant's deferrlas and investment income.
    2. (2) A qualified vendor may not loan to a participant all or part of the participant's deferrals and investment income.

21. (u) Federal withholding and reporting requirements.

    1. (1) A qualified vendor shall file all reports required by the Internal Revenue Service (IRS) when any deferrals and investment income are distributed or otherwise made available to a participant or beneficiary. Payments made to a participant during the participant's life must be reported as taxable wages on an IRS Form W-2, or another appropriate form which may be hereafter promulgated by the IRS. Pursuant to the provisions of Internal Revenue Service Revenue Ruling 86-109 (1986-2 CB 196), payments to the beneficiary of a deceased participant must be reported on IRS Form 1099-R (or another appropriate form which may be hereafter promulgated by the IRS) as taxable income of the beneficiary.
    2. (2) A qualified vendor shall file an application for authorization to act as agent of the State of Texas, or effective January 1, 1999, the plan, with the District Director of the Internal Revenue Service Center where the qualified vendor files its returns. The application shall include Form 2678--Employer Appointment of Agent under Section 3504 of the Internal Revenue Code, which shall be supplied by the plan administrator, and shall be completed and filed in accordance with the instructions set forth in Internal Revenue Service Publication 1271. The qualified vendor shall promptly furnish to the plan administrator a copy of such vendor's letter of authorization from the Internal Revenue Service approving the appointment of the qualified vendor as agent.
    3. (3) When reporting to the Internal Revenue Service, the qualified vendor shall use the vendor's Federal Employer Identification Number and shall comply with all requirements of Revenue Procedure 70-6 as set out in Internal Revenue Service Publication 1271 and as subsequently amplified or superseded by subsequent Revenue Procedures. A qualified vendor may not use the federal employer identification number of the plan, plan administrator or the State of Texas. Regardless of how many qualified investment products a qualified vendor sponsors, the vendor must use the same federal employer identification number for all reports to the Internal Revenue Service.
    4. (4) Federal tax withholding is mandatory for distributions to participants. A qualified vendor shall accurately determine any amounts to be withheld for federal taxes based on a Form W-4 submitted by the participant at the time of a distribution. If no Form W-4 is provided, the participant must be considered single with no dependents. The Tax Equity and Fiscal Responsibility Act does not apply to a deferred compensation plan governed by the Internal Revenue Code of 1986, §457.
    5. (5) Total death benefits, including life insurance proceeds, are taxable as ordinary income to the beneficiary and must be reported on a Form 1099-R in accordance with subsection (m) of this section.
    6. (6) A qualified vendor shall mail a copy of all reports filed with the Internal Revenue Service about a participant or beneficiary to the participant's or beneficiary's home address.

Source Note:The provisions of this §87.17 adopted to be effective March 28, 1991, 16 TexReg 1560; amended to be effective January 10, 1992, 16 TexReg 7743; amended to be effective November 23, 1992, 17 TexReg 7911; amended to be effective November 9, 1994, 19 TexReg 8617; amended to be effective January 5, 1996, 20 TexReg 11022; amended to be effective November 11, 1996, 21 TexReg 10766; amended to be effective March 21, 1997, 22 TexReg 2513; amended to be effective December 8, 1997, 22 TexReg 11718; amended to be effective February 12, 1998, 23 TexReg 1113; amended to be effective September 10, 1998, 23 TexReg 9067; amended to be effective January 10, 1999, 24 TexReg 165.