1. (a) A distributee may elect, at the time and in the manner prescribed by the Board of Trustees, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover.

2. (b) The terms "eligible rollover distribution" and eligible retirement plan" are defined as follows:

   1. (1) An "eligible rollover distribution" is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include the following:

      1. (A) any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten (10) years or more;
      2. (B) any distribution to the extent such distribution is required under Internal Revenue Code §401(a)(9);
      3. (C) the portion of any distribution that is not includible in gross income.

   2. (2) An "eligible retirement plan" should include:

      1. (A) an individual retirement account described in Internal Revenue Code §408(a);
      2. (B) an individual retirement annuity described in Internal Revenue Code §408(b);
      3. (C) an annuity plan described in Internal Revenue Code §403(a);
      4. (D) a qualified trust described in Internal Revenue Code §401(a) that accepts the distributee's eligible rollover distribution;
      5. (E) an annuity contract described in Internal Revenue Code §403(b); or
      6. (F) an eligible plan under Internal Revenue Code §457(b), which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this plan.
   3. (3) The definition of eligible retirement plan also shall apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relations order as defined in Internal Revenue Code §414(p).
   4. (4) A "distributee" includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Internal Revenue Code §414(p), are distributees with regard to the interest of the spouse or former spouse.
   5. (5) A "direct rollover" is a payment by the plan to the eligible retirement plan specified by the distributee.
3. (c) Notwithstanding anything in this section to the contrary, a portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax contributions which are not includible in gross income. However, such portion may be paid only to an individual retirement account or annuity described in Internal Revenue Code §§408(a) or (b), or to a qualified defined contribution plan described in Internal Revenue Code §§401(a) or 403(a) that agrees to separately account for amounts so transferred, including separate accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

Source Note:The provisions of this §127.7 adopted to be effective April 20, 2003, 28 TexReg 3058.