Title 105 | Chapter 001 | Regulation 400REG
PROPOSED
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FINANCE AND ADMINISTRATION CABINET
Kentucky Public Pensions Authority
(Amendment)
105 KAR 1:400.Federal taxation limitation year.
Section 1.
Definitions.(1)
"Annual addition" is defined by 26 U.S.C. 415(c)(2).(2)
"Annual benefit" is defined by 26 U.S.C. 415(b)(2).(3)(1)
"Fiscal year" is defined by KRS 16.505(32), 61.510(19), and 78.510(19).(4)(2)
"415(b) limit" means(5)(3)
"415(c) limit" means the limitation on annual additions established by 26 U.S.C. 415(c).Section 2.
The "fiscal year" shall be the limitation year establishedSection 3.
This administrative regulation shall apply to all plans administered by Kentucky Retirement Systems or County Employees Retirement System. Subject to the provisions of this administrative regulation, benefits paid from, and employee contributions made to, these plans shall not exceed the maximum benefits and the maximum annual addition, respectively, as established inSection 4.
Participation in Other Qualified Plans: Aggregation of Limits. The 415(b) limit with respect to any member who at any time has been a member in any other defined benefit plan as defined in 26 U.S.C. 414(j) maintained by the member's employer in a Kentucky Retirement Systems or County Employees Retirement SystemSection 5.
The 415(c) limit with respect to any member who at any time has been a member in any other defined contribution plan as defined in 26 U.S.C. 414(i) maintained by a participating employerSection 6.
Basic 415(b) Limitation. On and after January 1, 1995, a member shall not receive an annual benefit that exceeds the dollar amount establishedSection 7.
(1)
For purposes of 26 U.S.C. 415(b), the "annual benefit" is the(a)
After-tax(b)
To rollover contributions as defined by 26 U.S.C. 415(b)(2)(A)(2)
The "benefit attributable" shall be determined in accordance with 26 C.F.R. 1.415(b)-1(b)(2).Section 8.
Adjustments to Basic 415(b) Limitation for Form of Benefit.(1)
If the benefit under a Kentucky Retirement Systems or County Employees Retirement System(2)
If the form of benefit without regard to the automatic benefit increase feature is not a straight life annuity or a qualified joint and survivor annuity, then subsection (1) of this section shall be applied by either reducing the section 415(b) limit applicable at the annuity starting date or adjusting the form of benefit to an actuarially equivalent amount(a)
For a benefit paid in a form to which 26 U.S.C. 417(e)(3) does not apply a monthly benefit, the actuarially equivalent straight life annuity benefit that is the greater of, or1.
The annual amount of the straight life annuity2.
The annual amount of the straight life annuity commencing ona.
b.
(b)
For a benefit paid in a form to which 26 U.S.C. 417(e)(3) applies1.
The annual amount of the straight life annuity commencing on2.
The annual amount of the straight life annuity commencing ona.
b.
3.
The annual amount of the straight life annuity commencing ona.
b.
Section 9.
Benefits Not Taken into Account for 415(b) Limit.(1)
Any ancillary benefit which is not directly related to retirement income benefits;(2)
That portion of any joint and survivor annuity(3)
Any other benefit not required under 26 U.S.C. 415(b)(2) and 26 C.F.R. 1.415(b)-1 to be taken into account for purposes of the limitation of 26 U.S.C. 415(b)(1).Section 10.
Other Adjustments in 415(b) Limitation.(1)
If the member's retirement benefits become payable before age sixty-two (62), the limit established in(2)
If the member's benefit is based on at least fifteen (15) years of service as a full-time employee of any police or fire department or on fifteen (15) years of military service, the adjustments established(3)
The reductions establishedSection 11.
Less than Ten (10) Years of Participation.(1)
The maximum retirement benefits payable to any member who has completed less than ten (10) years of participation in a system shall be the amount determined under Section 6 of this administrative regulation as adjusted under Sections 8 or 10 of this administrative regulation multiplied by a fraction, the numerator of which is the number of the member's years of service and the denominator of which is ten (10).(2)
The reduction established in(a)
Reduce(b)
ApplySection 12.
$10,000 Limit Less than Ten (10) Years of Service.(1)
Notwithstanding any provision of(a)
Do(b)
The(2)
If the member has completed less than ten (10) years of service with the employer, the limit under this section shall be a reduced limit equal to $10,000 multiplied by a fraction, the numerator of which is the number of years of service the member has and the denominator of which is ten (10).Section 13.
Effect of COLA without a Lump Sum Component on 415(b) Testing. On(1)
A member's(2)
To the extent that the member's annual benefit equals or exceeds the limit(3)
InSection 14.
Effect of COLA with a Lump Sum Component on 415(b) Testing. On and after January 1, 2009, with respect to a member who receives a portion of theirSection 15.
415(c) Limit. After-tax member contributions or other annual additions with respect to a member shall not exceed the lesser of $40,000, as adjusted pursuant to 26 U.S.C. 415(d),(1)
(2)
For purposes of applying the 415(c) limits only, compensation(2)
(a)(3)
Unless another definition of compensation that is permitted by Treasury Regulation Section 1.415(c)-21.
Wages as defined by2.
All3.
Determined(b)(a)
For(c)
For limitation years beginning on and after January 1, 2001, compensation shall also include any elective amounts that are not includible in the gross income of the employee by reason of 26 U.S.C. 132(f)(4).(d)(b)
For limitation years beginning on and after January 1, 2009, compensation1.
The payment is:a.
Regular compensation for services during the employee's regular working hours;b.
Compensation for services outside the employee's regular working hours, includingc.
Commissions, bonuses, or other similar payments; and2.
Absent a severance from employment, the employee would have been able to use the payments including(e)(c)
Any payments not established1.
The compensation the employee would have received during the period if the employee were not in qualified military service, determined based on the rate of pay the employee would have received from the employer but for the absence during the period of qualified military service; or2.
If the compensation the employee would have received during the period was not reasonably certain, the employee's average compensation from the employer during the twelve (12) month period immediately preceding the qualified military service or,(f)(d)
Back pay, as established in 26 C.F.R.Section 16.
Service Purchases Under Section 415(n).(1)
Beginning(a)
The(b)
All of the(2)
For purposes of applying this section, a Kentucky Retirement Systems or County Employees Retirement System(a)
Reduced(b)
Percentage(3)
(a)
For purposes of this section the term "permissive service credit" shall mean service credit:1.
Recognized by a Kentucky Retirement Systems or County Employees Retirement System2.
Which the member has not received under a Kentucky Retirement Systems or County Employees Retirement System3.
Which the member may receive only by making a voluntary additional contribution, in an amount determined under a Kentucky Retirement Systems or County Employees Retirement System(b)
Permissive(4)
The Kentucky Retirement Systems or County Employees Retirement System(a)
More than five (5) years of nonqualified service credit are taken into account for purposes of this section; or(b)
Any nonqualified service credit is taken into account under this section before the member has at least five (5) years of participation under a Kentucky Retirement Systems or County Employees Retirement System(5)
For purposes of subsection (4) of this section,(a)
Service as an employee of the Government of the United States, any state or political subdivision thereof, or any agency or instrumentality of any of the foregoing other(b)
Service as an employee other(c)
Service as an employee of an association of employees as established(d)
Military service other(6)
Service established(7)
For a trustee-to-trustee transfer after December 31, 2001, to which 26 U.S.C. 403(b)(13)(A) or 457(e)(17)(A) applies without(a)
Limitations(b)
Distribution(8)
For individuals who began membership in a Kentucky Retirement Systems or County Employees Retirement System plan before January 1, 1998Section 17.
Modification of Contributions for 415(c) and 415(n) Purposes. The agency(1)
If the law requires a lump sum payment for the purchase of service credit, the agency(2)
If payment pursuant to subsection (1) of this section will not avoid a contribution in excess of the limits imposed by 26 U.S.C. 415(c) or 415(n), the agencySection 18.
Repayments of Cashouts. Any service purchase pursuant to KRS 61.552(3) of repayment of contributions, including interest, is a repayment of a cashout under 26 U.S.C. 415(k)(3) andRYAN BARROW, Executive Director
APPROVED BY AGENCY: December 10, 2025
FILED WITH LRC: January 9, 2026 AT 10:45 a.m.
PUBLIC HEARING AND COMMENT PERIOD: A public hearing on this administrative regulation shall be held on March 23, 2026 at 10:00 a.m. Eastern Time at the Kentucky Public Pensions Authority (KPPA), 1270 Louisville Road, Frankfort, Kentucky 40601. Individuals interested in presenting a public comment at this hearing shall notify this agency in writing no later than five (5) workdays prior to the hearing of their intent to attend. If no notification of intent to attend the hearing is received by that date, the hearing may be canceled. This hearing is open to the public. Any person who wishes to be heard will be given an opportunity to comment on the proposed administrative regulation. A transcript of the public hearing will not be made unless a written request for a transcript is made. If you do not wish to be heard at the public hearing, you may submit written comments on the proposed administrative regulation. Written comments shall be accepted through March 31, 2026 and shall receive the same consideration as verbal comments. Send written notification of intent to be heard at the public hearing, or written comments on the proposed administrative regulation, to the contact person. KPPA shall file a response with the Regulations Compiler to any public comments received, whether at the public comment hearing or in writing, via a Statement of Consideration no later than the 15th day of the month following the end of the public comment period, or upon filing a written request for extension, no later than the 15th day of the second month following the end of the public comment period.
CONTACT PERSON: Carole J. Catalfo, Policy Specialist, Kentucky Public Pensions Authority, 1260 Louisville Road, Frankfort, Kentucky 40601, Phone (502) 696-8679, Fax (502) 696-8615, Email: Legal.Non-Advocacy@kyret.ky.gov
REGULATORY IMPACT ANALYSIS AND TIERING STATEMENT
Contact Person:
Carole J. Catalfo
Subject Headings:
Boards and Commissions, Retirement and Pensions, State Employees
(1) Provide a brief summary of:
(a) What this administrative regulation does:
This administrative regulation concerns the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(b) The necessity of this administrative regulation:
This administrative regulation is necessary for the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(c) How this administrative regulation conforms to the content of the authorizing statutes:
KRS 61.505(g) authorizes the Kentucky Public Pensions Authority on behalf of Kentucky Retirement Systems and County Employees Retirement System to promulgate administrative regulations necessary or proper in order to carry out the provisions of KRS 61.510 to 61.705, 16.505 to 16.652, and 78.510 to 78.852 and to conform to federal statutes and regulations. 26 U.S.C. 415(c) limits post-tax contributions by a member. This administrative regulation concerns the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(d) How this administrative regulation currently assists or will assist in the effective administration of the statutes:
This administrative regulation assists in the effective administration of the statutes by establishing the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(2) If this is an amendment to an existing administrative regulation, provide a brief summary of:
(a) How the amendment will change this existing administrative regulation:
The amendment to this administrative regulation is primarily technical in nature and adds definitions for "annual benefit" and "annual addition", updates statutory references, clarifies that plans include those from KRS and CERS, and updates language to conform with KRS Chapter 1A drafting requirements.
(b) The necessity of the amendment to this administrative regulation:
The amendment to this administrative regulation is technical in nature and necessary to add definitions for "annual benefit" and "annual "addition", update references to statutes, clarify that plans include those from KRS and CERS, and update language to conform with KRS Chapter 1A drafting requirements.
(c) How the amendment conforms to the content of the authorizing statutes:
KRS 61.505(g) authorizes the Kentucky Public Pensions Authority on behalf of Kentucky Retirement Systems and County Employees Retirement System to promulgate administrative regulations necessary or proper in order to carry out the provisions of KRS 61.510 to 61.705, 16.505 to 16.652, and 78.510 to 78.852 and to conform to federal statutes and regulations. 26 U.S.C. 415(c) limits post-tax contributions by a member. This administrative regulation concerns the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(d) How the amendment will assist in the effective administration of the statutes:
The amendment to this administrative regulation is technical in nature and will assist in the effective administration of the statutes by adding definitions for "annual benefit" and "annual addition", updating statutory references, clarifying that plans include those from KRS and CERS, and updating language to conform with KRS Chapter 13A drafting requirements to establish the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(3) Does this administrative regulation or amendment implement legislation from the previous five years?
(If yes, provide the year of the legislation and either the bill number or Ky Acts chapter number being implemented.) KRS 61.505 - Amended 2024 Ky. Acts ch. 55, sec. 1, effective July 15, 2024. -- Amended 2023 Ky. Acts ch. 28, sec. 1, effective June 29, 2023. -- Amended 2022 Ky. Acts ch. 216, sec. 2, effective April 14, 2022. -- Amended 2021 Ky. Acts ch. 102, sec. 76, effective April 1, 2021. -- Created 2020 Ky. Acts ch. 79, sec. 2, effective April 1, 2021.
(4) List the type and number of individuals, businesses, organizations, or state and local governments affected by this administrative regulation:
Fewer than 20 each year of approximately 433,461 participants in the Kentucky Employees Retirement System, the State Police Retirement System, and the County Employees Retirement System.
(5) Provide an analysis of how the entities identified in question (4) will be impacted by either the implementation of this administrative regulation, if new, or by the change, if it is an amendment, including:
(a) List the actions that each of the regulated entities identified in question (4) will have to take to comply with this administrative regulation or amendment:
The regulated community will be minimally impacted because the administrative regulation is already being implemented as written. The amendments are primarily technical in nature.
(b) In complying with this administrative regulation or amendment, how much will it cost each of the entities identified in question (4):
There will be no additional costs to comply with the amendment because it is already being implemented as written. The amendment is primarily technical in nature.
(c) As a result of compliance, what benefits will accrue to the entities identified in question (4):
The regulated community will benefit from definitions of "annual benefit" and "annual addition", updated statutory references and regulatory language, and clarification that plans include those from KRS and CERS.
(6) Provide an estimate of how much it will cost the administrative body to implement this administrative regulation:
(a) Initially:
There will be no additional costs because the regulation is already being implemented as written.
(b) On a continuing basis:
There will be no additional costs because the regulation is already being implemented as written.
(7) What is the source of the funding to be used for the implementation and enforcement of this administrative regulation or this amendment:
Administrative expenses of the Kentucky Public Pensions Authority are paid from the Retirement Allowance Account (trust and agency funds).
(8) Provide an assessment of whether an increase in fees or funding will be necessary to implement this administrative regulation, if new, or by the change if it is an amendment:
No, an increase in fees or funding will not be necessary.
(9) State whether or not this administrative regulation establishes any fees or directly or indirectly increases any fees:
No, this administrative regulation does not establish any fees or directly or indirectly increase any fees.
(10) TIERING: Is tiering applied?
No, tiering is not applied. The administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415 applies to all members.
FISCAL IMPACT STATEMENT
(1) Identify each state statute, federal statute, or federal regulation that requires or authorizes the action taken by the administrative regulation:
KRS 61.505(g), 61.645(9)(e), 26 U.S.C. 415
(2) State whether this administrative regulation is expressly authorized by an act of the General Assembly, and if so, identify the act:
KRS 61.505(g), 61.645(9)(e)
(3)(a) Identify the promulgating agency and any other affected state units, parts, or divisions:
The promulgating agency is the Kentucky Public Pensions Authority. There are no other affected state units, parts, or divisions. (b) Estimate the following for each affected state unit, part, or division identified in (3)(a):
(b) Estimate the following for each affected state unit, part, or division identified in (3)(a):
1. Expenditures:
For the first year:
None.
For subsequent years:
None.
2. Revenues:
For the first year:
None.
For subsequent years:
None.
3. Cost Savings:
For the first year:
None.
For subsequent years:
None.
(4)(a) Identify affected local entities (for example: cities, counties, fire departments, school districts):
There are no affected local entities.
(b) Estimate the following for each affected local entity identified in (4)(a):
1. Expenditures:
For the first year:
None.
For subsequent years:
None.
2. Revenues:
For the first year:
None.
For subsequent years:
None.
3. Cost Savings:
For the first year:
None.
For subsequent years:
None.
(5)(a) Identify any affected regulated entities not listed in (3)(a) or (4)(a):
Approximately 433,461 participants in the Kentucky Employees Retirement System, the State Police Retirement System, and the County Employees Retirement System.
(b) Estimate the following for each regulated entity identified in (5)(a):
1. Expenditures:
For the first year:
None.
For subsequent years:
None.
2. Revenues:
For the first year:
None.
For subsequent years:
None.
3. Cost Savings:
For the first year:
None.
For subsequent years:
None.
(6) Provide a narrative to explain the following for each entity identified in (3)(a), (4)(a), and (5)(a)
(a) Fiscal impact of this administrative regulation:
This administrative regulation has minimal fiscal impact because it is already being substantially implemented as written.
(b) Methodology and resources used to reach this conclusion:
The agency analyzed costs and procedures for the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(7) Explain, as it relates to the entities identified in (3)(a), (4)(a), and (5)(a):
(a) Whether this administrative regulation will have a "major economic impact", as defined by KRS 13A.010(14):
No, this administrative regulation will not have a major economic impact as defined by KRS 13A.010(14).
(b) The methodology and resources used to reach this conclusion:
The agency analyzed costs and procedures for the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
FEDERAL MANDATE ANALYSIS COMPARISON
(1) Federal statute or regulation constituting the federal mandate.
26 U.S.C. Section 415
(2) State compliance standards.
KRS 61.645(9)(e)
(3) Minimum or uniform standards contained in the federal mandate.
The federal standard generally limits annual additions to an individual’s defined contribution plan.
(4) Will this administrative regulation impose stricter requirements, or additional or different responsibilities or requirements, than those required by the federal mandate?
No. This administrative regulation applies the federal standard.
(5) Justification for the imposition of the stricter standard, or additional or different responsibilities or requirements.
This administrative regulation does not impose a stricter standard, or additional or different responsibilities or requirements.
FINANCE AND ADMINISTRATION CABINET
Kentucky Public Pensions Authority
(Amendment)
105 KAR 1:400.Federal taxation limitation year.
Section 1.
Definitions.(1)
"Annual addition" is defined by 26 U.S.C. 415(c)(2).(2)
"Annual benefit" is defined by 26 U.S.C. 415(b)(2).(3)
"Fiscal year" is defined by KRS 16.505(32), 61.510(19), and 78.510(19).(4)
"415(b) limit" means the limitation on benefits established by 26 U.S.C. 415(b).(5)
"415(c) limit" means the limitation on annual additions established by 26 U.S.C. 415(c).Section 2.
The "fiscal year" shall be the limitation year established in 26 U.S.C. Section 415 for determining contribution and benefit limits in the plans administered by the Kentucky Retirement Systems or County Employees Retirement System.Section 3.
This administrative regulation shall apply to all plans administered by Kentucky Retirement Systems or County Employees Retirement System. Subject to the provisions of this administrative regulation, benefits paid from, and employee contributions made to, these plans shall not exceed the maximum benefits and the maximum annual addition, respectively, as established in 26 U.S.C. 415. The provisions of this section shall not prevent the member receiving benefits from the funds created by KRS 16.568, 61.663, and 78.652.Section 4.
Participation in Other Qualified Plans: Aggregation of Limits. The 415(b) limit with respect to any member who at any time has been a member in any other defined benefit plan as defined in 26 U.S.C. 414(j) maintained by the member's employer in a Kentucky Retirement Systems or County Employees Retirement System plan shall apply as if the total benefits payable under all those defined benefit plans in which the member has been a member were payable from one (1) plan.Section 5.
The 415(c) limit with respect to any member who at any time has been a member in any other defined contribution plan as defined in 26 U.S.C. 414(i) maintained by a participating employer shall apply as if the total annual additions under all those defined contribution plans in which the member has been a member were payable from one (1) plan.Section 6.
Basic 415(b) Limitation. On and after January 1, 1995, a member shall not receive an annual benefit that exceeds the dollar amount established in 26 U.S.C. 415(b)(1)(A), subject to the applicable adjustments established in 26 U.S.C. 415(b) and subject to any additional limits established in this section. A member's annual benefit payable in any limitation year from a Kentucky Retirement Systems or County Employees Retirement System plan shall not be greater than the limit applicable on the annuity starting date, as increased in subsequent years pursuant to 26 U.S.C. 415(d) and 26 C.F.R. 1.415(d)-1.Section 7.
Annual Benefit.(1)
For purposes of 26 U.S.C. 415(b), the "annual benefit" is the benefit payable annually in the form of a straight life annuity with no ancillary benefits without regard to the benefit attributable to:(a)
After-tax employee contributions other than permissive service credit as defined by 26 U.S.C. 415(n); or(b)
To rollover contributions as defined by 26 U.S.C. 415(b)(2)(A).(2)
The "benefit attributable" shall be determined in accordance with 26 C.F.R. 1.415(b)-1(b)(2).Section 8.
Adjustments to Basic 415(b) Limitation for Form of Benefit.(1)
If the benefit under a Kentucky Retirement Systems or County Employees Retirement System plan is other than the form specified in Section 6 of this administrative regulation, then the benefit shall be adjusted so that it is the equivalent of the annual benefit, using factors established in 26 C.F.R. 1.415(b)-1(c).(2)
If the form of benefit without regard to the automatic benefit increase feature is not a straight life annuity or a qualified joint and survivor annuity, then subsection (1) of this section shall be applied by either reducing the section 415(b) limit applicable at the annuity starting date or adjusting the form of benefit to an actuarially equivalent amount using the assumptions established in Treasury Regulation Section 1.415(b)-1(c)(2)(ii) that take into account the additional benefits under the form of benefit as established in this subsection.(a)
For a benefit paid in a form to which 26 U.S.C. 417(e)(3) does not apply a monthly benefit, the actuarially equivalent straight life annuity benefit that is the greater of, or the reduced 415(b) limit applicable at the annuity starting date which is the "lesser of" when adjusted in accordance with the assumptions established in subparagraphs 1 and 2 of this paragraph.1.
The annual amount of the straight life annuity payable to the member under the Kentucky Retirement Systems or County Employees Retirement Systems plan commencing on the same annuity starting date as the form of benefit to the member; or2.
The annual amount of the straight life annuity commencing on the same annuity starting date that has the same actuarial present value as the form of benefit payable to the member, computed using a five (5) percent statutory interest assumption established in 26 U.S.C. 415(b)(2) E)(i); and009 the applicable mortality tables established in 26 U.S.C. 417(e)(3)(B); or(b)
For a benefit paid in a form to which 26 U.S.C. 417(e)(3) applies, the actuarially equivalent straight life annuity benefit that is the greatest of, or the reduced 415(b) limit applicable at the annuity starting date which is the "least of" when adjusted in accordance with the assumptions established in subparagraphs 1 through 3 of this paragraph.1.
The annual amount of the straight life annuity commencing on the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using the interest rate and mortality table, or tabular factor, established in the Kentucky Retirement Systems or County Employees Retirement System plan for actuarial experience;2.
The annual amount of the straight life annuity commencing on the annuity starting date that has the same actuarial present value as the particular form of benefit payable, computed using a five and one-half (5.5) percent statutory interest assumption established in 26 U.S.C. 415(b)€(ii)(l) and the009 mortality tables established in 26 U.S.C. 417(e)(3)(B); or3.
The annual amount of the straight life annuity commencing on the annuity starting date that has the same actuarial present value as the particular form of benefit payable using the applicable interest rate for the distribution established in 26 C.F.R. 1.417(e)-1(d)(3) in effect for the first day of the plan year with a one (1) year stabilization period and009 the applicable mortality tables established in 26 U.S.C. 417(e)(3)(B) divided by 1.05.Section 9.
Benefits Not Taken into Account for 415(b) Limit. For purposes of this administrative regulation, the following benefits shall not be taken into account in applying these limits:(1)
Any ancillary benefit which is not directly related to retirement income benefits;(2)
That portion of any joint and survivor annuity that constitutes a qualified joint and survivor annuity pursuant to 26 U.S.C. 415(b)(2)(g); and(3)
Any other benefit not required under 26 U.S.C. 415(b)(2) and 26 C.F.R. 1.415(b)-1 to be taken into account for purposes of the limitation of 26 U.S.C. 415(b)(1).Section 10.
Other Adjustments in 415(b) Limitation.(1)
If the member's retirement benefits become payable before age sixty-two (62), the limit established in this section shall be reduced in accordance with 26 C.F.R. 1.415(b)-1(d), so that the reduced limit equals an annual straight life benefit when the retirement income benefit begins which is equivalent to an adjusted $160,000 annual benefit beginning at age sixty-two (62).(2)
If the member's benefit is based on at least fifteen (15) years of service as a full-time employee of any police or fire department or on fifteen (15) years of military service, the adjustments established in subsection (1) of this section shall not apply.(3)
The reductions established in subsection (1) of this section shall not apply to preretirement disability benefits or preretirement death benefits.Section 11.
Less than Ten (10) Years of Participation.(1)
The maximum retirement benefits payable to any member who has completed less than ten (10) years of participation in a system shall be the amount determined under Section 6 of this administrative regulation as adjusted under Sections 8 or 10 of this administrative regulation multiplied by a fraction, the numerator of which is the number of the member's years of service and the denominator of which is ten (10).(2)
The reduction established in this section shall not:(a)
Reduce the maximum benefit below ten (10) percent of the limit determined without regard to this section; or(b)
Apply to preretirement disability benefits or preretirement death benefits.Section 12.
$10,000 Limit Less than Ten (10) Years of Service.(1)
Notwithstanding any provision of this administrative regulation to the contrary, the retirement benefit payable shall be deemed not to exceed the limit established in this section if the benefits payable under a Kentucky Retirement Systems or County Employee Retirement System plan and under all other qualified defined benefit pension plans to which the member's employer contributes:(a)
Do not exceed $10,000 for the applicable limitation year and for any prior limitation year; and(b)
The employer has not at any time maintained a qualified defined contribution plan in which the member participated.(2)
If the member has completed less than ten (10) years of service with the employer, the limit under this section shall be a reduced limit equal to $10,000 multiplied by a fraction, the numerator of which is the number of years of service the member has and the denominator of which is ten (10).Section 13.
Effect of COLA without a Lump Sum Component on 415(b) Testing. On and after January 1, 2003, for purposes of applying the 415(b) limit to a member with no lump sum benefit:(1)
A member's 415(b) limit shall be applied to the member's annual benefit in the member's first limitation year without regard to any automatic cost of living adjustments;(2)
To the extent that the member's annual benefit equals or exceeds the limit, the member shall not be eligible for cost of living increases from the funds created by KRS 16.510, 61.515, 78.520, until the benefit added to the accumulated increases are less than the 415(b) limit; and(3)
In any subsequent limitation year, a member's annual benefit, including any automatic cost of living increases, shall be tested under the current 415(b) limit including any adjustment to the 26 U.S.C. 415(b)(1)(A) dollar limit under 26 U.S.C. 415(d), and 26 C.F.R. 1.415(b)-1(d).Section 14.
Effect of COLA with a Lump Sum Component on 415(b) Testing. On and after January 1, 2009, with respect to a member who receives a portion of their annual benefit in a lump sum, the limit shall be applied taking into consideration cost of living increases as required by 26 U.S.C. 415(b) and 26 C.F.R. 1.415(b)-1.Section 15.
415(c) Limit. After-tax member contributions or other annual additions with respect to a member shall not exceed the lesser of $40,000, as adjusted pursuant to 26 U.S.C. 415(d), or 100 percent of the member's compensation.(1)
For purposes of applying the 415(c) limits only, compensation shall be compensation actually paid or made available during a limitation year, except as established in subsection (3) of this section and as permitted by Treasury Regulation Section 1.415(c)-2, except that member contributions picked up under 26 U.S.C. 414(h) shall not be treated as compensation.(2)
(a)
Unless another definition of compensation that is permitted by Treasury Regulation Section 1.415(c)-2 is specified by a Kentucky Retirement Systems or County Employees Retirement System plan, compensation shall be:1.
Wages as defined by 26 U.S.C. 3401(a);2.
All other payments of compensation to an employee by an employer for which the employer is required to furnish the employee a written statement under 26 U.S.C. 6041(d), 6051(a)(3), and 6052; and3.
Determined without regard to any rules under 26 U.S.C. 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed, including the exception for agricultural labor in 26 U.S.C. 3401(a)(2).(b)
For limitation years beginning on and after January 1, 1998, compensation shall also include amounts that would otherwise be included in compensation but for an election under 26 U.S.C. 125(a), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b).(c)
For limitation years beginning on and after January 1, 2001, compensation shall also include any elective amounts that are not includible in the gross income of the employee by reason of 26 U.S.C. 132(f)(4).(d)
For limitation years beginning on and after January 1, 2009, compensation shall also include compensation paid by the later of two and one-half (2 1/2) months after an employee's severance from employment or the end of the limitation year that includes the date of the employee's severance from employment if:1.
The payment is:a.
Regular compensation for services during the employee's regular working hours;b.
Compensation for services outside the employee's regular working hours, including overtime or shift differential; orc.
Commissions, bonuses, or other similar payments; and2.
Absent a severance from employment, the employee would have been able to use the payments including unused accrued bona fide sick, vacation or other leave if employment had continued.(e)
Any payments not established in paragraph (d) of this subsection shall not be considered compensation if paid after severance from employment, even if they are paid within two and one half (2 1/2) months following severance from employment, except for payments to the individual who does not currently perform services for the employer by reason of qualified military service as established in 26 U.S.C. 414(u)(1) to the extent these payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the employer rather than entering qualified military service. An employee who is in qualified military service shall be treated as receiving compensation from the employer during the period of qualified military service equal to:1.
The compensation the employee would have received during the period if the employee were not in qualified military service, determined based on the rate of pay the employee would have received from the employer but for the absence during the period of qualified military service; or2.
If the compensation the employee would have received during the period was not reasonably certain, the employee's average compensation from the employer during the twelve (12) month period immediately preceding the qualified military service or, if shorter, the period of employment immediately preceding the qualified military service.(f)
Back pay, as established in 26 C.F.R. 1.415(c)-2(g)(8), shall be treated as compensation for the limitation year to which the back pay relates to the extent the back pay represents wages and compensation that would otherwise be included under this definition.Section 16.
Service Purchases Under Section 415(n).(1)
Beginning after December 31, 1997, if a member makes one (1) or more contributions to purchase permissive service credit under a Kentucky Retirement Systems or County Employees Retirement System plan, the requirements of 26 U.S.C. 415(n) shall be treated as met only if determined by treating:(a)
The accrued benefit derived from all these contributions as an annual benefit for purposes of the 415(b) limit; or(b)
All of the contributions made pursuant to this subsection as annual additions for purposes of the 415(c) limit.(2)
For purposes of applying this section, a Kentucky Retirement Systems or County Employees Retirement System plan shall not fail to meet solely by reason of this section the:(a)
Reduced limit under 26 U.S.C. 415(b)(2)(C); and(b)
Percentage limitation under 26 U.S.C. 415(c)(1)(B).(3)
(a)
For purposes of this section the term "permissive service credit" shall mean service credit:1.
Recognized by a Kentucky Retirement Systems or County Employees Retirement System plan for purposes of calculating a member's benefit under a Kentucky Retirement Systems or County Employees Retirement System plan;2.
Which the member has not received under a Kentucky Retirement Systems or County Employees Retirement System plan; and3.
Which the member may receive only by making a voluntary additional contribution, in an amount determined under a Kentucky Retirement Systems or County Employees Retirement System plan, which does not exceed the amount necessary to fund the benefit attributable to the service credit.(b)
Permissive service credit contributions made in limitation years beginning after December 31, 1997 may include service credit for periods for which there is no performance of service, and, notwithstanding paragraph (a)2 of this subsection, may include service credited to provide an increased benefit for service credit which a member is receiving under a Kentucky Retirement Systems or County Employees Retirement System plan.(4)
The Kentucky Retirement Systems or County Employees Retirement System plan shall fail to meet the requirements of this section if:(a)
More than five (5) years of nonqualified service credit are taken into account for purposes of this section; or(b)
Any nonqualified service credit is taken into account under this section before the member has at least five (5) years of participation under a Kentucky Retirement Systems or County Employees Retirement System plan.(5)
For purposes of subsection (4) of this section, for permissive service credit contributions made in limitation years beginning after December 31, 1997, "nonqualified service credit" shall be permissive service credit other than that allowed with respect to:(a)
Service as an employee of the Government of the United States, any state or political subdivision thereof, or any agency or instrumentality of any of the foregoing other than military service or service for credit which was obtained as a result of a repayment described in 26 U.S.C. 415(k)(3);(b)
Service as an employee other than that established in paragraph (a) of this subsection of an education organization established in 26 U.S.C. 170(b)(1)(A)(ii) which is a public, private, or sectarian school which provides elementary, secondary through grade twelve (12), or a comparable level of education, pursuant to the applicable law of the jurisdiction in which the service was performed;(c)
Service as an employee of an association of employees as established in paragraph (a) of this subsection; or(d)
Military service other than qualified military service under 26 U.S.C. 414(u) recognized by the Kentucky Retirement Systems or County Employees Retirement System plan.(6)
Service established in subsection (5)(a), (b), or (c) of this section shall be nonqualified service if recognition of the service would cause a member to receive a retirement benefit for the same service under more than one plan.(7)
For a trustee-to-trustee transfer after December 31, 2001, to which 26 U.S.C. 403(b)(13)(A) or 457(e)(17)(A) applies without regard to whether the transfer is made between plans maintained by the same employer, the:(a)
Limitations of subsection (4) of this section shall not apply in determining whether the transfer is for the purchase of permissive service credit; and(b)
Distribution rules applicable under federal law to a Kentucky Retirement Systems or County Employees Retirement System plan shall apply to these amounts and any benefits attributable to these amounts.(8)
For individuals who began membership in a Kentucky Retirement Systems or County Employees Retirement System plan before January 1, 1998, the 415(c) limit shall not be applied to reduce the amount of permissive service credit which may be purchased to an amount less than the amount which was allowed to be purchased under the terms of a Kentucky Retirement Systems or County Employees Retirement System plan as in effect on August 5, 1997..Section 17.
Modification of Contributions for 415(c) and 415(n) Purposes. The agency may modify a request by a member to make a contribution to a Kentucky Retirement Systems or County Employees Retirement System plan if the amount of the contribution would exceed the limits provided in Section 415 by using the methods established in this section(1)
If the law requires a lump sum payment for the purchase of service credit, the agency may establish a periodic payment plan for the member to avoid a contribution in excess of the limits under 26 U.S.C. 415(c) or 415(n).(2)
If payment pursuant to subsection (1) of this section will not avoid a contribution in excess of the limits imposed by 26 U.S.C. 415(c) or 415(n), the agency may either reduce the member's contribution to an amount within the limits of those sections or refuse the member's contribution.Section 18.
Repayments of Cashouts. Any service purchase pursuant to KRS 61.552(3) of repayment of contributions, including interest, is a repayment of a cashout under 26 U.S.C. 415(k)(3) and shall not be taken into account for purposes of the 415(b) or (c) limits.RYAN BARROW, Executive Director
APPROVED BY AGENCY: December 10, 2025
FILED WITH LRC: January 9, 2026 AT 10:45 a.m.
PUBLIC HEARING AND COMMENT PERIOD: A public hearing on this administrative regulation shall be held on March 23, 2026 at 10:00 a.m. Eastern Time at the Kentucky Public Pensions Authority (KPPA), 1270 Louisville Road, Frankfort, Kentucky 40601. Individuals interested in presenting a public comment at this hearing shall notify this agency in writing no later than five (5) workdays prior to the hearing of their intent to attend. If no notification of intent to attend the hearing is received by that date, the hearing may be canceled. This hearing is open to the public. Any person who wishes to be heard will be given an opportunity to comment on the proposed administrative regulation. A transcript of the public hearing will not be made unless a written request for a transcript is made. If you do not wish to be heard at the public hearing, you may submit written comments on the proposed administrative regulation. Written comments shall be accepted through March 31, 2026 and shall receive the same consideration as verbal comments. Send written notification of intent to be heard at the public hearing, or written comments on the proposed administrative regulation, to the contact person. KPPA shall file a response with the Regulations Compiler to any public comments received, whether at the public comment hearing or in writing, via a Statement of Consideration no later than the 15th day of the month following the end of the public comment period, or upon filing a written request for extension, no later than the 15th day of the second month following the end of the public comment period.
CONTACT PERSON: Carole J. Catalfo, Policy Specialist, Kentucky Public Pensions Authority, 1260 Louisville Road, Frankfort, Kentucky 40601, Phone (502) 696-8679, Fax (502) 696-8615, Email: Legal.Non-Advocacy@kyret.ky.gov
REGULATORY IMPACT ANALYSIS AND TIERING STATEMENT
Contact Person:
Carole J. Catalfo
Subject Headings:
Boards and Commissions, Retirement and Pensions, State Employees
(1) Provide a brief summary of:
(a) What this administrative regulation does:
This administrative regulation concerns the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(b) The necessity of this administrative regulation:
This administrative regulation is necessary for the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(c) How this administrative regulation conforms to the content of the authorizing statutes:
KRS 61.505(g) authorizes the Kentucky Public Pensions Authority on behalf of Kentucky Retirement Systems and County Employees Retirement System to promulgate administrative regulations necessary or proper in order to carry out the provisions of KRS 61.510 to 61.705, 16.505 to 16.652, and 78.510 to 78.852 and to conform to federal statutes and regulations. 26 U.S.C. 415(c) limits post-tax contributions by a member. This administrative regulation concerns the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(d) How this administrative regulation currently assists or will assist in the effective administration of the statutes:
This administrative regulation assists in the effective administration of the statutes by establishing the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(2) If this is an amendment to an existing administrative regulation, provide a brief summary of:
(a) How the amendment will change this existing administrative regulation:
The amendment to this administrative regulation is primarily technical in nature and adds definitions for "annual benefit" and "annual addition", updates statutory references, clarifies that plans include those from KRS and CERS, and updates language to conform with KRS Chapter 1A drafting requirements.
(b) The necessity of the amendment to this administrative regulation:
The amendment to this administrative regulation is technical in nature and necessary to add definitions for "annual benefit" and "annual "addition", update references to statutes, clarify that plans include those from KRS and CERS, and update language to conform with KRS Chapter 1A drafting requirements.
(c) How the amendment conforms to the content of the authorizing statutes:
KRS 61.505(g) authorizes the Kentucky Public Pensions Authority on behalf of Kentucky Retirement Systems and County Employees Retirement System to promulgate administrative regulations necessary or proper in order to carry out the provisions of KRS 61.510 to 61.705, 16.505 to 16.652, and 78.510 to 78.852 and to conform to federal statutes and regulations. 26 U.S.C. 415(c) limits post-tax contributions by a member. This administrative regulation concerns the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(d) How the amendment will assist in the effective administration of the statutes:
The amendment to this administrative regulation is technical in nature and will assist in the effective administration of the statutes by adding definitions for "annual benefit" and "annual addition", updating statutory references, clarifying that plans include those from KRS and CERS, and updating language to conform with KRS Chapter 13A drafting requirements to establish the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(3) Does this administrative regulation or amendment implement legislation from the previous five years?
(If yes, provide the year of the legislation and either the bill number or Ky Acts chapter number being implemented.) KRS 61.505 - Amended 2024 Ky. Acts ch. 55, sec. 1, effective July 15, 2024. -- Amended 2023 Ky. Acts ch. 28, sec. 1, effective June 29, 2023. -- Amended 2022 Ky. Acts ch. 216, sec. 2, effective April 14, 2022. -- Amended 2021 Ky. Acts ch. 102, sec. 76, effective April 1, 2021. -- Created 2020 Ky. Acts ch. 79, sec. 2, effective April 1, 2021.
(4) List the type and number of individuals, businesses, organizations, or state and local governments affected by this administrative regulation:
Fewer than 20 each year of approximately 433,461 participants in the Kentucky Employees Retirement System, the State Police Retirement System, and the County Employees Retirement System.
(5) Provide an analysis of how the entities identified in question (4) will be impacted by either the implementation of this administrative regulation, if new, or by the change, if it is an amendment, including:
(a) List the actions that each of the regulated entities identified in question (4) will have to take to comply with this administrative regulation or amendment:
The regulated community will be minimally impacted because the administrative regulation is already being implemented as written. The amendments are primarily technical in nature.
(b) In complying with this administrative regulation or amendment, how much will it cost each of the entities identified in question (4):
There will be no additional costs to comply with the amendment because it is already being implemented as written. The amendment is primarily technical in nature.
(c) As a result of compliance, what benefits will accrue to the entities identified in question (4):
The regulated community will benefit from definitions of "annual benefit" and "annual addition", updated statutory references and regulatory language, and clarification that plans include those from KRS and CERS.
(6) Provide an estimate of how much it will cost the administrative body to implement this administrative regulation:
(a) Initially:
There will be no additional costs because the regulation is already being implemented as written.
(b) On a continuing basis:
There will be no additional costs because the regulation is already being implemented as written.
(7) What is the source of the funding to be used for the implementation and enforcement of this administrative regulation or this amendment:
Administrative expenses of the Kentucky Public Pensions Authority are paid from the Retirement Allowance Account (trust and agency funds).
(8) Provide an assessment of whether an increase in fees or funding will be necessary to implement this administrative regulation, if new, or by the change if it is an amendment:
No, an increase in fees or funding will not be necessary.
(9) State whether or not this administrative regulation establishes any fees or directly or indirectly increases any fees:
No, this administrative regulation does not establish any fees or directly or indirectly increase any fees.
(10) TIERING: Is tiering applied?
No, tiering is not applied. The administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415 applies to all members.
FISCAL IMPACT STATEMENT
(1) Identify each state statute, federal statute, or federal regulation that requires or authorizes the action taken by the administrative regulation:
KRS 61.505(g), 61.645(9)(e), 26 U.S.C. 415
(2) State whether this administrative regulation is expressly authorized by an act of the General Assembly, and if so, identify the act:
KRS 61.505(g), 61.645(9)(e)
(3)(a) Identify the promulgating agency and any other affected state units, parts, or divisions:
The promulgating agency is the Kentucky Public Pensions Authority. There are no other affected state units, parts, or divisions. (b) Estimate the following for each affected state unit, part, or division identified in (3)(a):
(b) Estimate the following for each affected state unit, part, or division identified in (3)(a):
1. Expenditures:
For the first year:
None.
For subsequent years:
None.
2. Revenues:
For the first year:
None.
For subsequent years:
None.
3. Cost Savings:
For the first year:
None.
For subsequent years:
None.
(4)(a) Identify affected local entities (for example: cities, counties, fire departments, school districts):
There are no affected local entities.
(b) Estimate the following for each affected local entity identified in (4)(a):
1. Expenditures:
For the first year:
None.
For subsequent years:
None.
2. Revenues:
For the first year:
None.
For subsequent years:
None.
3. Cost Savings:
For the first year:
None.
For subsequent years:
None.
(5)(a) Identify any affected regulated entities not listed in (3)(a) or (4)(a):
Approximately 433,461 participants in the Kentucky Employees Retirement System, the State Police Retirement System, and the County Employees Retirement System.
(b) Estimate the following for each regulated entity identified in (5)(a):
1. Expenditures:
For the first year:
None.
For subsequent years:
None.
2. Revenues:
For the first year:
None.
For subsequent years:
None.
3. Cost Savings:
For the first year:
None.
For subsequent years:
None.
(6) Provide a narrative to explain the following for each entity identified in (3)(a), (4)(a), and (5)(a)
(a) Fiscal impact of this administrative regulation:
This administrative regulation has minimal fiscal impact because it is already being substantially implemented as written.
(b) Methodology and resources used to reach this conclusion:
The agency analyzed costs and procedures for the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
(7) Explain, as it relates to the entities identified in (3)(a), (4)(a), and (5)(a):
(a) Whether this administrative regulation will have a "major economic impact", as defined by KRS 13A.010(14):
No, this administrative regulation will not have a major economic impact as defined by KRS 13A.010(14).
(b) The methodology and resources used to reach this conclusion:
The agency analyzed costs and procedures for the administration of testing contribution and benefit limits in accordance with 26 U.S.C. Section 415.
FEDERAL MANDATE ANALYSIS COMPARISON
(1) Federal statute or regulation constituting the federal mandate.
26 U.S.C. Section 415
(2) State compliance standards.
KRS 61.645(9)(e)
(3) Minimum or uniform standards contained in the federal mandate.
The federal standard generally limits annual additions to an individual’s defined contribution plan.
(4) Will this administrative regulation impose stricter requirements, or additional or different responsibilities or requirements, than those required by the federal mandate?
No. This administrative regulation applies the federal standard.
(5) Justification for the imposition of the stricter standard, or additional or different responsibilities or requirements.
This administrative regulation does not impose a stricter standard, or additional or different responsibilities or requirements.