Sec. 3. The legislators' retirement system shall satisfy the qualification requirements in Section 401 of the Internal Revenue Code, as applicable to the system. In order to meet those requirements, the system is subject to the following provisions, notwithstanding any other law:

(1) The board shall distribute the corpus and income of the funds to participants and their beneficiaries in accordance with this chapter, IC 2-3.5-4, and IC 2-3.5-5.

(2) No part of the corpus or income of the funds may be used for or diverted to a purpose other than the exclusive benefit of the participants and their beneficiaries.

(3) Forfeitures arising from severance of employment, death, or for any other reason may not be applied to increase the benefits a participant would otherwise receive under this chapter, IC 2-3.5-4, and IC 2-3.5-5.

(4) If the system is terminated, or if all contributions to the system are completely discontinued, the rights of each affected participant to the benefits accrued at the date of termination or discontinuance, to the extent then funded, are nonforfeitable.

(5) All benefits paid from the system shall be distributed in accordance with the requirements of Section 401(a)(9) of the Internal Revenue Code and the regulations under that section. In order to meet those requirements, the funds are subject to the following provisions:

(A) The life expectancy of a participant, the participant's spouse, or the participant's beneficiary may not be recalculated after the initial determination for purposes of determining benefits.

(B) If a participant dies before the distribution of the participant's benefits has begun, distributions to beneficiaries must begin no later than December 31 of the calendar year immediately following the calendar year in which the member died.

(C) The amount of an annuity paid to a participant's beneficiary may not exceed the maximum determined under the incidental death benefit requirement of the Internal Revenue Code.

(6) The board may not:

(A) determine eligibility for benefits;

(B) compute rates of contribution; or

(C) compute benefits of participant's beneficiaries;

in a manner that discriminates in favor of participants who are considered officers, supervisors, or highly compensated, as prohibited under Section 401(a)(4) of the Internal Revenue Code.

(7) Benefits paid under this chapter, IC 2-3.5-4, and IC 2-3.5-5 may not exceed the maximum benefits and contributions specified by Section 415 of the Internal Revenue Code. If a participant's benefits under this chapter, IC 2-3.5-4, and IC 2-3.5-5 would exceed those maximum benefits and contributions, the benefit payable under IC 2-3.5-4 shall be reduced as necessary.

(8) The salary taken into account under this chapter, IC 2-3.5-4, and IC 2-3.5-5 may not exceed the applicable amount under Section 401(a)(17) of the Internal Revenue Code.

(9) The board may not engage in a transaction prohibited by Section 503(b) of the Internal Revenue Code.

As added by P.L.6-1989, SEC.1. Amended by P.L.4-1990, SEC.3; P.L.35-2012, SEC.6.