Tenn. Comp. R. & Regs. 1700-03-01-.01 - CORRECTION OF PARTICIPATION ERRORS MADE BY EMPLOYERS

(1) Error Corrections. The retirement system shall correct errors in its records that relate to participation in the retirement system and shall make any necessary corrections so that employer and employee contributions are the correct amount in the retirement system records. The retirement system shall also correct the amount of an employee's service credit in its records so that the retirement system's records accurately reflect the employee's required participation in the retirement system or the correct plan within the retirement system.

(2) Determination of Errors. The retirement system shall determine whether an error has occurred in the retirement system records on a case-by-case basis based on consideration of the following factors, including, but not limited to:

(a) The authenticity of the documents provided to demonstrate the alleged error;

(b) The length of time the employee has not participated in the retirement system or has participated in the incorrect retirement system plan;

(c) The reason for the alleged error relative to participation in the retirement system; and

(d) The effect of the alleged error on the employee, the employer and the retirement system.

(3) Recoupment of Underpayments. The retirement system shall correct any errors resulting in underpayments of contributions to the retirement system in accordance with the procedures for qualified plans as established by the Internal Revenue Service in Revenue Procedure 2016-51, and subsequent amendments thereto, as follows:

(a) An underpayment to the retirement system resulting from an error in failing to accurately report the employee to the retirement system or the correct plan within the retirement system, shall be recouped by the retirement system by obtaining the underpaid employee and employer contributions. The retirement system may recoup the underpaid employee and employer contributions, including applicable interest, from any one or a combination of the following:

1. The employee;

2. The employee's employer; or

3. A third party that is a governmental entity.

(b) The retirement system shall recoup interest relative to an underpayment; however, under extraordinary circumstances, the retirement system may waive interest, in whole or in part, based on consideration of the following factors, including, but not limited to:

1. The length of time the underpayment has occurred;

2. The reason for the underpayment;

3. The amount of the underpayment;

4. The financial effect that recouping the applicable interest would have on the employee, the employee's employer or a third party;

5. The impact on the retirement system's ability to provide retirement benefits;

6. Whether the payment of interest would cause a financial hardship;

7. Whether there would be recoupment by the retirement system from more than one source; and

8. Whether the recoupment complies with Internal Revenue Service regulations, procedures and guidelines.

(c) The interest rate shall be the assumed actuarial interest rate of return established by the Board under T.C.A. § 8-34-505 at the time the payment is made. The retirement system may recoup the interest from a source or combination of sources listed in subparagraph (3)(a) of this rule that is different from the source or sources for the underpaid contributions.

(d) The retirement system shall document its consideration of the factors contained in paragraph (2) and subparagraph (3)(b) in this rule in an individualized plan of correction for each employee affected by an underpayment of contributions. The plan of correction shall demonstrate how the employee has been restored to the position that the employee would have been in if the employee had participated in the retirement system in accordance with the retirement system plan document.

(4) Failure of Employer to Pay Underpaid Employer Contributions. Should an employer fail to pay its underpaid contributions or fail to pay any underpaid contributions based on the determination of the director of the retirement system, the retirement system may collect the underpaid contributions for which the employer is responsible through any means provided under applicable law.

(5) Right to Appeal. Any individual or entity affected by an action or decision made by the retirement system relative to the payment of underpaid contribution amounts, may appeal the action or decision to the director in accordance with Tenn. Comp. R. & Reg. Chapter 1700-3-2.

(6) Purchase of Prior Service Credit. If an employee was required to be a member of the retirement system as a condition of employment, but was not accurately reported to the retirement system, the employee shall establish prior service credit in the retirement system for the period of time that he or she should have been participating in the retirement system or within the correct retirement system plan. The payment of both employee and employer contributions must be paid to establish the prior service credit back to the date the employee should have participated in the retirement system. The payments of employee and employer contributions or interest, or both for the prior service credit, may come from any one or a combination of the sources listed in subparagraph (3)(a) of this rule; however, this will in no way require the employee to pay for the employer contributions. The purchase of prior service credit will consist of the following payments: the underpaid employee and employer contributions and interest paid on the underpaid contributions at the assumed actuarial interest rate of return established by the Board under T.C.A. § 8-34-505 at the time the payment is made, unless payment of interest is waived. Under extraordinary circumstances, the retirement system may waive the recoupment of interest relative to the purchase of prior service credit, in whole or in part, based on consideration of the factors contained in subparagraph (3)(b) of this rule.

Notes

Tenn. Comp. R. & Regs. 1700-03-01-.01

Original rule filed June 30, 1981; effective August 19, 1981. Amendment filed August 16, 1996; effective December 27, 1996. Amendments filed February 1, 2018; effective 5/2/2018.

Authority: T.C.A. §§ 8-34-313, 8-35-101, 8-35-203(a)(1), 8-36-115, and 8-37-214.