(1) To the extent required by law, and except as otherwise provided by rules adopted by the Public Employees Retirement Board under subsection (4) of this section, any portion of a distribution of benefits described in subsection (2) of this section shall, at the election of and in lieu of distribution to the distributee, be paid directly to an eligible retirement plan specified by the distributee.

(2) The provisions of subsection (1) of this section apply to a distribution of any benefit under the pension program or the individual account program except:

(a) A distribution that is one of a series of substantially equal periodic payments made at least annually for the life or life expectancy of the distributee, or for the joint lives or life expectancies of the distributee and a designated beneficiary;

(b) A distribution that is one of a series of substantially equal periodic payments made at least annually for a specified period of 10 years or more; and

(c) A distribution to the extent that the distribution is required under 26 U.S.C. § 401(a)(9).

(3) The provisions of subsection (1) of this section apply to any portion of a distribution of benefits under the pension program or the individual account program even though the portion consists of after-tax employee contributions that are not includable in gross income. Any portion of a distribution that consists of after-tax employee contributions that are not includable in gross income may be transferred only to an individual retirement account or annuity described in 26 U.S.C. 408(a) or (b), or to a qualified defined contribution or defined benefit plan described in 26 U.S.C. § 401(a) or 403(b) that agrees to account separately for amounts transferred, including accounting separately for the portion of the distribution that is includable in gross income and the portion of the distribution that is not includable in gross income. The amount transferred shall be treated as consisting first of the portion of the distribution that is includable in gross income, determined without regard to 26 U.S.C. § 402(c)(1).

(4) The board shall adopt rules implementing the direct rollover requirements of 26 U.S.C. § 401(a)(31) and the regulations implementing that section, and may adopt administrative exceptions to the direct rollover requirements to the extent permitted by 26 U.S.C. § 401(a)(31) and the regulations implementing that section.

(5) All references in this section to federal laws and regulations are to the laws and regulations in effect on December 31, 2022.

(6) For purposes of this section:

(a) ‘Distributee’ means a member, a member’s surviving spouse or a member’s alternate payee under ORS § 238.465.

(b) ‘Eligible retirement plan’ means:

(A) An individual retirement account described in 26 U.S.C. 408(a);

(B) An individual retirement annuity described in 26 U.S.C. 408(b), other than an endowment contract;

(C) A qualified trust under 26 U.S.C. § 401(a), that is a defined contribution or defined benefit plan and permits the acceptance of rollover contributions;

(D) An annuity plan described in 26 U.S.C. § 403(a);

(E) An eligible deferred compensation plan described in 26 U.S.C. § 457(b) that is maintained by an eligible governmental employer described in 26 U.S.C. § 457(e)(1)(A) and that agrees to account separately for amounts transferred into such plan from the distributing plan; or

(F) An annuity contract described in 26 U.S.C. § 403(b). [2003 c.733 § 44; 2009 c.5 § 10; 2009 c.909 § 10; 2010 c.82 § 10; 2011 c.7 § 10; 2012 c.31 § 10; 2013 c.377 § 10; 2014 c.52 § 10; 2015 c.442 § 10; 2016 c.33 § 11; 2017 c.527 § 11; 2018 c.101 § 11; 2019 c.319 § 11; 2021 c.456 § 12; 2022 c.83 § 12; 2023 c.171 § 12]