KPPA received a Private Letter Ruling from the IRS approving Tier 2 members to transfer their accounts to Tier 3. Tier 1 members are prohibited from transferring their account to Tier 3 because the employee contributions must be the same between the defined benefit plan and the hybrid cash balance plan.
Tier 2 members that choose this option will have their accumulated contributions, less any interest earned, deposited into a hybrid cash balance account. Employer pay credits will be added to the accumulated account balance for each month the member contributed prior to their election date. Interest credits will only be applied for periods on or after the effective date of election.
Service purchases made as a Tier 2 member that are not available under Tier 3 will be refunded and service reduced accordingly if the member opts-in to Tier 3.
Switching to Tier 3 may require a member to retire later than he or she would have been eligible to do so had he or she remained in Tier 2; Tier 2 members can retire with a reduced retirement, whereas Tier 3 members have no reduced retirement option.
The decision to opt-in to Tier 3 is an irrevocable choice and members who do so will be subject to the same statutes and regulations governing Tier 3 membership as those whose participation date is 1/1/2014 and later.