Ohio Administrative Code Title 3307:2 - Defined Contribution
🔎 Detailed Explanation of Ohio Administrative Code Title 3307:2 – Defined Contribution
⚖️ 1. Purpose and Scope of OAC Title 3307:2
Title 3307:2 of the Ohio Administrative Code governs the Defined Contribution Plan administered by the State Teachers Retirement System (STRS) of Ohio.
STRS is the public retirement system for Ohio’s public educators, created under Chapter 3307 of the Ohio Revised Code (ORC).
OAC Title 3307:2 specifically regulates the defined contribution (DC) component, an alternative to the traditional defined benefit (DB) pension plan.
The rules under this title implement and administer provisions of R.C. 3307.81 – 3307.89, focusing on individual retirement accounts, contributions, investment options, plan elections, and distributions.
This plan gives members more control over their investments, but also more responsibility and risk, compared to the defined benefit plan.
🧱 2. Structure of Title 3307:2
OAC Title 3307:2 is organized into several rules, each dealing with specific aspects of the Defined Contribution Plan. Key areas include:
| Rule Number | Subject |
|---|---|
| 3307:2-1-01 | Definitions |
| 3307:2-2-01 to 3307:2-2-04 | Eligibility, elections, and participation |
| 3307:2-3-01 to 3307:2-3-05 | Contributions, vesting, rollovers |
| 3307:2-4-01 to 3307:2-4-04 | Investments and allocation of accounts |
| 3307:2-5-01 to 3307:2-5-06 | Distributions, death benefits, annuitization |
| 3307:2-6-01 to 3307:2-6-04 | Re-employment and return to service |
| 3307:2-7-01 | Miscellaneous provisions including compliance with federal tax law (as incorporated into Ohio law) |
🧾 3. Key Legal Concepts in OAC Title 3307:2
A. Defined Contribution vs. Defined Benefit
Defined Benefit (DB): Retirement benefit is calculated based on a formula (e.g., years of service × final average salary).
Defined Contribution (DC): Benefit is based on contributions made by the employee (and possibly employer) and the investment performance of those contributions.
B. Plan Elections (Rule 3307:2-2)
New members of STRS Ohio have a limited window (typically 180 days) to elect between the DB plan, DC plan, or a Combined Plan.
Once an election is made, it is usually irrevocable after the deadline passes, subject to some exceptions (e.g., election errors, administrative mistakes).
C. Contributions and Vesting (Rule 3307:2-3)
Employee contributions are mandatory; employer contributions may be allocated differently between administrative costs and the member's account.
Vesting (i.e., ownership of the employer contribution) typically occurs over a five-year period.
Members are always 100% vested in their own contributions, but may lose unvested employer contributions if they leave early.
D. Investments and Account Management (Rule 3307:2-4)
Members select from a list of STRS-approved investment options, ranging from low-risk to high-risk funds.
Members may change allocations periodically, subject to STRS rules.
E. Distributions (Rule 3307:2-5)
Distributions are allowed upon:
Retirement
Termination of employment
Death
Options include lump-sum withdrawals, rollovers, annuities, or periodic payments.
Required Minimum Distributions (RMDs) must begin at age 73, in line with federal tax code as integrated into Ohio law.
F. Return to Work (Rule 3307:2-6)
A retiree who returns to covered service may impact eligibility for future benefits.
In certain cases, a new membership may be created, restarting the contribution and vesting process.
⚖️ 4. Relevant Ohio Case Law
While there are limited direct cases interpreting OAC Title 3307:2 specifically, several Ohio decisions provide relevant legal guidance on public retirement systems, plan elections, and administrative discretion:
A. State ex rel. Mallory v. State Teachers Retirement System, 82 Ohio St.3d 235 (1998)
Issue: Whether STRS abused its discretion in denying a member's request to change plan participation after deadline.
Holding: STRS has broad discretion in interpreting its rules, and the court upheld its decision when it was not arbitrary or capricious.
Relevance: Supports the finality of plan elections under OAC 3307:2-2 and the limited ability to change elections after statutory deadlines.
B. State ex rel. Burch v. Ohio State Teachers Retirement System, 148 Ohio App.3d 275 (2002)
Issue: Vesting and eligibility for employer contributions after termination.
Holding: The court upheld STRS’s denial of benefits where the member failed to meet the vesting period.
Relevance: Reinforces the vesting rules in OAC 3307:2-3, showing that partial service doesn't entitle a member to full employer contributions.
C. State ex rel. Dutton v. State Teachers Retirement System, 2008-Ohio-3265 (10th Dist.)
Issue: Whether STRS properly denied a service retirement benefit based on timing of termination.
Holding: STRS’s application of its administrative rules was upheld because it was consistent with the statutory framework and its own policies.
Relevance: Affirms STRS’s discretion in interpreting administrative rules, especially regarding eligibility and benefit timing.
D. State ex rel. Cooke v. State Teachers Retirement System, 2009-Ohio-2328
Issue: Whether STRS’s interpretation of retirement eligibility based on combined service was correct.
Holding: The court deferred to STRS’s interpretation of its own administrative rules unless clearly unreasonable.
Relevance: Emphasizes judicial deference to administrative agencies like STRS in interpreting OAC rules, including those in Title 3307:2.
📘 5. Summary Table
| Issue | Rule in OAC 3307:2 | Case Law | Key Point |
|---|---|---|---|
| Election of Defined Contribution Plan | 3307:2-2-02 | Mallory, 82 Ohio St.3d 235 | Elections are generally irrevocable after 180 days |
| Vesting of Employer Contributions | 3307:2-3-02 | Burch, 148 Ohio App.3d 275 | Full vesting usually requires 5 years of service |
| STRS Discretion in Benefit Decisions | All rules | Dutton, Cooke cases | Courts defer to STRS unless decision is arbitrary or unlawful |
| Re-employment After Retirement | 3307:2-6-01 | — | May impact plan participation and future benefits |
🏛️ 6. Practical Implications
New STRS Members: Must understand the differences between DB, DC, and Combined Plans before making an irrevocable election.
Educators Leaving Early: Should review vesting timelines to avoid losing employer contributions.
Retirees Returning to Work: May be subject to re-enrollment and different benefit rules under 3307:2-6.
Legal Practitioners: Should advise clients that STRS has broad discretion in interpreting and applying these rules, and judicial review is limited.
✅ Conclusion
OAC Title 3307:2 establishes the administrative framework for Ohio’s Defined Contribution retirement plan under STRS. It covers elections, contributions, vesting, investments, and distributions. Ohio courts have upheld the STRS’s broad administrative authority and have emphasized the finality of plan elections, the importance of vesting periods, and the requirement for strict compliance with procedural deadlines.
RELATED Blog
0 comments