Current through Register Vol. 50, No. 3, March 20, 2024
A. Definitions. As
provided under
R.S.
11:1402(6), effective for
limitation years beginning on or after July 1, 2007, compensation is hereby
defined as follows.
Compensation - the regular pay of the
member, not including any overtime or bonuses;
IRC §415 Compensation - wages, tips and
other compensation required to be reported under §6041 of the Internal
Revenue Code (IRC) (wages, tips and other compensation box on IRS Form
W-2), during the calendar year of the plan (the plan year or determination
period).
B. Exclusions from
Compensation. Compensation shall not include:
1. any amounts that are not includible in IRC
§415 compensation;
2. employer
contributions to a plan of deferred compensation to the extent contributions
are not included in gross income of the employee for the taxable year in which
contributed, or on behalf of an employee to a simplified employee pension plan
and any distributions form a plan of deferred compensation;
3. amounts realized from the exercise of a
non-qualified stock option, or when restricted stock (or property) held by an
employee becomes freely transferable or is no longer subject to a substantial
risk of forfeitures;
4. amounts
realized from the sale, exchange or other disposition of stock acquired under a
qualified stock option;
5. other
amounts that receive special tax benefits, or contributions made by an employer
(whether or not under a salary reduction agreement) towards the purchase of a
IRC § 403(b) annuity contract (whether or not the contributions are excludible
from the gross income of the employee); and
6. pre-tax amounts contributed by the
employee to an IRC §125 cafeteria plan.
C. Determination of IRC §415 Compensation.
IRC §415 compensation must be determined without regard to any rules under IRC
§3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception for
agricultural labor in IRC §3401(a)(2) ).
1.
For plan years beginning on and after January 1, 2001:
a. IRC §415 compensation shall include
elective amounts that are not includible in the gross income of the employee
under IRC §125
2. For
any plan year beginning after December 31, 2001:
a. IRC §415 compensation shall not exceed the
maximum amount of compensation permitted to be taken into account under IRC
§401(a)(17), $200,000 adjusted for the cost of living increases in accordance
with IRC §401(a)(17)(B)
i. The cost-of-living
adjustment in effect for a calendar year applies to annual compensation for the
determination period that begins with or within such calendar year.
3. If a determination
period consists of fewer than 12 months, as a result of a change in plan year
or in the year of the termination of the plan:
a. the IRC §415 compensation limit is an
amount equal to the otherwise applicable IRC §415 compensation limit multiplied
by a fraction, the numerator of which is the number of months in the short
determination period, and the denominator of which is 12;
4. If IRC §415 compensation for any prior
determination period is taken into account in determining a participant's
benefit for the current plan year, the IRC §415 compensation for such prior
determination period is subject to the applicable IRC §415 compensation limit
in effect for that prior period.
D. IRC §415 Compensation Paid After Severance
from Employment
1. Adjusted Compensation. IRC
§415 compensation shall be adjusted for the following types of compensation
paid after a participant 's severance from employment with the employer
maintaining the plan (or any other entity that is treated as the employer
pursuant to IRC §414(b), (c), (m) or (o)). However, amounts described in
Paragraphs 2-8 of this Subsection may only be included in IRC §415 compensation
to the extent such amounts are paid by the later of 2 1/2 months after
severance from employment or by the end of the limitation year that includes
the date of such severance from employment. Any other payment of compensation
paid after severance from employment that is not described in the following
types of compensation is not considered IRC §415 compensation within the
meaning of IRC §415(c)(3), even if payment is made within the time period
specified above.
2. Regular Pay.
IRC §415 compensation shall include regular pay after severance from employment
if:
a. the payment is regular compensation for
services during the participant 's regular working hours, or compensation for
services outside the participant 's regular working hours (such as overtime or
shift differential), commissions, bonuses, or other similar payments;
and
b. the payment would have been
paid to the participant prior to a severance from employment if the participant
had continued in employment with the employer.
3. Leave Cashouts. Leave cashouts shall be
included in IRC §415 compensation if:
a.
those amounts would have been included in the definition of IRC §415
compensation if they were paid prior to the participant 's severance from
employment; and
b. the amounts are
payment for unused accrued bona fide sick, vacation, or other leave, but only
if:
i. the participant would have been able
to use the leave if employment had continued.
4. Deferred Compensation. IRC §415
compensation will include deferred compensation if the compensation would have
been included in the definition of IRC §415 compensation if:
a. it had been paid prior to the participant
's severance from employment; and
b. the compensation is received pursuant to a
nonqualified unfunded deferred compensation plan, but only if:
i. the payment would have been paid at the
same time if the participant had continued in employment with the employer and
only to the extent that the payment is includible in the participant 's gross
income.
5.
Qualified Military Service. IRC §415 compensation does not include payments to
an individual who does not currently perform services for the employer by
reason of qualified military service (as that term is used in IRC §414(u)(1))
to the extent those payments do not exceed the amounts the individual would
have received if the individual had continued to perform services for the
employer rather than entering qualified military service.
6. Permanently and Totally Disabled. IRC §
415 compensation does not include compensation paid to a participant who is
permanently and totally disabled (as defined in IRC §22(e)(3)).
7. Amounts Earned but not Paid. IRC §415
compensation for a limitation year shall not include amounts earned but not
paid during the limitation year solely because of the timing of pay periods and
pay dates.
8. Lost Wages. Payments
awarded by an administrative agency or court or pursuant to a bona fide
agreement by an employer to compensate an employee for lost wages are IRC §415
compensation for the limitation year to which the back pay relates, but only to
the extent such payments represent wages and compensation that would otherwise
be included in IRC §415 compensation.
E. Limitation Year
1. The limitation year:
a. shall be the calendar year of the
fund;
b. is the period that is used
to apply the limitations of IRC §415.
2. The limitation year may only be changed by
amendment to the fund.
a. Furthermore, if the
fund is terminated effective as of a date other than the last day of the fund's
limitation year, then the fund is treated as if the fund had been amended to
change its limitation year.
AUTHORITY NOTE:
Promulgated in accordance with
R.S.
11:1402(6),
R.S.
11:1404(A), and R.S. 49.950
et seq.