Current through 2024-38, September 18, 2024
1. Notwithstanding any other provisions of
the retirement program to the contrary, the member contributions paid to and
retirement benefits paid from each program shall be limited to such extent as
may be necessary to conform to the requirements of Code Section 415 for a
qualified pension plan.
2.
Participation in Other Qualified Plans: Aggregation of Limits
A. The 415(b) limit with respect to any
member who at any time has been a member in any other defined benefit plan as
defined in Code Section 414(j) maintained by the member's employer in this plan
shall apply as if the total benefits payable under all such defined benefit
plans in which the member has been a member were payable from one (1)
plan.
B. The 415(c) limit with
respect to any member who at any time has been a member in any other defined
contribution plan as defined in Code Section 414(i) maintained by the member's
employer in this plan shall apply as if the total annual additions under all
such defined contribution plans in which the member has been a member were
payable from one (1) plan.
3.
Basic 415(b) Limitation
A. Before January 1, 1995, a member may not
receive an annual benefit that exceeds the limits specified in Code Section
415(b), subject to the applicable adjustments in that section. On and after
January 1, 1995, a member may not receive an annual benefit that exceeds the
dollar amount specified in Code Section 415(b)(1)(A), subject to the applicable
adjustments in Code Section 415(b) and subject to any additional limits that
may be specified in the retirement program. In no event shall a member's
benefit payable under the plan in any limitation year be greater than the limit
applicable at the annuity starting date, as increased in subsequent years
pursuant to Code Section 415(d) and the regulations thereunder.
B. For purposes of Code Section 415(b), the
"annual benefit" means a benefit payable annually in the form of a straight
life annuity (with no ancillary benefits) without regard to the benefit
attributable to after-tax employee contributions (except pursuant to Code
Section 415(n) and to rollover contributions (as defined in Code Section
415(b)(2)(A)). The "benefit attributable" shall be determined in accordance
with Treasury Regulations.
4.
Adjustments to Basic 415(b)
Limitation for Form of Benefit
If the benefit under the plan is other than the form
specified in subsection (3)(b), then the benefit shall be adjusted so that it
is the equivalent of the annual benefit, using factors prescribed in Treasury
Regulations.
A. If the form of benefit
without regard to the automatic benefit increase feature is not a straight life
annuity or a qualified joint and survivor annuity, then the preceding sentence
is applied by either reducing the Code Section 415(b) limit applicable at the
annuity starting date or adjusting the form of benefit to an actuarially
equivalent amount [determined using the assumptions specified in Treasury
Regulation Section 1.415(b)-1(c)(2)(ii)] that takes into account the additional
benefits under the form of benefits as described in (b) or (c).
B. For a monthly benefit to which Code
Section 417(e)(3) does not apply, the actuarially equivalent straight life
annuity benefit that is the greater of (or the reduced 415(b) limit applicable
at the annuity starting date which is the "lesser of" when adjusted in
accordance with the following assumptions):
1
The annual amount of the straight life annuity (if any) payable to the member
under the plan commencing at the same annuity starting date as the form of
benefit to the member; or
2 The
annual amount of the straight life annuity commencing at the same annuity
starting date that has the same actuarial present value as the form of benefit
payable to the member, computed using a 5% interest assumption (or the
applicable statutory interest assumption) and (i) for years prior to January 1,
2009, the applicable mortality tables described in Treasury Regulation Section
1.417(e)-1(d)(2) (Revenue Ruling 2001-62 or any subsequent Revenue Ruling or
federal law modifying the applicable provisions of Revenue Ruling 2001-62), and
(ii) for years after December 31, 2008, the applicable mortality tables
described in Code Section 417(e)(3)(B) (Notice 2008-85 or any subsequent
Internal Revenue Service guidance implementing Code Section
417(e)(3)(B)).
C. For a
lump sum benefit to which Code Section 417(e)(3) applies , the actuarially
equivalent straight life annuity benefit that is the greatest of (or the
reduced Code Section 415(b) limit applicable at the annuity starting date which
is the "least of" when adjusted in accordance with the following assumptions):
1 The annual amount of the straight life
annuity commencing at the annuity starting date that has the same actuarial
present value as the particular form of benefit payable, computed using the
interest rate and mortality table, or tabular factor, specified in the plan for
actuarial experience;
2 The annual
amount of the straight life annuity commencing at the annuity starting date
that has the same actuarial present value as the particular form of benefit
payable, computed using a 5.5 percent interest assumption (or the applicable
statutory interest assumption) and (i) for years prior to January 1, 2009, the
applicable mortality tables for the distribution under Treasury Regulation
Section 1.417(e)-1(d)(2) (the mortality table specified in Revenue Ruling
2001-62 or any subsequent Revenue Ruling or federal law modifying the
applicable provisions of Revenue Ruling 2001-62), and (ii) for years after
December 31, 2008, the applicable mortality tables described in Code Section
417(e)(3)(B) (Notice 2008-85 or any subsequent Internal Revenue Service
guidance implementing Code Section 417(e)(3)(B)); or
3 The annual amount of the straight life
annuity commencing at the annuity starting date that has the same actuarial
present value as the particular form of benefit payable (computed using the
applicable interest rate for the distribution under Treasury Regulation Section
1.417(3)-1(d)(3) (the 30-year Treasury rate (prior to January 1, 2007, using
the rate in effect for the month prior to retirement, and on and after January
1, 2007, using the rate then in effect for the first day of the plan year with
a one-year stabilization period)) and (i) for years prior to January 1, 2009,
the applicable mortality tables for the distribution under Treasury Regulation
Section 1.417(e)-1(d)(2) (the mortality table specified in Revenue Ruling
2001-62 or any subsequent Revenue Ruling or federal law modifying the
applicable provisions of Revenue Ruling 2001-62), and (ii) for years after
December 31, 2008, the applicable mortality tables described in Code Section
417(e)(3)(B) (Notice 2008-85 or any subsequent Internal Revenue Service
guidance implementing Code Section 417(e)(3)(B)), divided by 1.05.
5.
Benefits Not
Taken into Account for 415(b) Limitation
For purposes of this section, the following benefits shall
not be taken into account in applying these limits:
A. Any ancillary benefit which is not
directly related to retirement income benefits;
B. That portion of any joint and survivor
annuity that constitutes a qualified joint and survivor annuity;
C. Any other benefit not required under Code
Section 415(b)(2) and Treasury Regulations thereunder to be taken into account
for purposes of the limitation of Code Section 415(b)(1).
6.
Other Adjustments in 415(b)
Limitation
A. In the event the member's
retirement benefits become payable before age sixty-two (62), the limit
prescribed by this section shall be reduced in accordance with Treasury
Regulations pursuant to the provisions of Code Section 415(b), so that such
limit (as so reduced) equals an annual straight life benefit (when such
retirement income benefit begins) which is equivalent to a one hundred sixty
thousand dollar ($160,000) (as adjusted) annual benefit beginning at age
sixty-two (62).
B. In the event the
member's benefit is based on at least fifteen (15) years of service as a
full-time employee of any police or fire department or on fifteen years (15)
years of military service, the adjustments provided for in (a) above shall not
apply.
C. The reductions provided
for in (a) above shall not be applicable to pre-retirement disability benefits
or pre-retirement death benefits.
7.
Less than Ten (10) Years of
Participation
The maximum retirement benefit payable under this section 3
to any member who has completed less than ten (10) years of participation shall
be the amount determined under subsection 3, above, as adjusted under
subsections 4 and/or 6, above, multiplied by a fraction, the numerator of which
is the number of the member's years of participation and the denominator of
which is ten (10). The reduction provided by this subsection 7 cannot reduce
the maximum benefit below 10% of the limit determined without regard to this
subsection. The reduction provided for in this subsection shall not be
applicable to pre-retirement disability benefits or pre-retirement death
benefits.
8.
Ten
Thousand Dollar Limit; Less than Ten (10) Years of Service
Notwithstanding anything in this section 3 to the contrary,
the retirement benefit payable with respect to a member shall be deemed not to
exceed the limit set forth in this section if the benefits payable, with
respect to such member under this plan and under all other qualified defined
benefit pension plans to which the member's employer contributes, do not exceed
ten thousand dollars ($10,000) for the applicable limitation year and for any
prior limitation year and the employer has not at any time maintained a
qualified defined contribution plan in which the member participated; provided,
however, that if the member has completed less than ten (10) years of service
with the employer, the limit under this subsection 8 shall be a reduced limit
equal to ten thousand dollars ($10,000) multiplied by a fraction, the numerator
of which is the number of the member's years of service and the denominator of
which is ten (10).
9.
Effect of COLA without a Lump Sum Component on 415(b) Testing
Effective on and after January 1, 2009, for purposes of
applying the limits under section 415(b) of the Internal Revenue Code (the
"Limit") to a member with no lump sum benefit, the following will apply:
A. a member's applicable Limit will be
applied to the member's annual benefit in the member's first limitation year
without regard to any cost of living adjustments under relevant state
law;
B. to the extent that the
member's annual benefit equals or exceeds the Limit, the member will no longer
be eligible for cost of living increases until such time as the benefit plus
the accumulated increases are less than the Limit; and
C. thereafter, in any subsequent limitation
year, a member's annual benefit, including any cost of living increases under
relevant state law, shall be tested under the then applicable benefit Limit
including any adjustment to the section 415(b)(1)(A) of the Internal Revenue
Code dollar limit under section 415(d) of the Internal Revenue Code, and the
regulations thereunder.
10.
Section 415(c) Limitations on
Contributions and Other Additions
After-tax member contributions or other annual additions with
respect to a member may not exceed the lesser of $40,000 (as adjusted pursuant
to section 415(d) of the Internal Revenue Code) or 100% of the member's
compensation.
A. Annual additions are
defined to mean the sum (for any year) of employer contributions to a defined
contribution plan, member contributions, and forfeitures credited to a member's
individual account. Member contributions are determined without regard to
rollover contributions and to picked-up employee contributions that are paid to
a defined benefit plan.
B. For
purposes of applying section 415(c) of the Internal Revenue Code and for no
other purpose, the definition of compensation where applicable will be
compensation actually paid or made available during a limitation year, except
as noted below and as permitted by Treasury Regulation section 1.415(c)-2, or
successor regulation; provided, however, that member contributions picked up
under section 414(h) of the Internal Revenue Code shall not be treated as
compensation.
C. Compensation will
be defined as wages within the meaning of section 3401(a) of the Internal
Revenue Code and all other payments of compensation to an employee by an
employer for which the employer is required to furnish the employee a written
statement under sections 6041(d), 6051(a)(3) and 6052 of the Internal Revenue
Code and will be determined without regard to any rules under section 3401(a)
of the Internal Revenue Code 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 section 3401(a)(2) of the
Internal Revenue Code).
1 For limitation years
beginning after December 31, 1997, compensation will also include amounts that
would otherwise be included in compensation but for an election under section
125(a), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b) of the Internal Revenue
Code. For limitation years beginning after December 31, 2000, compensation
shall also include any elective amounts that are not includible in the gross
income of the member by reason of section 132(f)(4) of the Internal Revenue
Code.
2 For limitation years
beginning on and after January 1, 2009, compensation for the limitation year
shall also include compensation paid by the later of 21/2 months after a
member's severance from employment or the end of the limitation year that
includes the date of the member's severance from employment if:
i. the payment is regular compensation for
services during the member's regular working hours, or compensation for
services outside the member's regular working hours (such as overtime or shift
differential), commissions, bonuses or other similar payments, and, absent a
severance from employment, the payments would have been paid to the member
while the member continued in employment with the employer; or
ii. the payment is for unused accrued bona
fide sick, vacation or other leave that the member would have been able to use
if employment had continued.
Any payments not described in paragraph (2) above are not
considered compensation if paid after severance from employment, even if they
are paid within 21/2 months following severance from employment, except for
payments to the individual who does not currently perform services for the
employer by reason of qualified military service (within the meaning of section
414(u)(1) of the Internal Revenue Code) to the extent these 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.
An employee who is in qualified military service (within the
meaning of section 414(u)(1) of the Internal Revenue Code) shall be treated as
receiving compensation from the employer during such period of qualified
military service equal to (i) the compensation the employee would have received
during such period if the employee were not in qualified military service,
determined based on the rate of pay the employee would have received from the
employer but for the absence during the period of qualified military service,
or (ii) if the compensation the employee would have received during such period
was not reasonably certain, the employee's average compensation from the
employer during the twelve (12) month period immediately preceding the
qualified military service (or, if shorter, the period of employment
immediately preceding the qualified military service)
3 Back pay, within the meaning of
Treasury Regulation section 1.415(c)-2(g)(8), shall be treated as compensation
for the limitation year to which the back pay relates to the extent the back
pay represents wages and compensation that would otherwise be included under
this definition.
4 Retroactive pay
will be treated as compensation in the year received.
D. For limitation years beginning on or after
January 1, 2009, a member's compensation for purposes of this section shall not
exceed the annual limit under section 401(a)(17) of the Internal Revenue
Code.
11.
Service
Purchases Under Section 415(n)
A.
Effective for permissive service credit contributions made in limitation years
beginning after December 31, 1997, if a member makes one or more contributions
to purchase permissive service credit under the plan, then the requirements of
section 415(n) of the Internal Revenue Code will be treated as met only if:
1 the requirements of section 415(b) of the
Internal Revenue Code are met, determined by treating the accrued benefit
derived from all such contributions as an annual benefit for purposes of
section 415(b) of the Internal Revenue Code, or
2 the requirements of section 415(c) of the
Internal Revenue Code are met, determined by treating all such contributions as
annual additions for purposes of section 415(c) of the Internal Revenue
Code.
3 For purposes of applying
this section, the System will not fail to meet the reduced limit under section
415(b)(2)(C) of the Internal Revenue Code solely by reason of this subparagraph
and will not fail to meet the percentage limitation under section 415(c)(1)(B)
of the Internal Revenue Code solely by reason of this section.
4 For purposes of this section the term
"permissive service credit" means service credit:
i recognized by the System for purposes of
calculating a member's benefit under the System,
ii which such member has not received under
the System, and
iii which such
member may receive only by making a voluntary additional contribution, in an
amount determined under the System, which does not exceed the amount necessary
to fund the benefit attributable to such service credit.
B. Effective for permissive
service credit contributions made in limitation years beginning after December
31, 1997, if permitted under State law, such term may include service credit
for periods for which there is no performance of service, and, notwithstanding
clause A(4)(ii), above, may include service credited in order to provide an
increased benefit for service credit which a member is receiving under the
System.
1 The retirement program will fail to
meet the requirement of this section if :
i
more than five years of nonqualified service credit are taken into account for
purposes of this subparagraph, or
ii any nonqualified service credit is taken
into account under this paragraph before the member has at least five years of
participation under the System.
2 For purposes of subparagraph B(1), above,
effective for permissive service credit contributions made in limitation years
beginning after December 31, 1997, the term "nonqualified service credit" means
permissive service credit other than that allowed with respect to:
i service (including parental, medical,
sabbatical, and similar leave) as an employee of the Government of the United
States, any State or political subdivision thereof, or any agency or
instrumentality of any of the foregoing (other than military service or service
for credit which was obtained as a result of a repayment described in section
415(k)(3) of the Internal Revenue Code),
ii service (including parental, medical,
sabbatical, and similar leave) as an employee (other than as an employee
described in clause (i)) of an education organization described in section
170(b)(1)(A)(ii) of the Internal Revenue Code which is a public, private, or
sectarian school which provides elementary or secondary education (through
grade 12), or a comparable level of education, as determined under the
applicable law of the jurisdiction in which the service was
performed,
iii service as an
employee of an association of employees who are described in clause (i),
or
iv military service (other than
qualified military service under section 414(u) of the Internal Revenue Code)
recognized by the system.
v In the
case of service described in clause (i), (ii), or (iii), such service will be
nonqualified service if recognition of such service would cause a member to
receive a retirement benefit for the same service under more than one
plan.
3 In the case of a
trustee-to-trustee transfer after December 31, 2001, to which section
403(b)(13)(A) of the Internal Revenue Code or section 457(e)(17)(A) of the
Internal Revenue Code applies (without regard to whether the transfer is made
between plans maintained by the same employer):
i the limitations of subparagraph B(1) will
not apply in determining whether the transfer is for the purchase of permissive
service credit, and
ii the
distribution rules applicable under federal law to the system will apply to
such amounts and any benefits attributable to such amounts.
4 For an eligible member, the
limitation of section 415(c)(1) of the Internal Revenue Code shall not be
applied to reduce the amount of permissive service credit which may be
purchased to an amount less than the amount which was allowed to be purchased
under the terms of a Plan as in effect on August 5, 1997. For purposes of this
paragraph an eligible member is an individual who first became a member in the
System before January 1, 1998.
12.
Modification of Contributions for
415(c) and 415(n) Purposes
Notwithstanding any other provision of law to the contrary,
the retirement program may modify a request by a member to make a contribution
to the System if the amount of the contribution would exceed the limits
provided in section 415 of the Internal Revenue Code by using the following
methods:
A. If the law requires a lump
sum payment for the purchase of service credit, the System may establish a
periodic payment plan for the member to avoid a contribution in excess of the
limits under section 415(c) or 415(n) of the Internal Revenue Code.
B. If payment pursuant to paragraph A, above,
will not avoid a contribution in excess of the limits imposed by section 415(c)
or 415(n) of the Internal Revenue Code, the System may either reduce the
member's contribution to an amount within the limits of those sections or
refuse the member's contribution.
13.
Repayment of Cashouts
Any repayment of contributions (including interest thereon)
to the plan with respect to an amount previously refunded upon a forfeiture of
service credit under the plan or another governmental plan maintained by the
retirement program shall not be taken into account for purposes of section 415
of the Internal Revenue Code, in accordance with applicable Treasury
Regulations.
14.
Reduction of Benefits Priority
Reduction of benefits and/or contributions to all plans,
where required, shall be accomplished by first reducing the member's benefit
under any defined benefit plans in which the member participated, such
reduction to be made first with respect to the plan in which the member most
recently accrued benefits and thereafter in such priority as shall be
determined by the plan and the plan administrator of such other plans, and
next, by reducing or allocating excess forfeitures for defined contribution
plans in which the member participated, such reduction to be made first with
respect to the plan in which the member most recently accrued benefits and
thereafter in such priority as shall be established by the plan and the plan
administrator for such other plans provided, however, that necessary reductions
may be made in a different manner and priority pursuant to the agreement of the
plan and the plan administrator of all other plans covering such member.
