Current through Vol. 41, No. 13, March 15, 2024
(a)
General
provisions. Notwithstanding any other provisions of the System to the
contrary, the member contributions paid to and retirement benefits paid from
the Plan shall be limited to such extent as may be necessary to conform to the
requirements of Section 415(b) of the Internal Revenue Code for a qualified
pension plan.
(b)
Participation in other qualified plans: Aggregation of limits.
(1) 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 Section 414(j) of the Internal Revenue Code 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.
(2) 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 Section 414(i) of the
Internal Revenue Code 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.
(c)
Basic
415(b) limitation.
(1) Before January
1, 1995, a member may not receive an annual benefit that exceeds the limits
specified in Section 415(b) of the Internal Revenue Code, 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
Section 415(b)(1)(A) of the Internal Revenue Code, subject to the applicable
adjustments in Section 415(b) of the Internal Revenue Code and subject to any
additional limits that may be specified in the retirement system. 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 Section 415(d) of the Internal Revenue Code and
the regulations thereunder.
(2) For
purposes of Section 415(b) of the Internal Revenue Code, 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 Section 415(n) of the Internal
Revenue Code) and to rollover contributions (as defined in Section 415(b)(2)(A)
of the Internal Revenue Code). The "benefit attributable" shall be determined
in accordance with Treasury Regulations.
(d)
Adjustments to basic 415(b)
limitation for form of benefit. If the benefit under the plan is other
than the form specified in subsection (c)(2), then the benefit shall be
adjusted so that it is the equivalent of the annual benefit, using factors
prescribed in Treasury Regulations.
(1) 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 Section 415(b) of the
Internal Revenue Code 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 benefit as follows:
(2) For
a benefit paid in a form to which Section 417(e)(3) of the Internal Revenue
Code does not apply (that is, a monthly benefit), the actuarially equivalent
straight life annuity benefit that is the greater of (or the reduced Limit
applicable at the annuity starting date which is the "lesser of" when adjusted
in accordance with the following assumptions):
(A) 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
(B) 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 five percent (5%) interest assumption (or the applicable statutory
interest assumption) and (i) for years prior to January 1, 2009, the applicable
mortality rate 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 modifying the applicable provisions of Revenue
Ruling 2001-62), and (ii) for years after December 31, 2008, the applicable
mortality tables described in Section 417(e)(3)(B) of the Internal Revenue Code
(Notice 2008-85 or any subsequent Internal Revenue Service guidance
implementing Section 417(e)(3)(B) of the Internal Revenue Code); or
(3) For a benefit paid in a form
to which Section 417(e)(3) of the Internal Revenue Code applies (that is, a
lump sum benefit), the actuarially equivalent straight life annuity benefit
that is the greatest of (or the reduced Section 415(b) of the Internal Revenue
Code limit applicable at the annuity starting date which is the "least of" when
adjusted in accordance with the following assumptions):
(A) 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;
(B) 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 rate 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 modifying the applicable
provisions of Revenue Ruling 2001-62), and (ii) for years after December 31,
2008, the applicable mortality tables described in Section 417(e)(3)(B) of the
Internal Revenue Code (Notice 2008-85 or any subsequent Internal Revenue
Service guidance implementing Section 417(e)(3)(B) of the Internal Revenue
Code); or
(C) 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(e)-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 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 rate 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 modifying the
applicable provisions of Revenue Ruling 2001-62), and (ii) for years after
December 31, 2008, the applicable mortality tables described in Section
417(e)(3)(B) of the Internal Revenue Code (Notice 2008-85 or any subsequent
Internal Revenue Service guidance implementing Section 417(e)(3)(B) of the
Internal Revenue Code), divided by 1.05.
(e)
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:
(1) Any ancillary benefit which is not
directly related to retirement income benefits;
(2) that portion of any joint and survivor
annuity that constitutes a qualified joint and survivor annuity;
(3) any other benefit not required under
Section 415(b)(2) of the Internal Revenue Code and Treasury Regulations
thereunder to be taken into account for purposes of the limitation of Section
415(b)(1) of the Internal Revenue Code.
(f)
Other adjustments in 415(b)
limitation.
(1) 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 Section 415(b) of the Internal
Revenue Code, 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 ($160,000.00) (as adjusted) annual benefit
beginning at age sixty-two (62).
(2) 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 (15) years of military service, the
adjustments provided for in paragraph (1) of this subsection shall not
apply.
(3) The reductions provided
for in paragraph (1) of this subsection shall not be applicable to
pre-retirement disability benefits or pre-retirement death benefits.
(g)
Less than ten (10) years
of service adjustment for 415(b) limitations. The maximum retirement
benefits payable to any member who has completed less than ten (10) years of
service shall be the amount determined under subsection (c) of this section
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). The reduction
provided by this subsection cannot reduce the maximum benefit below ten percent
(10%). The reduction provided for in this subsection shall not be applicable to
pre-retirement disability benefits or pre-retirement death benefits.
(h)
Ten Thousand Dollar ($10,000.00)
limit. Notwithstanding the foregoing, the retirement benefit payable
with respect to a member shall be deemed not to exceed the 415 limit 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 ($10,000.00) for the applicable
limitation year and for any prior limitation year and the employer has not any
time maintained a qualified defined contribution plan in which the member
participated.
(i)
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:
(1) 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;
(2) 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
(3) thereafter, in any subsequent limitation
year, a member's annual benefit, including any cost-of-living increases, 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.
(j)
Effect of COLA with a lump sum component on 415(b) testing. On and
after January 1, 2009, with respect to a member who receives a portion of the
member's annual benefit in a lump sum, a member's applicable Limit will be
applied taking into consideration cost-of-living increases as required by
Section 415(b) of the Internal Revenue Code and applicable Treasury
Regulations.
(k)
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 Forty Thousand Dollars ($40,000.00) (as adjusted pursuant
to Section 415(d) of the Internal Revenue Code) or one hundred percent (100%)
of the member's compensation.
(1) 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.
(2) 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.
(3) 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).
(A) However, 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.
(B) For limitation years beginning on and
after January 1, 2009, compensation for the limitation year shall also include
compensation paid by the later of 2 1/2 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.
(C) Any payments not described in
subparagraph (B) of this paragraph are not considered compensation if paid
after severance from employment, even if they are paid within 2 1/2 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.
(D) 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).
(E) 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) For limitation years beginning on or
after January 1, 2009, a member's compensation for purposes of subsection (k)
shall not exceed the annual limit under Section 401(a)(17) of the Internal
Revenue Code.
(l)
Service purchases under Section 415(n).
(1) 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:
(A) 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
(B) 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.
(2) 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 paragraph 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.
(3) For purposes of this section the term
"permissive service credit" means service credit:
(A) Recognized by the system for purposes of
calculating a member's benefit under the system,
(B) which such member has not received under
the system, and
(C) 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. Effective for
permissive service credit contributions made in limitation years beginning
after December 31, 1997, such term may include service credit for periods for
which there is no performance of service, and, notwithstanding subparagraph (B)
of this paragraph, may include service credited in order to provide an
increased benefit for service credit which a member is receiving under the
system.
(4) The system
will fail to meet the requirements of this section if:
(A) more than five (5) years of nonqualified
service credit are taken into account for purposes of this paragraph,
or
(B) any nonqualified service
credit is taken into account under this paragraph before the member has at
least five (5) years of participation under the system.
(5) For purposes of paragraph (4) of this
subsection, 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:
(A) 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),
(B) service (including parental, medical,
sabbatical, and similar leave) as an employee (other than as an employee
described in subparagraph (A) of this paragraph) 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,
(C) service as an
employee of an association of employees who are described in subparagraph (A)
of this paragraph, or
(D) military
service (other than qualified military service under Section 414(u) of the
Internal Revenue Code) recognized by the system.
(6) In the case of service described in
subparagraphs (A), (B), or (C) of paragraph (5) of this subsection, 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.
(7) 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):
(A) The limitations of paragraph (4) of this
subsection will not apply in determining whether the transfer is for the
purchase of permissive service credit, and
(B) the distribution rules applicable under
federal law to the system will apply to such amounts and any benefits
attributable to such amounts.
(8) 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.
(m)
Modification of contributions for 415(c) and 415(n) purposes.
Notwithstanding any other provision of law to the contrary, the system 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:
(1) 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.
(2) If payment pursuant to paragraph (1) of
this subsection 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.
(n)
Repayments 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 system
shall not be taken into account for purposes of Section 415 of the Internal
Revenue Code, in accordance with applicable Treasury Regulations.
(o)
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.
Added at 18 Ok Reg 551,
eff 12-28-00 through 7-14-01 (emergency); Added at 18 Ok Reg 3264, eff 7-26-01;
Amended at 27 Ok Reg 1040, eff 5-13-10