Current through Vol. 42, No. 1, September 16, 2024
(a) Notwithstanding any other provision of
the administrative code, contributions paid to and benefits paid from the
retirement system shall not exceed the maximum contributions and benefits
permissible under Internal Revenue Code Section 415. For 415 testing purposes,
the limitation year is the calendar year.
(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 Internal Revenue Code Section 414(j)
maintained by the member's employer in the retirement system 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 Internal Revenue Code Section 414(i) maintained by the member's
employer in the retirement system 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 Internal Revenue
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 Internal Revenue Code Section
415(b)(1)(A), subject to the applicable adjustments in Internal Revenue Code
Section 415(b) 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
retirement system in any limitation year be greater than the limit applicable
at the annuity starting date, as increased in subsequent years pursuant to
Internal Revenue Code Section 415(d) and the regulations thereunder.
(2) For purposes of Internal Revenue 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 Internal Revenue Code Section 415(n)) and to rollover contributions (as
defined in Internal Revenue Code Section 415(b)(2)(A)). 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 retirement system 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
any 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 Internal Revenue 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 benefit as follows:
(2) For a benefit paid in a form to which
Internal Revenue Code Section 417(e)(3) does not apply [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 retirement system 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 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 modifying the
applicable provisions of Revenue Rulings 2001-62), and (ii) for years after
December 31, 2008, the applicable mortality tables described in Internal
Revenue Code Section 417(e)(3)(B) (Notice 2008-85 or any subsequent Internal
Revenue Service guidance implementing Internal Revenue Code Section
417(e)(3)(B)); or
(3)
For a benefit paid in a form to which Internal Revenue Code Section 417(e)(3)
applies [a lump sum benefit], the actuarially equivalent straight life annuity
benefit that is the greatest of (or the reduced Internal Revenue Code Section
415(b) 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 table 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 Internal Revenue Code
Section 417(e)(3)(B) (Notice 2008-85 or any subsequent Internal Revenue Service
guidance implementing Internal Revenue Code Section 417(e)(3)(B)); 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 the 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 Internal Revenue Code Section
417(e)(3)(B) (Notice 2008-85 or any subsequent Internal Revenue Service
guidance implementing Internal Revenue Code Section 417(e)(3)(B)), 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
Internal Revenue Code Section 415(b)(2) and Treasury Regulations thereunder to
be taken into account for purposes of the limitation of Internal Revenue Code
Section 415(b)(1).
(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 Internal Revenue 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).
(2) The reductions provided for in (1) above
shall not be applicable to pre-retirement disability benefits or pre-retirement
death benefits.
(g) Less
than Ten (10) Years of Participation. The maximum retirement benefits payable
under OAC 715:10-15-26 to any member who has completed less than ten (10) years
of participation shall be the amount determined under OAC 715:10-15-26(c), as
adjusted under OAC 715:10-15-26(d) and/or OAC 715:10-15-26(f), 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 OAC 715:10-15-26(g) cannot reduce the maximum benefit below 10% of the limit
determined without regard to OAC 715:10-15-26(g). The reduction provided for in
OAC 715:10-15-26(g) shall not be applicable to pre-retirement disability
benefits or pre-retirement death benefits.
(h) Ten Thousand Dollar ($10,000) Limit; Less
than Ten (10) Years of Service. Notwithstanding anything in OAC 715:10-15-26 to
the contrary, the retirement benefit payable with respect to a member shall be
deemed not to exceed the limit set forth in OAC 715:10-15-26(h) if the benefits
payable, with respect to such member under the retirement system 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 in the retirement system, the limit
under OAC 715:10-15-26(h) 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).
(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 Internal Revenue Code Section 415(b)
(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 under Oklahoma
statutes;
(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 under
Oklahoma statutes, shall be tested under the then applicable benefit Limit
including any adjustment to the Internal Revenue Code Section 415(b)(1)(A)
dollar limit under Internal Revenue Code Section 415(d), 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 Internal Revenue Code
Section 415(b) 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 $40,000
(as adjusted pursuant to Internal Revenue Code Section 415(d)) or 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 Internal Revenue Code Section 415(c) 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
Internal Revenue Code Section 414(h) shall not be treated as
compensation.
(3) Solely for
purposes of calculating and complying with the limitations under Internal
Revenue Code Section 415, a member's compensation will be defined as wages
within the meaning of Internal Revenue Code Section 3401(a) 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 Internal Revenue
Code Sections 6041(d), 6051(a)(3) and 6052 and will be determined without
regard to any rules under Internal Revenue Code Section 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 Internal Revenue Code Section 3401(a)(2)).
(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 Internal
Revenue Code Sections 125(a), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b). 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 Internal Revenue Code Section 132(f)(4).
(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 22 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.
(iii) payments pursuant to a nonqualified
unfunded deferred compensation plan, but only if the payments would have been
paid to the member at the same time if the member had continued employment with
the employer and only to the extent that the payment is includible in the
member's gross income.
(iv) Any
payments not described in paragraph (B) above are not considered compensation
if paid after severance from employment, even if they are paid within 2 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 Internal Revenue Code
Section 414(u)(1)) 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.
(v) An employee who is in
qualified military service (within the meaning of Internal Revenue Code Section
414(u)(1)) 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 month period immediately
preceding the qualified military service (or, if shorter, the period of
employment immediately preceding the qualified military service).
(C) 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 Internal Revenue Code Section
401(a)(17).
(l) Service
Purchases under Section 415(n). 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 retirement system, then the requirements of Internal Revenue Code
Section 415(n) will be treated as met only if:
(1) the requirements of Internal Revenue Code
Section 415(b) are met, determined by treating the accrued benefit derived from
all such contributions as an annual benefit for purposes of Internal Revenue
Code Section 415(b), or
(2) the
requirements of Internal Revenue Code Section 415(c) are met, determined by
treating all such contributions as annual additions for purposes of Internal
Revenue Code Section 415(c).
(3)
For purposes of applying this section, the retirement system will not fail to
meet the reduced limit under Internal Revenue Code Section 415(b)(2)(C) solely
by reason of this subparagraph and will not fail to meet the percentage
limitation under Internal Revenue Code Section 415(c)(1)(B) solely by reason of
this section.
(4) For purposes of
this section the term "permissive service credit" means service credit
(A) recognized by the retirement system for
purposes of calculating a member's benefit under the retirement
system,
(B) which such member has
not received under the retirement system, and
(C) which such member may receive only by
making a voluntary additional contribution, in an amount determined under the
retirement system, which does not exceed the amount necessary to fund the
benefit attributable to such service credit.
(5) 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 paragraph (4), subparagraph (B), may include
service credited in order to provide an increased benefit for service credit
which a member is receiving under the retirement system.
(6) The retirement system will fail to meet
the requirements of this section if
(A) more
than five years of nonqualified service credit are taken into account for
purposes of this subparagraph, or
(B) any nonqualified service credit is taken
into account under this paragraph before the member has at least five years of
participation under the retirement system.
(7) For purposes of paragraph (6), 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 Internal
Revenue Code Section 415(k)(3)),
(B) service (including parental, medical,
sabbatical, and similar leave) as an employee (other than as an employee
described in subparagraph (A)) of an education organization described in
Internal Revenue Code Section 170(b)(1)(A)(ii) 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),
or
(D) military service (other than
qualified military service under Internal Revenue Code Section 414(u))
recognized by the retirement system.
(8) In the case of service described in
paragraph (7), subparagraph (A), (B), or (C), 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.
(9) In the case of a trustee-to-trustee
transfer after December 31, 2001, to which Internal Revenue Code Section
403(b)(13)(A) or Internal Revenue Code Section 457(e)(17)(A) applies (without
regard to whether the transfer is made between plans maintained by the same
employer):
(A) the limitations of paragraph
(6) 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.
(10) For an eligible member, the
limitation of Internal Revenue Code Section 415(c)(1) 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 the retirement system 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
retirement system before January 1, 1998.
(11) Nothing in this subsection (l) shall
provide any additional rights to purchase service credit in the retirement
system that are not otherwise expressly provided for under other provisions of
these rules or Oklahoma statutes.
(m) Modification of Contributions for 415(c)
and 415(n) Purposes.Notwithstanding any other provision of law to the contrary,
the retirement system may modify a request by a member to make a contribution
to the retirement system if the amount of the contribution would exceed the
limits provided in Internal Revenue Code Section 415 by using the following
methods:
(1) If the law requires a lump sum
payment for the purchase of service credit, the retirement system may establish
a periodic payment plan for the member to avoid a contribution in excess of the
limits under Internal Revenue Code Section 415(c) or 415(n), pursuant to OAC
715:10-5-4.
(2) If payment pursuant to subparagraph (1)
will not avoid a contribution in excess of the limits imposed by Internal
Revenue Code Section 415(c) or 415(n), the retirement system may either reduce
the member's contribution to an amount within the limits of those sections or
refuse the member's contribution. The rules applicable to picked-up service
purchases under OAC
715:10-5-35
are not subject to this subsection.
(n) Repayments of Cashouts. Any repayment of
contributions (including interest thereon) to the retirement system with
respect to an amount previously refunded upon a forfeiture of service credit
under the retirement system or another governmental plan maintained by the
retirement system shall not be taken into account for purposes of Internal
Revenue Code Section 415, 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 11 Ok Reg 4785, eff 9-12-94 through 7-14-95
(emergency) 1 ; Added at 12 Ok Reg 3285, eff 7-27-95
; Amended at 26 Ok Reg 318, eff 11-12-08 (emergency); Amended at 26 Ok Reg
2379, eff 6-25-09 ; Amended at 30 Ok Reg 1476, eff
7-1-13
1 This emergency action expired
before being superseded by a permanent action. Upon expiration of an emergency
action enacting a new Section, the text of the Section is no longer effective.
Therefore, on 7-15-95 (after the 7-14-95 expiration of the emergency action),
the text of section 715:10-15-26 was no longer effective, and remained as such
until added by permanent action on
7-27-95.
