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The retirement system is intended and has been administered to be a qualified pension plan under § 401 of the IRC, as amended, or successor provisions of law, including the Tax Reform Act of 1986 (TRA '86); the Technical Miscellaneous Revenue Act of 1988 (TAMRA); the Unemployment Compensation Amendments of 1992 (UCA); the Omnibus Budget Reconciliation Act of 1993 (OBRA); the Uniformed Service Employment and Reemployment Rights Act of 1994 (USERRA); the Uruguay Round Agreements Act of 1994 (GATT); the Small Business Job Protection Act of 1996 (SBJPA '96); the Taxpayer Relief Act of 1997 (TRA '97); the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA '98); the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA); the Job Creation and Workers Assistance Act of 2002 (JCWAA); the Pension Fund Equity Act of 2004 (PFEA); the Pension Protection Act of 2006 (PPA); the Heroes Earnings Assistance and Relief Tax Act of 2008 (WRERA); and related law, regulations and administrative authority. The retirement system is a governmental plan under IRC § 414(d) and is administered for the exclusive benefit of the plan’s participants and their beneficiaries. The retirement system trust is an exempt organization under IRC § 501. The retirement system shall operate and be administered so as to fulfill the purpose of maintaining a tax-qualified retirement system.
(Ord. 3819, passed 2-16-2012)
In the event the retirement system is discontinued, terminated or partially terminated, all members shall immediately become fully vested in their benefits to the extent funded. The discontinuance or termination shall be carried out in all respects in conformance with applicable statute, rule or regulation of the Federal government or State of Michigan, or any duly constituted agency thereof.
(Ord. 3297, passed 5-22-1995)
(a) Maximum annual earnings. For plan years beginning on or after January 1, 1989 and before July 1, 1996, the annual compensation of each plan participant taken into account for determining all benefits provided under the plan for any determination period shall not include any amounts in excess of the annual compensation limit (originally $200,008.00) provided for in IRC § 401(A)(17) prior to the Omnibus Budget Reconciliation Act of 1993 and adjusted for inflation in the manner provided by IRC § 401(A)(17). For plan years beginning on or after July 1,1996, the annual compensation of each employee taken into account shall not exceed the annual compensation limit provided for in IRC § 401(A)(17), as amended by OBRA '93. This limit may be adjusted as required by federal law for qualified government plans and shall be further adjusted for inflation in the manner provided by IRC § 401(A)(17). Annual compensation means compensation during the plan year or such other consecutive 12 month period over which compensation is otherwise determined under the plan. 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.
(b) Defined benefit plans. The maximum permissible annual pension benefit with respect to any member shall be in accordance with IRC § 415(B) which provides that such annual pension benefits shall not exceed $90,000, as adjusted for inflation, pursuant to IRC § 415(B) (the “dollar limit”).
(1) Special dollar limitations. If the benefit is payable prior to age 62, the dollar limitation shall be reduced to the actuarial equivalent of a benefit commencing at age 62. In the case of any full-time public safety employee, who is a qualified participant as defined in IRC § 415(B)(2)(G), there is no reduction in the dollar limitation. If the benefit is not payable until after age 65, the dollar limitation shall be increased to the actuarial equivalent of a benefit commencing at age 65.
(2) In the case of an employee who has less than ten (10) years of participation in the plan, the dollar limitation shall be reduced 1/10 for each year of participation in accordance with IRC § 415(B)(5).
(c) Excess benefit payment. The retirement system shall not pay any benefit that would exceed the benefit limitations for governmental plans as set forth in IRC § 415 and regulations, as amended.
(d) Compensation. As defined by IRC § 415(C)(3)(D) and Treas. Reg. § 1.415-2(D)(2)(I), compensation means amounts actually paid to the employee during the limitation year, including: wages, salary, professional fees, percentage of profits, commissions, tips and bonuses paid or made available to the member during the limitation year for personal services actually rendered in the course of employment, any elective deferral, and any amount which is contributed or deferred by the employer at the election of the employee and which is not includable in the gross income of the employee by reason of IRC §§ 125, 132(F) or 457.
(Ord. 3297, passed 5-22-1995; Ord. 3592, passed 6-24-2004; Ord. 3817, passed 2-16-2012)
All assets of the retirement system shall be held and invested for the sole purpose of meeting the legitimate obligations of the retirement system and shall be used for no other purpose. No part of the assets shall be used for or diverted to purposes other than for the exclusive benefits of members and beneficiaries prior to satisfaction of all retirement system obligations.
(Ord. 3297, passed 5-22-1995)
(a) General rules.
(1) Distributions from the retirement system shall comply with the requirements of IRC § 401(A)(9) and the regulations thereunder. A member’s interest in the trust must begin to be distributed by the member’s required beginning date, being the later of (I) April 1 of the calendar year following the calendar year that the employee attains the age of 70-1/2, or (II) April 1 of the calendar year in which the member retires. With respect to distributions under the retirement system made for calendar years beginning on or after January 1, 2001, the retirement system will apply the minimum distribution requirements of IRC § 401(A)(9) in accordance with the regulations under IRC § 401(A)(9) that were proposed in January 2001, notwithstanding any provision in the retirement ordinance to the contrary. This amendment shall continue in effect until the end of the last calendar year beginning before the effective date of final regulations under IRC § 401(A)(9) or such other date as may be specified in guidance published by the Internal Revenue Service.
(2) In the case of a distribution in the form of a joint and survivor annuity, if the survivor beneficiary is not the member’s spouse, the method of payment selected must assure that the periodic annuity payable to the survivor annuitant must not at any time on or after the member’s required beginning date, as defined above and in applicable Treasury Regulations, exceed the applicable percentage of the annuity payment payable to the member using the table prescribed in the applicable provisions of the Treasury Regulation § 1.401(A)(9)-6.
(3) Effective on September 8, 2009, the U.S. Department of Treasury issued final regulations under IRC § 401(A)(9) to permit a governmental plan to comply with the required minimum distributions rules of IRC § 401(A)(9) by using a reasonable and good faith interpretation of the statute. The retirement system shall be administered accordingly.
(b) Forfeitures.
(1) Upon a member’s termination date, the value of any forfeitable accrued benefit shall be forfeited by the member as of the termination date. The value of such forfeitures shall be used to reduce the employer’s future contributions under the plan in accordance with IRC § 401(A)(8). No forfeitures under the plan shall be applied to increase the benefits that any member or beneficiary would otherwise receive at any time prior to the time when the plan may be terminated. If a member whose employment has terminated does not retain a vested benefit under the plan, he/she shall no longer be a member or retain or earn credited service under the plan unless and until he/she again becomes an employee.
(c) Forfeitabhjty of accrued benefits.
(1) An employee’s right to his/her normal retirement benefit is nonforfeitable on the attainment of his/her normal retirement age as defined in IRC § 411(A)(8) and in accordance with Rev. Rul. 66-11 and IRC § 411(E)(2). The accrued financial benefits of each member and/or beneficiary of the retirement system shall be a contractual obligation thereof, and shall not be diminished or impaired as protected by Article IX, Section 24 of the State of Michigan Constitution. In the event of termination or partial termination of the plan, a member’s interest is nonforfeitable to the extent funded in conformity with applicable sections of the Code and Treasury Regulations.
(d) Prohibition against reversion.
(1) The retirement system and trust have been created for the exclusive benefit of the members and beneficiaries set forth herein. The funds thereof have been established for the benefit of the members and for the operation of the retirement system. No part of the principle and income of any of the funds of the system and trust shall revert to or be returned to the City prior to the satisfaction of all liabilities hereunder to all members, beneficiaries and anyone claiming by or through them.
(e) Vesting.
(1) A member shall be vested in his/her accrued benefit in accordance with IRC § 411(E) as in effect in 1974.
(f) Actuarial reports.
(1) Annually, or more frequently, the Board of Trustees shall obtain actuarial computations from an enrolled actuary as to the contributions necessary to fund the benefits provided by the plan on a reasonable basis in accordance with any applicable regulations, and such actuary shall certify such amounts to the employer. Contributions accumulated under the plan, along with the earnings thereon, will be distributed in accordance with the terms of the plan.
(g) Assignment of benefits.
(1) None of the benefits, payments, proceeds, claims, or rights of any participant or their beneficiary hereunder shall be subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency law, or other process of law, nor shall any participant or beneficiary have any right to transfer, assign, encumber, or otherwise alienate any of the benefits or proceeds which the participant may expect to receive, contingently or otherwise under the plan, except as provided under a domestic relations order and in accordance with Public Act 100 of 2002, as amended, being MCLA §§ 38.1681 et seq., and Public Act 350 of 1994, as amended, being MCLA §§ 38.2701 et seq.
(h) Plan year.
(1) The plan year shall be the 12 consecutive month period commencing on July 1 and each anniversary thereafter.
(Ord. 3593, passed 6-24-2004; Ord. 3818, passed 2-16-2012)
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