(A) Basic limitation. Notwithstanding any other provisions of the plan 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 of the IRC 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 IRC 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 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 IRC 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 plan.
(C) Basic 415(b) limitation. Subject to the adjustments hereinafter set forth, the maximum amount of annual benefit payable with respect to a member under this plan shall not exceed $160,000. For purposes of applying this limitation, 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 emp1oyee contributions (except pursuant to Section 415(n) of the IRC) and to rollover contributions (as defined in Section 415(b)(2)(A) of the IRC). The ”benefit attributable” shall be determined in accordance with Treasury Regulations. For purposes of this section, the following benefits shall not be taken into account:
(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 IRC and Regulations thereunder to be taken into account for purposes of the limitation of Section 415(b)(1) of the IRC.
(D) Adjustments to basic 415(b) limitation for form of benefit. If the benefit under the plan is other than the annual benefit specified in subsection (C) above, 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 IRC 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 IRC 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 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 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 Ruling 2001-62), and (ii) for years after December 31, 2008, the applicable mortality tables described in Section 417(e)(3)(B) of the IRC (Notice 2008-85 or any subsequent Internal Revenue Service guidance implementing Section 417(e)(3)(B) of the IRC); or
(3) For a benefit paid in a form to which Section 417(e)(3) of the IRC applies [a lump sum benefit], the actuarially equivalent straight life annuity benefit that is the greatest of (or the reduced Section 415(b) of the IRC 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% 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 Section 417(e)(3)(B) of the IRC (Notice 2008-85 or any subsequent Internal Revenue Service guidance implementing Section 417(e)(3)(B) of the IRC); 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 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 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 IRC (Notice 2008-85 or any subsequent Internal Revenue Service guidance implementing Section 417(e)(3)(B) of the IRC), divided by 1.05.
(E) Other adjustments in limitations.
(1) In the event the member’s retirement benefits become payable before age 62, the $160,000 limitation prescribed by this section shall be reduced in accordance with regulations issued by the Secretary of the Treasury pursuant to the provisions of Section 415(b) of the IRC, so that such limitation (as so reduced) equals an annual benefit (beginning when such retirement income benefit begins) which is equivalent to a $160,000 annual benefit beginning at age 62.
(2) The reductions provided for in (E)(1) above shall not be applicable to disability benefits or pre-retirement death benefits.
(3) The reductions provided for in (E)(1) above shall not be applicable in the event the member’s benefit is based on at least 15 years of service as a full-time employee of any police or fire department or on 15 years of military service.
(4) In the event the member's retirement benefit becomes payable after age 62, there shall be no adjustment to the limitation set forth in subsection (A) herein based on the member's age at benefit commencement.
(5) The reductions provided for in (E)(1) above shall be applied separately with each change in the benefit structure to the extent provided for in Treasury Regulations.
(F) Less than ten years of participation or service. The maximum retirement benefits payable under this section to any member who has completed less than ten years of credited service with the city shall be the amount determined under subsection (C) of this section, as adjusted under subsection (D) and/or (E), multiplied by a fraction, the numerator of which is the number of the member’s years of participation (but no less than one) and the denominator of which is ten. The limit under subsection (G) (concerning the $10,000 limit) shall be similarly reduced for any member who has accrued less than ten years of credited service, except the fraction shall be determined with respect to years of service instead of years of participation. The reduction provided by this subsection 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 disability benefits or pre-retirement death benefits.
(F) Less than ten years of service. The maximum retirement benefits payable under this section to any member who has completed less than ten years of credited service with the city 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 credited service (but no less than one) and the denominator of which is ten. The reduction provided for in this subsection shall not be applicable to disability benefits or pre-retirement death benefits.
(G) Ten thousand dollar limit. Notwithstanding the foregoing, the retirement benefit payable with respect to a member shall be deemed not to exceed the limitations 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 city contributes, do not exceed $10,000 for the applicable plan year and for any prior plan year and the city has not at any time maintained a qualified defined contribution plan in which the member participated.
(H) 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 IRC (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 § 34.038;
(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 § 34.038, shall be tested under the then applicable benefit limit including any adjustment to the Section 415(b)(1)(A) of the IRC dollar limit under Section 415(d) of the IRC, and the regulations thereunder.
(I) 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 IRC and applicable Treasury Regulations.
(J) 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 IRC) 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 Section 415(c) of the IRC 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 IRC shall not be treated as compensation.
(3) Compensation will be defined as wages within the meaning of Section 3401(a) of the IRC 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 IRC and will be determined without regard to any rules under Section 3401(a) of the IRC 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 IRC).
(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 IRC. 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 IRC.
(b) For limitation years beginning on and after January 1, 2008, compensation for the limitation year shall also include compensation paid by the later of two and one-half 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:
1. 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
2. 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; or
3. 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.
Any payments not described in this paragraph are not considered compensation if paid after severance from employment, even if they are paid within two and one-half 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 IRC) to the extent these payments do not exceed the amounts th 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 IRC) 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 12-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, 2008, a member’s compensation for purposes of this subsection shall not exceed the annual limit under Section 401(a)(17) of the IRC.
(K) 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 plan, then the requirements of Section 415(n) of the IRC will be treated as met only if:
(1) The requirements of Section 415(b) of the IRC are met, determined by treating the accrued benefit derived from all such contributions as an annual benefit for the purposes of Section 415(b) of the IRC, or
(2) The requirements of Section 415(c) of the IRC are met, determined by treating all such contributions as annual additions for purposes of Section 415(c) of the IRC.
(3) For purposes of applying this section, the plan will not fail to meet the reduced limit under Section 415(b)(2)(C) of the IRC solely by reason of this subsection and will not fail to meet the percentage limitation under Section 415(c)(1)(B) of the IRC solely by reason of this section.
(4) For purposes of this section, the term PERMISSIVE SERVICE CREDIT means service credit:
(a) Recognized by the plan for purposes of calculating a member’s benefit under the plan,
(b) Which such member has not received under the plan, and
(c) Which such member may receive only by making a voluntary additional contribution, in an amount determined under the plan, 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 clause (b), may include service credited in order to provide an increased benefit for service credit which a member is receiving under the plan.
(5) The plan 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 plan.
(6) For purposes of paragraph (5), 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 IRC),
(b) Service (including parental, medical, sabbatical, and similar leave) as an employee (other than as an employee described in clause (a)) of an education organization described in Section 170(b)(1)(A)(ii) of the IRC 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 clause (a), or
(d) Military service (other than qualified military service under Section 414(u) of the IRC) recognized by the plan.
In the case of service described in clause (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.
(7) In the case of a trustee-to-trustee transfer after December 31, 2001, to which Section 403(b)(13)(A) of the IRC or Section 457(e)(17)(A) of the IRC applies (without regard to whether the transfer is made between plans maintained by the same employer):
(a) The limitations of paragraph (5) 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 plan 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 IRC 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 plan before January 1, 1998.
(L) Modification of contributions for 415(c) and 415(n) purposes. Notwithstanding any other provision of law to the contrary, the plan may modify a request by a member to make a contribution to the plan if the amount of the contribution would exceed the limits provided in Section 415 of the IRC by using the following methods:
(1) If the law requires a lump sum payment for the purchase of service credit, the plan 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 IRC.
(2) If payment pursuant to subparagraph (1) will not avoid a contribution in excess of the limits imposed by Section 415(c) or 415(n) of the IRC, the plan may either reduce the member’s contribution to an amount within the limits of those sections or refuse the member’s contribution.
(M) 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 city shall not be taken into account for purposes of Section 415 of the IRC, in accordance with applicable Treasury Regulations.
(N) Reduction of benefits. 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 board 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 board 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 board and the plan administrator of all other plans covering such member.
(O) Cost-of-living adjustments. The limitations as stated in subsections (A), (B), (D) and (F) herein shall be adjusted to the time payment of a benefit begins in accordance with any cost-of-living adjustments prescribed by the Secretary of the Treasury pursuant to Section 415(d) of the IRC.
(P) Limitation year. For 415 testing purposes, the limitation year is the calendar year.
(Ord. 2007-22, passed 1-9-07; Am. Ord. 2010-35, passed 6- 22-10; 2012-61, passed 7-24-12)