The purpose of this section is to limit benefits in accordance with Section 415(b)(10) of the Internal Revenue Code for members who first become participants in this system after December 31, 1989.
Benefits payable to members who were participants in this system before January 1, 1990 shall not be less than the benefits which would have been paid under the terms of the system on October 14, 1987 before applying the limitations of Section 415 of the Internal Revenue Code.
For purposes of this section and Internal Revenue Code Section 415, the plan year will be the limitation year.
A. Basic Limitation.
1. Subject to the adjustments set forth hereafter, the maximum annual amount of retirement allowance payable to a member under this system in the normal form under this chapter will not exceed the lesser of:
a. The defined benefit dollar limitation or its actuarial equivalent payable in a different form; or
b. One hundred (100) percent of the member's highest average annual compensation during any three consecutive calendar years of membership. For purposes of this section, annual compensation shall not include amounts over two hundred thousand dollars ($200,000.00) in any calendar year.
2. For purposes of applying the defined benefit dollar limitation of subsection (A)(1) of this section, the limitation applicable before age sixty-two (62) will be adjusted to the lesser of:
a. The limitation that is the actuarial equivalent of the limitation at age sixty-two (62), except that the greater of a five percent interest rate assumption or the rate specified in Section 2.124.020 of this chapter for determining actuarial equivalence shall apply; or
b. The dollar limitation after adjustments for an early retirement reduction as provided by the system.
3. For purposes of applying the defined benefit dollar limitation of subsection (A)(1) of this section, the limitation applicable after age sixty-two (62) and through Social Security retirement age shall be the defined benefit dollar limitation at Social Security retirement age decreased by 5/9 of one percent for each of the first thirty-six (36) months and by 5/12 of one percent for each of the additional months by which benefits begin before Social Security retirement age.
4. For purposes of applying the defined benefit dollar limitation of subsection (A)(1) of this section, the limitation applicable after Social Security retirement age shall be the defined benefit dollar limitation at Social Security retirement age increased to provide the actuarial equivalent of such retirement allowance payable at Social Security retirement age in accordance with Internal Revenue Code Section 415(b)(2)(D). For purposes of this increase, the interest rate assumption shall be the lesser of five percent or the rate specified in Section 2.124.020 of this chapter for determining actuarial equivalence, and mortality decrements shall be ignored to the extent a forfeiture does not occur at the date of death.
5. For purposes of applying the above limitation, benefits payable in any form other than the normal form under this chapter with no ancillary benefits will be adjusted, as provided by Treasury Department regulations, so that such benefits are the equivalent of a benefit payable under the normal form. For purposes of this section, any ancillary benefit not directly related to retirement income benefits will not be taken into account.
6. "Defined benefit dollar limitation" for any plan year means the dollar limitation set forth in Internal Revenue Code Section 415(b)(1) (ninety-eight thousand sixty-four dollars ($98,064.00) for the limitation year ending in 1989) as adjusted by the Secretary of the Treasury under Internal Revenue Code Section 415(d) to reflect increases in the cost of living, in such manner as the Secretary of the Treasury shall prescribe.
7. "Social Security retirement age" for any plan year means the age used as the retirement age for the member under Section 216(1) of the Social Security Act except that such section shall be applied without regard to the age increase factor, and as if the early retirement age under Section 216(1)(2) of such Act were sixty-two (62).
B. Participation in Other Defined Benefit Plans. The limitation of this subsection with respect to any member who has at any time been a participant in any other qualified defined benefit plan (as defined in ERISA Section 3(35) and Internal Revenue Code Section 414(j)) maintained by the city will apply as if the total benefits payable under all such defined benefit plans in which he or she has been a member were payable from one plan.
C. Benefits Not in Excess of Ten Thousand Dollars. Subsections A and B of this section will not apply to any member who has not at any time participated in any defined contribution plan (as defined in ERISA Section 3(34) and Internal Revenue Code Section 414(i)) maintained by the city if his or her total annual retirement benefit under all defined benefit plans of the city does not exceed ten thousand dollars ($10,000.00) for any year.
D. Fewer Than Ten Years of Service or Participation.
1. The maximum retirement benefits payable under this section to any member who has completed fewer than ten (10) years of service in this plan will be the amount determined under subsection A or subsection C of this section, as applicable, 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).
2. If a member has completed fewer than ten (10) years of participation in this plan, the defined benefit dollar limitation under subsection (A)(6) of this section shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of the member's years of participation (or part thereof) and the denominator of which is ten (10).
3. In no event shall subsection (D)(1) or (2) of this section reduce the dollar or compensation limitations of subsection (A)(1)(b) of this section, or the limitation of subsection C of this section to an amount less than 1/10 of such limitation (determined without regard to this subsection D).
4. To the extent provided by the Secretary of the Treasury, this subsection D shall be applied separately with respect to each change in benefit structure under the system.
E. Membership in this System and Defined Contribution Plan. If a member has at any time been a participant in a qualified defined contribution plan (as defined in ERISA Section 3(34) and Internal Revenue Code Section 414(i)) maintained by the city, the sum of the member's defined benefit plan fraction and defined contribution plan fraction for any plan year will not exceed 1.0.
For purposes of this subsection E only, the following words and phrases will have the meaning specified below:
1. "Defined benefit plan fraction" for any plan year means a fraction in which the numerator is the member's projected annual benefit under the system, as defined below, as of the end of the year and the denominator is the lesser of 1.25 multiplied by the dollar limitation in effect under Internal Revenue Code Section 415(b)(1)(A) for such plan year or 1.4 multiplied by one hundred (100) percent of the member's highest average annual compensation during any three consecutive plan years of membership.
2. "Defined contribution plan fraction" for any plan year means a fraction, not to exceed 1.0, in which the numerator is the sum of all annual additions made on behalf of such member to his participant accounts in such plan year and for all prior plan years and the denominator of which is the lesser of subsections (E)(2)(a) or (b) of this section determined for such plan year and for all prior plan years during which such member was employed by the city.
a. 1.25 multiplied by the dollar limitation in effect under Internal Revenue Code Section 415(c)(1)(A) for such plan year.
b. 1.4 multiplied by twenty-five (25) percent of the member's compensation in such plan year.
The numerator of the defined contribution plan fraction shall be adjusted pursuant to Internal Revenue Service Regulation 1.415-7(d)(1) and Internal Revenue Service Notice 83-10.
3. "Member's projected annual benefit" means the sum of the following:
a. The annual benefit to which the member would be entitled under this system, assuming that the member continues employment until his or her normal retirement age, that the member's compensation continues until his or her normal retirement age at the rate in effect during the current plan year, and that all other factors relevant for determining benefits under the system remain constant at the level in effect during the current plan year; and
b. The annual benefit to which the member would be entitled, in accordance with the assumptions described above, under any other defined benefit plan of the city.
If the member's defined benefit plan fraction and defined contribution plan fraction for any plan year exceeds one, adjustments will be made first by reducing the amount in the numerator of the defined benefit plan fraction, to the extent possible, and second by reducing the amount in the numerator of the defined contribution plan fraction.
F. Preservation of December 31, 1986 Accrued Benefit. If the member's current accrued benefit as of December 31, 1986 exceeds the benefit limitations of this section, then for purposes of Internal Revenue Code Sections 415(b) and (e) the defined benefit dollar limitation will be equal to the member's current accrued benefit on December 31, 1986. For purposes of this subsection, "current accrued benefit" means the member's annual benefit under the system, determined as if the member had terminated employment as of December 31, 1987, expressed as an annual benefit within the meaning of Internal Revenue Code Section 415(b)(2). The amount of the member's current accrued benefit will be determined without regard to any:
1. Change in the terms and conditions of the system after May 5, 1986; or
2. Cost-of-living adjustment occurring after May 5, 1986.
G. Restrictions on Payment of Benefits. Despite any other system provisions, the benefits provided under this system for employees (including retirees) who are among the twenty-five (25) most highly compensated employees of the city as of the original date of establishment of the system by the city, or as of any date after such applicable original date of establishment as of which any amendment changed the system so as to increase the benefits for such highly compensated employees (each date is hereafter referred to as a "restricted date") and whose anticipated annual benefits from the system exceed one thousand five hundred dollars ($1,500.00) (such employees are hereafter referred to as "limited employees") will be subject to the following restrictions:
1. If, on any date before ten (10) years after the applicable restricted date, the system is terminated, the benefits under the system payable to any limited employee will not exceed the benefits that can be provided from the greater of the following:
a. The city contributions (or funds attributable thereto) that would have been applied to provide benefits for the employee under the system as it was in effect on the day before such applicable restricted date, had it continued in effect unchanged to the date the system is terminated; or
b. Twenty thousand dollars ($20,000.00); or
c. The sum of:
i. Such city's contributions (or funds attributable thereto) that would have been applied to provide benefits for the member under the system as in effect on the day before such applicable restricted date if it had been terminated on such day, and
ii. An amount computed by multiplying (1) the lesser of (A) twenty (20) percent of his or her average annual compensation paid by the city over the last five years of his or her employment or (B) ten thousand dollars ($10,000.00) by (2) the number of years elapsed between such applicable restricted date and the date the system is terminated, or
d. The dollar amount equal to the present value of the benefit guaranteed to the limited employee under Section 4022 of ERISA.
2. If, at the end of any plan year before ten (10) years after the applicable restricted date, the city's contributions made pursuant to the system have been insufficient to meet the full current costs of the plan, then no benefits for any limited employee will exceed those that would be provided if the system were terminated at that time until such time as the city's contributions have been sufficient to meet such full current costs of the retirement system. If the Internal Revenue Service determined by the statute or ruling that the provisions of this section are no longer necessary to satisfy the requirements of Internal Revenue Code Section 401(a), this section will be void and of no further effect without the need to amend the retirement system. (Prior code § 34.01.110)