(a) Upon a general member's retirement, the member shall receive a straight life retirement allowance and shall have the right to elect to receive a retirement allowance under an option provided in § 39.236 in lieu of a straight life retirement allowance. The straight life retirement allowance shall consist of the benefits provided as follows:
(1) An annuity which shall be the actuarial equivalent of the accumulated contributions standing to the member's credit in his or her accumulated contributions account at the time of retirement; and
(2) A pension which when added to the member's annuity will provide a retirement allowance equal to 1.8% of his or her final average pay multiplied by the number of years, and fraction of a year, of his or her credited service.
(b) Notwithstanding any other provisions of the retirement 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 § 415 of the Internal Revenue Code for a qualified pension plan.
(c) 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 § 415(d) of the Internal Revenue Code) or 100 percent of the member's compensation.
(1) Annual additions are defined to mean the sum (for any year) of employer and member contributions to a defined contribution plan, post-tax member contributions to a defined benefit plan (except for purposes of service purchases, if tested under the modified limit of § 415(b) of the Internal Revenue Code), 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 § 415(c) of the Internal Revenue Code and for no other purpose, the definition of compensation where applicable shall be compensation actually paid or made available during a limitation year, except as noted below and as permitted by Treasury Regulation § 1.415(c)-2, or successor regulation; provided, however, that member contributions picked up under § 414(h) of the Internal Revenue Code shall not be treated as compensation.
(3) Compensation shall be defined as wages within the meaning of § 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 §§ 6041(d), 6051(a)(3) and 6052 of the Internal Revenue Code and shall be determined without regard to any rules under § 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 § 3401(a)(2) of the Internal Revenue Code).
A. However, for limitation years beginning after December 31, 1997, compensation shall also include amounts that would otherwise be included in compensation but for an election under §§ 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 § 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 2½ 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. The payment is pursuant to a nonqualified unfunded deferred compensation plan, but only if the payment 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.
4. Any payments not described in paragraph B. above are not considered compensation if paid after severance from employment, even if they are paid within 2½ 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 § 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 or deemed compensation to the individual if permanently and totally disabled (as defined in § 22(e)(3) of the Internal Revenue Code).
5. An employee who is in qualified military service (within the meaning of § 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).
C. Back pay, within the meaning of Treasury Regulation § 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) If the annual additions for any member for a plan year exceed the limitation under § 415(c) of the Internal Revenue Code, the excess annual addition shall be corrected as permitted under the Employee Plans Compliance Resolution System (or similar IRS correction program).
(5) A member's compensation for purposes of applying these limits shall not exceed the annual limit under § 401(a)(17) of the Internal Revenue Code which applies for that year.
(d) 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 § 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 § 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.
(e) Basic 415(b) Limitation.
(1) Before January 1, 1995, a member may not receive an annual benefit that exceeds the limits specified in § 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 § 415(b)(1)(A) of the Internal Revenue Code, subject to the applicable adjustments in § 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 annual 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 § 415(d) of the Internal Revenue Code and the regulations thereunder.
(2) For purposes of § 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 § 415(n) of the Internal Revenue Code) and to rollover contributions (as defined in § 415(b)(2)(A) of the Internal Revenue Code). The "benefit attributable" shall be determined in accordance with Treasury Regulations.
(f) Adjustments to Basic 415(b) Limitation for Form of Benefit. If the benefit under the plan is other than the form specified in subsection (e)(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 § 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 § 1.415(b)-1(c)(2)(ii)] that takes into account the additional benefits under the form of benefit in subsections (f)(2) and (f)(3).
(2) For a benefit paid in a form to which § 417(e)(3) of the Internal Revenue Code does not apply (generally, a monthly benefit), the actuarially equivalent straight life annuity benefit that is the greater of:
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 § 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 § 417(e)(3)(B) of the Internal Revenue Code (Notice 2008-85 or any subsequent Internal Revenue Service guidance implementing § 417(e)(3)(B) of the Internal Revenue Code); or
(3) For a benefit paid in a form to which § 417(e)(3) of the Internal Revenue Code applies (generally, a lump sum benefit), the actuarially equivalent straight life annuity benefit that is the greatest of:
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 tables for the distribution under Treasury Regulation § 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 § 417(e)(3)(B) of the Internal Revenue Code (Notice 2008-85 or any subsequent Internal Revenue Service guidance implementing § 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 §1.417(e)-1(d)(3) (using the rate in effect for the first day of the limitation year with a one-year stabilization period) and (i) for years prior to January 1, 2009, the applicable mortality tables for the distribution under Treasury Regulation § 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 § 417(e)(3)(B) of the Internal Revenue Code (Notice 2008-85 or any subsequent Internal Revenue Service guidance implementing § 417(e)(3)(B) of the Internal Revenue Code), divided by 1.05.
(4) The actuary may adjust the 415(b) limit at the annuity starting date in accordance with the above subsections (2) and (3).
(g) Benefits For Which No Adjustment of the 415(b) Limit is Required. For purposes of this section, the following benefits shall not be taken into account in adjusting 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 § 415(b)(2) of the Internal Revenue Code and Treasury Regulations thereunder to be taken into account for purposes of the limitation of § 415(b)(1) of the Internal Revenue Code.
(h) 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 for the member's annuity starting date shall be equal to the lesser of (i) the annual amount of a benefit payable in the form of a straight life annuity commencing at the member's annuity starting date that is the actuarial equivalent of the one hundred sixty thousand dollar ($160,000) annual limit (as adjusted under § 415(d) of the Internal Revenue Code and, if required, under subsection (g) for years of participation less than ten (10)), with actuarial equivalence computed using a five percent (5%) interest rate assumption and the applicable mortality table for the annuity starting date as defined in the plan (expressing the member's age based on completed calendar months as of the annuity starting date), and (ii) the one hundred sixty thousand dollar ($160,000) annual limit (as adjusted under § 415(d) of the Internal Revenue Code and, if required, under subsection (i) for years of participation less than ten (10) multiplied by the ratio of the annual amount of the immediately commencing straight life annuity under the plan at the member's annuity starting date to the annual amount of the immediately commencing straight life annuity under the plan at age sixty-two (62), both determined without applying the limitations of this section.
(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 (1) above shall not apply.
(3) The reductions provided for in (1) above shall not be applicable to pre-retirement disability benefits or preretirement death benefits.
(i) Less than Ten (10) Years of Participation or Service Adjustment for 415(b) Limitations. The maximum retirement benefits payable to any member who has completed less than ten (10) years of participation shall be the amount determined under subsection (e), as adjusted under subsection (f) and/or (g), 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 limit under subsection (j) (concerning the $10,000 limit) shall be similarly reduced for any member who has accrued less than ten (10) years of 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 preretirement disability benefits or pre-retirement death benefits.
(j) Ten Thousand Dollar ($10,000) 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) 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.
(k) Effect of COLA on 415(b) Testing. For purposes of applying the limits under § 415(b) of the Internal Revenue Code (the "Limit") to a member with no lump sum benefit, the following shall apply:
(1) A member's applicable Limit shall 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 shall 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 § 415(b)(1)(A) of the Internal Revenue Code dollar limit under § 415(d) of the Internal Revenue Code, and the regulations thereunder.
(l) Effect of a Lump Sum Component on 415(b) Testing. With respect to a member who receives a portion of the member's annual benefit in a lump sum, a member's applicable Limit shall be applied taking into consideration both the portion of the member's benefit subject to § 417(e)(3) of the Internal Revenue Code and the portion not subject to § 417(e)(3) of the Internal Revenue Code, as required by § 415(b) of the Internal Revenue Code and applicable Treasury Regulations.
(m) Service Purchases under § 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 § 415(n) of the Internal Revenue Code shall be treated as met only if:
(1) The requirements of § 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 § 415(b) of the Internal Revenue Code; or
(2) The requirements of § 415(c) of the Internal Revenue Code are met, determined by treating all such contributions as annual additions for purposes of § 415(c) of the Internal Revenue Code.
(3) For purposes of applying this section, the retirement system shall not fail to meet the reduced limit under section 415(b)(2)(C) of the Internal Revenue Code solely by reason of this subsection and shall not fail to meet the percentage limitation under section 415(c)(1)(B) of the Internal Revenue Code solely by reason of this subsection.
(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. 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 retirement system.
(5) The retirement system shall 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.
(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 § 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 clause A.) of an education organization described in § 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 clause (A); or
D. Military service (other than qualified military service under § 414(u) of the Internal Revenue Code) recognized by the retirement system. In the case of service described in clause A., B., or C., such service shall 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 § 403(b)(13)(A) of the Internal Revenue Code or § 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 (5) shall 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 retirement system shall apply to such amounts and any benefits attributable to such amounts.
(8) For an eligible member, the limitation of § 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 retirement system before January 1, 1998.
(n) 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 § 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 retirement system may establish a periodic payment plan for the member to avoid a contribution in excess of the limits under § 415(c) or 415(n) of the Internal Revenue Code.
(2) If payment pursuant to subparagraph (1) shall not avoid a contribution in excess of the limits imposed by § 415(c) or 415(n) of the Internal Revenue Code, 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.
(o) 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 § 415 of the Internal Revenue Code, in accordance with applicable Treasury Regulations.
(p) Effect of Direct Rollover on 415(b) Limit. If the plan accepts a direct rollover of an employee's or former employee's benefit from a defined contribution plan qualified under § 401(a) of the Internal Revenue Code which is maintained by the employer, any annuity resulting from the rollover amount that is determined using a more favorable actuarial basis than required under § 417(e) of the Internal Revenue Code shall be included in the annual benefit for purposes of the limit under § 415(b) of the Internal Revenue Code.
(q) 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.
(1957 Rev. Ords., § 2.517A; 1992 Code, § 35-25) (Ord. 2491, passed 8-7-1967; Ord. 123-78, passed 12-26-1978; Ord. 110-89, passed 10-16-1989; Ord. 110-90, passed 12-3-1990; Ord. 88-91, passed 11-25-1991; Ord. 118-16, passed 12-20-2016)