(a) Compensation in excess of one hundred sixty thousand dollars ($160,000), or such other amount provided in the Internal Revenue Code of 1986, as amended, shall be disregarded. Such amount shall be adjusted for increases in the cost-of-living in accordance with Section 401(a)(17)(B), except that the dollar increase in effect on January 1 of any calendar year shall be effective for the fiscal years beginning with or within such calendar year. If compensation for any prior determination period is taken into account in determining a participant member’s benefits for the current fiscal year, the compensation for such prior determination period is subject to the applicable annual compensation limit in effect for that prior period.
(b) Notwithstanding the foregoing and to the extent applicable to governmental plans as such are defined in Section 414(d) of the Internal Revenue Code of 1986, as amended, in no event may the normal retirement benefit exceed the annual dollar limits imposed by Section 415(b), excluding contributions under Section 414(h)(2). Further, no post severance compensation shall be included for any benefit hereunder. Post severance compensation means amounts paid by the later of: (1) Two and one-half months after an employee’s severance from employment with the city or (2) the end of the limitation year that includes the date of severance from employment with the city; and those amounts would have been included in the definition of compensation if they were paid prior to the employee’s severance from employment. However the payment must be for (a) unused accrued bona fide sick, vacation, or other leave, but only if the participant member would have been able to use the leave if the participant member had continued in employment; or (b) received by a member 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 employee had continued in employment with the city and only to the extent that the payment is includible in the member’s gross income. Notwithstanding the foregoing, in all events no benefit payments shall exceed limits imposed on governmental plans by applicable law.
(c) That portion of a terminated participant member's benefit that is forfeited shall be used only to reduce future costs of the system at such time as it becomes a forfeiture.
(d) Notwithstanding any provision in this subpart to the contrary, the distribution of a participant member’s benefits shall be made in accordance with the following requirements and shall otherwise comply with Section 401(a)(9) and the regulations thereunder, (including regulation 1.401(a)(9)-2), the provisions of which are incorporated herein by reference:
(1)a. A participant member's benefits shall be distributed or must begin to be distributed not later than April 1st of the calendar year following the later of (i) the calendar year in which the participant member attains age 70 1/2 or (ii) the calendar year in which the participant member retires. Such distributions shall be equal to or greater than any required distribution.
b. Alternatively, if the distribution is to be in the form of a joint and survivor annuity or single family annuity, then distributions must begin no later than the applicable April 1st as determined under the preceding paragraph and must be made over the life of the participant member, or the lives of the participant member and the participant member’s designated beneficiary, in accordance with regulations.
(2) Distributions to a participant member and the participant member's beneficiaries shall only be made in accordance with the incidental death benefit requirements of Section 401(a)(9)(G) and the regulations thereunder.
(3) For purposes of this subsection, the life expectancy of a participant member and a participant member's spouse, other than in the case of a life annuity, at the election of the participant member or the participant member's spouse, may be redetermined in accordance with regulations. The election, once made, shall be irrevocable. If no election is made by the time distributions must commence, then the life expectancy of the participant member and the participant member’s spouse shall not be subject to recalculation. Life expectancy and joint and last survivor expectancy shall be computed using the return multiples in Tables V and VI of regulation 1.729
(e) Notwithstanding any provision of this subpart to the contrary that would otherwise limit a distributee's election under this section, a distributee may elect, at the time and in the manner prescribed by the board, to have any portion of an eligible rollover distribution that is equal to at least five hundred dollars ($500) paid directly to an eligible retirement plan specified by the distributee in a direct rollover. For purposes of this subsection the following definitions shall apply:
(1) An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of 10 years or more; any distribution to the extent such distribution is required under Section 401(a)(9); the portion of any other distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); any hardship distribution described in Section 401(k)(2)(B)(i)(IV); and any other distribution that is reasonably expected to total less than two hundred dollars ($200) during a year.
(2) An eligible retirement plan is an individual retirement account described in Section 408(a), an individual retirement annuity described in Section 408(b), an annuity plan described in Section 403(a), a Roth IRA described in Section 408A(b), or a qualified trust described in Section 401(a), that accepts the distributee’s eligible rollover distribution.
(3) A distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p), are distributees with regard to the interest of the spouse or former spouse.
(4) A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee.
(5) A nonspouse beneficiary who is a designated beneficiary under Section 401(a)(9)(E) and the regulations thereunder, by a direct trustee-to-trustee transfer (direct rollover), may roll over all or any portion of his or her distribution to an Individual Retirement Account (IRA) the beneficiary establishes for purposes of receiving the distribution. In order to be able to roll over the distribution, the distribution otherwise must satisfy the definition of an eligible rollover distribution under Section 401(a)(31).
(f) Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act) provisions. In the case of a death or disability occurring on or after January 1, 2007, if a member dies while performing qualified military service (as defined in Section 414(u)), the survivors of the member are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under this system as if the member had resumed and then terminated employment on account of death.
(g) Pension Funding Equity Act of 2004 (PFEA). Solely for purposes of calculating DROP benefits and for converting lump sum amounts for compliance with Section 415, if the system provides a benefit in a form that is subject to the minimum present value requirements of Section 417(e)(3) in a fiscal year beginning in 2004 or 2005, the actuarially equivalent straight life annuity that is used for demonstrating compliance with Section 415 shall be the greater of: (1) the straight life annuity determined using the system's rate and system's mortality table and (2) the straight life annuity determined using 5.5 percent and the applicable mortality table. A benefit is subject to the minimum present value requirements of Section 417(e)(3) if it is any benefit other than a non-decreasing annuity payable for a period of not less than the life of the member (or, in the case of a qualified preretirement survivor annuity, the life of the surviving spouse), or such other benefit described in this subpart.
(h) Notwithstanding any provision of this subpart to the contrary, contributions, benefits, and service credit with respect to qualified military service shall be provided in accordance with Section 414(u).
Last modified: May 3, 2021