§ 62-107. Intent; retirement system as qualified pension plan and trust as exempt organization; administration; employer-financed benefit limitations; annual adjustment; use and investment of assets; return of post-tax member contributions; beginning date of distributions; termination of participation in retirement system; election to rollover to retirement system; interest rate; compliance with section 415 of Internal Revenue Code and Regulations.

(a)

This section is enacted pursuant to federal law that imposes certain administrative requirements and benefit limitations for qualified governmental plans. The board intends that the retirement system be a qualified pension plan under section 401 of the Internal Revenue Code and that the trust maintained pursuant to division 2 be an exempt organization under section 501 of the Internal Revenue Code. The board shall administer the retirement system to fulfill this intent.

(b)

Notwithstanding any other provision of this article, the retirement system shall be administered in compliance with the provisions of section 415 of the Internal Revenue Code and revenue service regulations under that section that are applicable to governmental plans. If there is a conflict between this section and another section of this article, this section prevails.

(c)

The annual benefit otherwise payable to a member at any time shall not exceed the maximum permissible amount under section 415(b) of the Internal Revenue Code. Except as otherwise provided in this section, benefits provided by the retirement system shall not exceed the dollar limit in effect under section 415(b)(1)(A) of the Internal Revenue Code. This limitation is subject to the following conditions:

(1)

The dollar limit must be reduced where a member has fewer than ten years of participation in the retirement system, when retirement benefits under the system commence. This adjustment is made by multiplying the dollar limit by a fraction:

a.

The numerator of which is the number of years (or part thereof) of participation in the retirement system as of, and including, the current limitation year, and

b.

The denominator of which is 10.

If the $10,000.00 minimum benefit under section 415(b)(4) is applicable, that dollar amount must be reduced where a member has fewer than ten years of service with the city at the time the member begins to receive retirement benefits under the system. This adjustment is made by multiplying the $10,000.00 minimum benefit by a fraction:

a.

The numerator of which is the number of years (or part thereof) of service with the city as of, and including the current limitation year, and

b.

The denominator of which is 10.

(2)

If benefits in any form other than a straight life annuity is selected (other than option II, III or IV with a spouse as named survivor beneficiary) or if the benefit as determined includes after-tax employee contributions or rollovers, then the benefit to be tested under this section must be adjusted to an actuarial equivalent straight life annuity, beginning at the same age. For limitation years beginning on or after January 1, 1995, the actuarially equivalent straight life annuity for purposes of applying the limitations under section 415(b) to benefits that are not subject to section 417(e)(3) is equal to the greater of:

a.

The equivalent annual benefit computed using the interest rate and mortality table, or tabular factor, specified for actuarial equivalence for the particular form of benefit payable, or

b.

The equivalent annual benefit computed using a five percent interest rate assumptions and the applicable mortality table.

The applicable mortality table is the mortality table described in Rev. Rul. 95-6. The annual benefit does not include any benefits attributable to employee contributions or rollover contributions, or assets transferred from a qualified plan that was not maintained by the city.

(3)

For limitation years beginning on or after January 1, 1995, if the benefit of a member begins before age 62, the defined benefit dollar limitation applicable to the member at such earlier age is an annual benefit payable in the form of a straight life annuity beginning at the earlier age that is the actuarial equivalent of the defined benefit dollar limitation applicable to the Member at age 62 (adjusted under (a) above, if required). The defined benefit dollar limitation applicable at an age prior to age 62 is determined as the lesser of:

a.

The equivalent amount computed using the interest rate and mortality table (or tabular factor) used for actuarial equivalence for early retirement benefits, or

b.

The actuarial equivalent (at such age) of the defined benefit dollar limitation computed the actuarial equivalent (at such age) of the defined benefit dollar limitation computed using a 5 percent interest rate and the applicable mortality table.

Any decrease in the defined benefit dollar limitation determined in accordance with this paragraph (3) shall not reflect a mortality decrement if benefits are not forfeited upon the death of the member. If any benefits are forfeited upon death, the full mortality decrement is taken into account.

(4)

If the benefit of a member begins after the member attains age 65, the defined benefit dollar limitation applicable to the member at the later age is the annual benefit payable in the form of a straight life annuity beginning at the later age that is actuarially equivalent to the defined benefit dollar limitation applicable to the member at age 65 (adjusted under (a) above, if required). The actuarial equivalent of the defined benefit dollar limitation applicable at an age after age 65 is determined as the lesser of

a.

The equivalent amount computed using the interest rate and mortality table (or tabular factor) used for actuarial equivalence for late retirement benefits; or

b.

The actuarial equivalent (at such age) of the defined benefit dollar limitation computed using a five percent interest rate assumption and the applicable mortality table.

(d)

Section 415(d) of the Internal Revenue Code requires the commissioner of Internal Revenue to adjust the dollar limit described in subsection (c) to reflect cost of living increases. Subsection (c) shall be administered using the limitations applicable to each calendar year as adjusted by the commissioner of Internal Revenue under section 415(d) of the Internal Revenue Code. The retirement system shall adjust the benefits subject to the limitation each year to conform to the adjusted limitation.

(e)

The 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 not be used for any other purpose. The assets shall not be used for or diverted to a purpose other than for the exclusive benefit of the members, vested former members, retirants and beneficiaries before satisfaction of all retirement system liabilities.

(f)

The retirement system shall assure that post-tax contributions made by a member to the retirement system shall be returned to such member following retirement, pursuant to internal revenue service regulations and approved Internal Revenue Service exclusion ratio tables.

(g)

The required beginning date for retirement allowances and other distributions shall not be later than the later of:

(1)

April 1 of the calendar year following the calendar year in which the employee attains age 70½; or

(2)

April 1 of the calendar year following the calendar year in which the employee retires.

(h)

If the retirement system is terminated, the interest of the members, vested former members, retirants, and beneficiaries in the system is nonforfeitable to the extent funded as described in section 411 of the Internal Revenue Code and the related Internal Revenue Service regulations applicable to governmental plans.

(i)

Notwithstanding any other provision of article III to the contrary that would limit a distributee's election under the retirement system, a distributee may elect, at the time and in the manner prescribed by the board, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. This subsection applies to distributions made on or after January 1, 1993.

(j)

For purposes of determining actuarial equivalent retirement allowances under section 62-92, the actuarially assumed interest rate shall be seven percent as of July 1, 2003, with utilization of the 1994 Group Annuity Mortality Table.

(k)

Any distribution made under the retirement system shall be made in accordance with section 401(a)(9) of the Internal Revenue Code and the regulations issued thereunder.

(l)

Notwithstanding any other provision of this article, the compensation of a member of the retirement system shall be taken into account for any year under the retirement system only to the extent that it does not exceed the compensation limit established in section 401 (a)(17) of the Internal Revenue Code, as adjusted for cost-of-living increases in accordance with section 401(a)(17)(B) of the Internal Revenue Code. For purposes of determining benefit accruals in a plan year beginning after December 31, 2001, compensation for any prior determination period shall be limited to $200,000.00. This subsection applies only to any person who first becomes a Member of the retirement system on or after October 1, 1996 ("noneligible participants"), and shall be effective for noneligible participants as of October 1, 1996.

(m)

Notwithstanding any other provision of this Article, contributions, benefits and service credit with respect to qualified military service will be provided under the retirement system in accordance with section 414(u) of the Internal Revenue Code. This subsection applies to all qualified military service on or after December 12, 1994.

(Code 1971, § 24-67; Ord. No. 11-417, § 1.C, 1-3-2012)