Sec. 4-32-12. - Limitation on benefits.
A. General limitation. Effective for plan years commencing on or after January 1, 1987, the projected annual benefit of a participant expressed as a single life annuity shall not, for any limitation year, exceed the lesser of $90,000.00 or 100 percent of his or her average aggregate compensation (as defined in code section 415(c)(3)) from the employer for his or her high three consecutive calendar years.
B. Adjustments to dollar limitation. The dollar limitation under subsection A of this section shall be automatically adjusted annually to reflect any cost-of-living adjustments made by the Secretary of the Treasury or his or her delegate, and shall be effective as of January 1 of each calendar year and shall apply to the limitation year ending with or within that calendar year. Anticipated future increases in such dollar limitation beyond the current limitation year shall not be taken into account by the actuary for purposes of determining the funding requirements of the plan under article 6 of this chapter.
C. Participation fewer than ten years.
1. If a participant has completed fewer than ten years of participation, the participant's accrued benefit shall not exceed the defined benefit dollar limitation as adjusted by multiplying such amount by a fraction, the numerator of which is the participant's number of years (or part thereof) of participation in the plan, and the denominator of which is ten.
2. If a participant has completed fewer than ten years of service with the employer or an affiliate, the limitations described in sections 415(b)(1)(B) and 415(b)(4) of the code shall be adjusted by multiplying such amounts by a fraction, the numerator of which is the participant's number of years of service (or part thereof), and the denominator of which is ten.
3. In no event shall this section reduce the limitations provided under sections 415(b)(1) and (4) of the code to an amount less than one-tenth of the applicable limitation (as determined without regard to this section).
D. Changes in benefit structure. To the extent provided by the Secretary of the Treasury, subsection C of this section shall be applied separately with respect to each change in the benefit structure of the plan.
E. Preservation of accrued benefit. If the current accrued benefit of an individual who is a participant as of the first day of the limitation year beginning on or after January 1, 1987, exceeds the benefit limitations under section 415(b) of the code (as modified by this section), then, for purposes of code section 415(b) and (e), the defined benefit dollar limitation with respect to such individual shall be equal to such current accrued benefit. "Current accrued benefit" means a participant's accrued benefit under the plan, determined as if the participant had separated from service as of the close of the last limitation year beginning before January 1, 1987, when expressed as an annual benefit within the meaning of section 415(b) (2) of the code. In determining the amount of a participant's current accrued benefit, the following shall be disregarded:
1. Any change in the terms and conditions of the plan after May 5, 1986; and
2. Any cost of living adjustment occurring after May 5, 1986.
F. Protected annual benefit. For purposes of this section, a participant's projected annual benefit shall be equal to the annual benefit to which he or she would be entitled based on the assumptions that his or her employment continues until his or her normal retirement date, that his or her compensation remains constant from the limitation year under consideration until his or her normal retirement date, and that all other relevant factors used to determine benefits remain constant as of the current limitation year for all future limitation years.
G. Benefits not in excess of $10,000.00. Notwithstanding subsection A of this section, benefits payable shall not be deemed to exceed the limitation of such subsection if such benefits do not exceed $10,000.00 for the limitation year or for any prior limitation year, and the employer has not at any time maintained a defined contribution plan in which the participant participated.
H. 1.0 limitation. If the employer maintains a defined contribution plan in addition to this plan, for a participant covered by such plan the sum of the "defined benefit plan fraction" and the "defined contribution plan fraction" for any plan year shall not exceed 1.0.
1. The defined benefit plan fraction for any limitation year is a fraction, the numerator of which is the participant's projected annual benefit under all defined benefit plans (determined as of the close of the limitation year), and the denominator of which is the lesser of: (i) the product of the maximum dollar limit for such year multiplied by 1.25; or (ii) the product of the percentage of compensation limit for such year multiplied by 1.4, if such plan provided the maximum benefit allowable under section 415(b) of the code as amended by TEFRA.
2. The defined contribution plan fraction for any limitation year is a fraction, the numerator of which is the sum of all of the annual additions (as defined in code section 415(c)(2)) to the participant's individual account under the plan as of the close of the limitation year, and the denominator of which is the sum of the lesser of the following amounts determined for such limitation year and for each prior limitation year of employment with the employer: (i) the product of the maximum dollar limit in effect pursuant to code section 415(c)(1)(a) without regard to code section 415(c)(6) for such year multiplied by 1.25; or (ii) the product of the amount determined under the percentage of compensation limit for such year pursuant to code section 415(c)(1)(b) multiplied by 1.4.
3. If the sum of the defined benefit plan fraction and the defined contribution plan fraction shall exceed 1.0 in any limitation year for any participant in this plan, the administrator shall adjust or freeze the rate of benefit accrual for purposes of a defined benefit plan or the amount of annual additions to a defined contribution plan on behalf of any participant so that the sum of both fractions shall not exceed 1.0 in any limitation year for such participant. The limitation on aggregate benefits from a defined benefit plan and a defined contribution plan shall be complied with by a reduction (if necessary) in the participants benefits under the defined contribution plan before a reduction to this defined benefit plan.
I. Other defined benefit plans. For purposes of applying the limitations set forth in subsection A of this section, all defined benefit plans of the employer, whether or not terminated, shall be treated as one defined benefit plan.
J. Benefits payable before age 62. In applying the dollar limitation set forth in subsection A of this section, with respect to benefits commencing prior to age 62, such dollar limitation shall be adjusted to the actuarial equivalent of a single life annuity beginning at age 62; such dollar limitation shall not be reduced, however, below: (i) if the benefit begins at or after age 55, $75,000.00; or (ii) if the benefit begins before age 55, the amount which is the equivalent of the $75,000.00 limitation for age 55. In determining the actuarial equivalent of such benefit, the interest rate assumption shall not be less than the greater of five percent or the applicable rate set forth in the plan for determining actuarial equivalence.
K. Benefits payable after age 65. In applying the dollar limitation set forth in subsection A of this section, with respect to benefits commencing after age 65, such dollar limit shall be adjusted to the actuarial equivalent of the dollar limit beginning at age 65. Such limitation on the benefit shall not exceed 100 percent of the participant's highest three years of compensation in determining the actuarial equivalent of such benefit, the interest rate assumption shall not exceed the lesser of five percent or the applicable rate set forth in the plan for determining actuarial equivalence.
(Code 1985, § 18-51; Ord. No. 4173, § 1, 4-16-1993)
