RS 11:1458 Computation of retirement benefits - Louisiana Statutes

§1458.  Computation of retirement benefits

A.(1)  This Section is intended to comply with Section 415 of the Internal Revenue Code.

(2)  The normal retirement benefit of a member shall not exceed the dollar amount set forth in this Section.

B.(1)  Maximum annual benefit.  The retirement benefit of any member of the retirement system and which is not attributable to the member's after-tax employee contribution, when expressed as an annual benefit may not exceed one hundred sixty-five thousand dollars per year, as adjusted for increases in the cost of living pursuant to Section 415 of the Internal Revenue Code.  For purposes of determining whether a member's benefit exceeds this limitation, if the normal form of benefit is other than a single life annuity, such form shall be adjusted actuarially to the equivalent of a single life annuity.  This single life annuity shall not exceed the maximum dollar limitation outlined in this Paragraph.  No adjustment is required for qualified joint and survivor annuity benefits; pre-retirement disability benefits; or pre-retirement death benefits.

(2)(a)  Adjustment if benefit begins at age other than social security retirement age.  If benefit distribution begins before age sixty-two, the actual retirement benefit shall not exceed the adjusted dollar limitation.  The adjusted dollar limitation shall be the equivalent, determined in a manner consistent with reduction of benefits for early retirement under the federal Social Security Act, of one hundred sixty-five thousand dollars beginning at age sixty-two, or, if greater, for a benefit beginning on or after age fifty-five, seventy-five thousand dollars per year.  For benefits beginning before age fifty-five, the dollar limitation shall not exceed the actuarial equivalent of seventy-five thousand dollars per year beginning at age fifty-five.

(b)  Adjustment if benefit begins after social security retirement age.  If benefit distribution begins after social security retirement age, the dollar limitation shall be increased to the equivalent of one hundred sixty-five thousand dollars beginning at social security retirement age, as adjusted for increases in the cost of living pursuant to Section 415 of the Internal Revenue Code.

(c)  Social security retirement age defined.  For purposes of this Subsection, the term "social security retirement age" means the age used as the retirement age under 42 U.S.C. 416(l) 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 416(l)(2) of such Act were sixty-two.

(d)  Interest assumption.  The interest rate used for adjusting the maximum limitations above shall be:

(i)  For benefits commencing before social security retirement age and for forms of benefit other than straight life annuity, the greater of five percent, or the rate used to determine actuarial equivalence for other purposes of this retirement system.

(ii)  For benefits commencing after social security retirement age, the lesser of five percent, or the rate used to determine actuarial equivalence for other purposes under this retirement system.

(3)  Adjustment for less than ten years of participation or service.

(a)  If retirement benefits are payable under this retirement system to a member who has less than ten years of participation in the retirement system, the dollar limitation referred to in Paragraph (1) of this Subsection shall be multiplied by a fraction, the numerator of which is the member's number of years of participation in the system and the denominator of which is ten.

(b)  If retirement benefits are payable under this retirement system to a member who has less than ten years of service with the employer, the dollar limitation referred to in Paragraph (9) of Subsection E of this Section shall be multiplied by a fraction, the numerator of which is the member's number of years of service with the employer and the denominator of which is ten.

(4)  Annual adjustment.  The one hundred sixty-five thousand dollar limitation and seventy-five thousand dollar limitation provided in this Subsection shall be adjusted annually to the maximum dollar limits allowable as determined by the commissioner of the Internal Revenue Service under Section 415(d) of the Internal Revenue Code.

(5)  Member or participant in more than one plan.  If a member is a member or participant in more than one defined benefit pension plan maintained by the state, its agencies, or its political subdivisions, then such member's benefit, considered in the aggregate after taking into account the benefits provided by all such retirement plans, shall not exceed the limits provided in this Subsection.

(6)  Treasury regulation applicable.  That portion of the benefit designated herein which is attributable to member contributions shall be determined in accordance with Treasury Regulations §1.415-3(d)(1).

C.  Total annual benefits not in excess of ten thousand dollars.  Notwithstanding the provisions of Subsection B, the benefits payable with respect to a participant under any defined benefit plan shall be deemed not to exceed the limitations of this Subsection if:

(1)  The retirement benefits payable with respect to such participant under such plan and under all other defined benefit plans of the employer do not exceed ten thousand dollars for the plan year, or for any prior plan year, and

(2)  The employer has not at any time maintained a defined contribution plan in which the participant participated.

D.  Average compensation.

(1)  For purposes of R.S. 11:1422 and 1432, average compensation shall include any amounts properly considered as the regular rate of pay of the member, as defined in R.S. 11:231, and unreduced by amounts excluded from income for federal income tax purposes by reason of 26 USC 125, 132(f), 402(e)(3), 402(h)(1)(B), 403(b), 414(h), or 457, or any other provision of federal law of similar effect.

(2)  In addition to other applicable limitations set forth in the plan, and notwithstanding any other provisions of the plan to the contrary, for plan years beginning on or after January 1, 1994, and before January 1, 2002, the annual compensation of each employee taken into account under the plan shall not exceed the Omnibus Budget Reconciliation Act of 1993 annual compensation limit.  The Omnibus Budget Reconciliation Act of 1993 annual compensation limit is one hundred fifty thousand dollars, as adjusted by the commissioner of Internal Revenue for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Internal Revenue Code.  The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding twelve months, over which compensation is determined beginning in such calendar year.  If a determination period consists of fewer than twelve months, the Omnibus Budget Reconciliation Act of 1993 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is twelve.

(3)  For plan years beginning on or after January 1, 2002, the annual compensation limitation shall not exceed two hundred thousand dollars, as adjusted for cost-of-living increases under Section 401(a)(17)(B) of the Internal Revenue Code.  If compensation for an earlier period is taken into account in determining an employee's benefits accruing in the current plan year, the compensation for the earlier period shall be subject to the compensation limit for the current year.

E.  The provisions of this Section shall apply if any member is covered, or has ever been covered, by another plan maintained by the employer, including a qualified plan, or a welfare benefit fund, as defined in Section 419(e) of the Internal Revenue Code, or an individual medical account, as defined in Section 415(l)(2) of the Internal Revenue Code, which provides an annual addition as described in Paragraph (4) of this Subsection.

(1)  If a member is, or has ever been, covered under more than one defined benefit plan maintained by the employer, the sum of the member's annual benefits from all such plans shall not exceed the maximum permissible amount set forth in Subsection D of this Section.

(2)  If the employer maintains or at any time maintained one or more qualified defined contribution plans covering any member in this system, a welfare benefit fund as defined in Internal Revenue Code Section 419(e), or an individual medical account as defined in Internal Revenue Code Section 415(l)(2), the sum of the member's defined contribution fraction and defined benefit fraction shall not exceed 1.0 in any limitation year, and the annual benefit otherwise payable to the member under this system shall be limited in order to satisfy such limitation.  This provision shall no longer be effective for plan years beginning after December 31, 1999.

(3)(a)  "Defined contribution dollar limitation" shall mean forty thousand dollars as adjusted for cost-of-living increases provided in Section 415(d) of the Internal Revenue Code.

(b)  If a member is, or ever has been covered under more than one defined contribution plan maintained by the employer, the sum of the member's annual additions to all such plans for each limitation year shall not exceed the maximum permissible amount.

(c)  The annual addition for any limitation year beginning before January 1, 1987, shall not be recomputed to treat all employee contributions as annual additions.

(4)  "Annual additions" of a member for the limitation year shall mean the sum of the following amounts credited to a member's account for the limitation year:

(a)  Employer contributions.

(b)  Employee contributions.

(c)  Forfeitures.

(d)  Amounts allocated to an individual medical account, as defined in Section 415(l)(2) of the Internal Revenue Code, which is a part of a pension or annuity plan maintained by the employer, are treated as annual additions to a defined contribution plan.  Additionally, amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separated account of a key employee, as defined in Section 419A(d)(3) of the Internal Revenue Code, or under a welfare benefit fund, as defined in Section 419(e) of the Internal Revenue Code, maintained by the employer, are treated as annual additions to a defined contribution plan.

(e)  The employee contribution shall be deemed to be a defined contribution plan.  If a member has made nondeductible employee contributions pursuant to the provisions of this system, the amount of such contributions shall be treated as an annual addition to a qualified defined contribution plan, for purposes of this Section.

(5)  The amount of annual additions which may be credited to the member's account for any limitation year shall not exceed the maximum permissible amount. Contributions and benefits under any other plan of the employer, to the extent that an adjustment is required to satisfy the requirements of this Section in the aggregate, shall be limited or reduced to the extent necessary to satisfy such requirement without reducing accrued benefits; however, only after such other plans have been modified shall the benefits and contributions under this plan be reduced.  As soon as it is administratively feasible after the end of the limitation year, the maximum permissible amount for the limitation year shall be determined on the basis of the member's actual compensation for the limitation year.  If there is an excess amount, the excess shall be disposed of as follows:

(a)  Any nondeductible voluntary employee contribution to the extent it would reduce the excess amount shall be returned to the member.

(b)  If, after the application of Subparagraph (a) of this Paragraph, an excess amount still exists, then any nondeductible mandatory contribution to the extent it would reduce the excess amount shall be returned to the member.

(c)  If, after the application of Subparagraph (b) of this Paragraph, an excess amount still exists, and the member is covered by the plan at the end of the limitation year, the excess amount in the member's account shall be used to reduce employer contributions, including any allocation of forfeitures, for such member in the next limitation year if necessary.

(d)  If after the application of Subparagraph (b) of this Paragraph, an excess amount still exists, and the member is not covered by the plan at the end of the limitation year, the excess amount shall be held unallocated in a suspense account.  The suspense account shall be applied to reduce future employer contributions for all remaining members in the next limitation year, and each succeeding limitation year if necessary.

(e)  If a suspense account is in existence at any time during a limitation year pursuant to the provisions of this Section, it shall not participate in the allocation of the trust's investment gains and losses.  If a suspense account is in existence at any time during a particular limitation year, all amounts in the suspense account shall be allocated and reallocated to members' accounts before any employer or any employee contributions may be made to the plan for that limitation year.  Excess amounts shall not be distributed to members or former members.

(6)  "Excess amount" of a member for a limitation year shall mean the excess of the member's annual additions for the limitation year over the maximum permissible amount.

(7)  The "limitation year" shall be the calendar year, or the twelve consecutive month period elected by the employer hereunder.

(8)(a)  The "maximum permissible amount" for a member for a limitation year shall be the maximum annual addition that may be contributed or allocated to a member's account under the plan for any limitation year and shall not exceed the lesser of:

(i)  The defined contribution dollar limitation.

(ii)  One hundred percent of the member's compensation for the limitation year.

(b)  The compensation limitation provided for in Item (a)(ii) of this Paragraph shall not apply to any contribution for medical benefits within the meaning of Section 401(h) or 419A(f)(2) of the Internal Revenue Code, which is otherwise treated as an annual addition pursuant to Section 415(l) or Section 419A(d)(2) of the Internal Revenue Code.

Acts 1997, No. 691, §1, eff. July 1, 1997; Acts 2004, No. 794, §1.