19 Del. Admin. Code § 2005-10.0 - Maximum Benefit Limits and Maximum Contribution Limits. [Compliance with IRS Code Section 415; IRS-approved language]

10.1 Employee contributions paid to, and retirement benefits paid from, the Pension Fund may not exceed the annual limits on contributions and benefits, respectively, allowed by §415 of the Internal Revenue Code of 1986.

10.2 Compensation: For purposes of applying these limits only and for no other purpose, the definition of compensation where applicable will 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. Specifically, compensation will be defined as wages within the meaning of §3401(a) 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 of 1986. Compensation will be determined without regard to any rules under Internal Revenue Code Section 3401(a) 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 of 1986.

10.2.1 However, for limitation years beginning after December 31, 1997, compensation will 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 of 1986. For limitation years beginning after December 31, 2000, compensation will also include any elective amounts that are not includible in the gross income of the employee by reason of §132(f)(4) of the Internal Revenue Code of 1986.

10.2.2 The definition of compensation will exclude employee contributions picked up under §414(h)(2) of the Internal Revenue Code of 1986.

10.2.3 For limitation years beginning on and after January 1, 2007, compensation for the limitation year will also include compensation paid by the later of 2 1/2 months after an employee's severance from employment or the end of the limitation year that includes the date of the employee's severance from employment if:

10.2.3.1 The payment is regular compensation for services during the employee's regular working hours, or compensation for services outside the employee'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 employee while the employee continue in employment with the employer; or

10.2.3.2 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

10.2.3.3 The payment is pursuant to a nonqualified unfunded deferred compensation plan, but only if the payments 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.

10.2.3.4 Any payments not described above are not considered compensation if paid after severance from employment, even if they are paid within 21/2 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 of 1986) 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.

10.2.4 Back Pay. 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.

10.2.5 Qualified Military Service. An employee who is in qualified military service (within the meaning of §414(u)(1) of the Internal Revenue Code of 1986) 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).

10.3 Basic 415(b) Limitation Before January 1, 1995, a plan participant may not receive an annual benefit that exceeds the limits specified in §415(b) of the Internal Revenue Code of 1986, subject to the applicable adjustments in that section. On and after January 1, 1995, a plan participant may not receive an annual benefit that exceeds the dollar amount specified in §415(b)(1)(A) of the Internal Revenue Code of 1986, subject to the applicable adjustments in §415(b) of the Internal Revenue Code of 1986. In no event shall a plan participant's annual benefit payable from the Pension Fund 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 of 1986 and the regulations thereunder.

10.4 On and after January 1, 2009, for purposes of applying the limits under §415(b) of the Internal Revenue Code of 1986, the following will apply:

10.4.1 A Plan participant's applicable limit will be applied to the Plan participant's annual benefit in the first limitation year without regard to any automatic cost of living increases;

10.4.2 To the extent the Plan participant's annual benefit equals or exceeds the limit, the Plan participant will 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

10.4.3 Thereafter, in any subsequent limitation year, the Plan participant's annual benefit including any automatic cost of living increase applicable shall be tested under the then applicable benefit limit including any adjustment to the §415(b)(1)(A) of the Internal Revenue Code of 1986 dollar limit under §415(d) of the Internal Revenue Code of 1986 and the regulations thereunder.

10.5 Non-Straight Life Annuity. If the benefit under the plan is other than a straight life annuity, then the benefit shall be adjusted so that it is the equivalent of the annual benefit, using factors prescribed in Treasury Regulations. 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 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 as follows:

10.5.1 For a benefit paid in a form to which §417(e)(3) of the Internal Revenue Code of 1986 does not apply (generally, a monthly benefit), the actuarially equivalent straight life annuity benefit that is the greater of:

10.5.1.1 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

10.5.1.2 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 Rulings 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 of 1986 (Notice 2008-85 or any subsequent Internal Revenue Service guidance implementing §417(e)(3)(B) of the Internal Revenue Code of 1986).

10.5.2 Lump Sum Benefit. For a benefit paid in a form to which §417(e)(3) of the Internal Revenue Code of 1986 applies (generally, a lump sum benefit), the actuarially equivalent straight life annuity benefit that is the greatest of:

10.5.2.1 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 equivalence;

10.5.2.2 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 of 1986 (Notice 2008-85 or any subsequent Internal Revenue Service guidance implementing §417(e)(3)(B) of the Internal Revenue Code of 1986); or

10.5.2.3 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) (the 30-year Treasury rate (prior to January 1 2007, using the rate in effect for the month prior to retirement, and on and after January 1, 2007, using the rate in effect for the first day of the plan 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 of 1986 (Notice 2008-85 or any subsequent Internal Revenue Service guidance implementing §417(e)(3)(B) of the Internal Revenue Code of 1986), divided by 1.05.

10.6 Notwithstanding any other provision of law to the contrary, the Board may modify a request by a Plan participant to make a contribution to the Pension Fund if the amount of the contribution would exceed the limits provided in §415 of the Internal Revenue Code of 1986 by using the following methods:

10.6.1 If the law requires a lump sum payment for the purchase of service credit, the Board may establish a periodic payment plan for the Plan participant to avoid a contribution in excess of the limits under §415(c) or 415(n) of the Internal Revenue Code of 1986.

10.6.2 If payment pursuant to subsection 4.6 .1 will not avoid a contribution in excess of the limits imposed by §415(c) or 415(n) of the Internal Revenue Code of 1986, the Board may either reduce the plan participant's contribution to an amount within the limits of that section or refuse the plan participant's contribution.

10.7 Permissive Service Credit Contributions after December 31, 1997. Effective for permissive service credit contributions made in limitation years beginning after December 31,1997, if a plan participant makes one or more contribution to purchase permissive service credit under the Pension Fund, then the requirements of this section will be treated as met only if:

10.7.1 The requirements of §415(b) of the Internal Revenue Code of 1986 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 of 1986; or

10.7.2 The requirements of §415(c) of the Internal Revenue Code of 1986 are met, determined by treating all such contributions as annual additions for purposes of section 415(c) of the Internal Revenue Code of 1986.

10.7.3 For purposes of applying subsection 10.7 .2, the Pension Fund will not fail to meet the reduced limit under §415(b)(2)(C) of the Internal Revenue Code of 1986 solely by reason of subsection 10.7 of this regulation, and for purposes of applying subsection 10.7 .3 of this regulation the Pension Fund will not fail to meet the percentage limitation under §415(c)(1)(B) of the Internal Revenue Code of 1986 solely by reason of subsection 9.7 of this regulation.

10.7.4 For purposes of subsection 12.9 of this regulation, the term "permissive service credit" means service credit that is:

10.7.4.1 Recognized by the Pension Fund for purposes of calculating a plan participant's benefit under the Pension Fund;

10.7.4.2 Which such Plan participant has not received under the Pension Fund; and

10.7.4.3 Which such Plan participant may receive only by making a voluntary additional contribution, in an amount determined under the Pension Fund, which does not exceed the amount necessary to fund the benefit attributable to such service credit.

10.7.5 Permissive Service Credit Contributions after December 31, 1997. 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 subsection 10.7 .5 of this regulation, may include service credited in order to provide an increased benefit for service credit which a plan participant is receiving under the Pension Fund.

10.7.6 The Pension Fund will fail to meet the requirements of this subsection 10.7 .6 of this regulation if:

10.7.6.1 More than five (5) years of nonqualified service credit are taken into account for purposes of subsection 10.7 .6.1; or

10.7.6.2 Any nonqualified service credit is taken into account under subsection 10.6 of this regulation before the plan participant has at least five (5) years of participation under the Pension Fund.

10.7.7 For purposes of subsection 10.7 .5 of this regulation, 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:

10.7.7.1 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 of 1986;

10.7.7.2 Service (including parental, medical, sabbatical, and similar leave) as an employee (other than as an employee described in clause (i)) of an education organization described in §170(b)(1)(A)(ii) of the Internal Revenue Code of 1986 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;

10.7.7.3 Service as an employee of an association of employees who are described in subsection 10.7 .7.1 of this regulation; or

10.7.7.4 Military service (other than qualified military service under §414(u) of the Internal Revenue Code of 1986) recognized by such governmental plan.

10.7.8 In the case of service described in subsections 10.7 .7.1,10.7.7.2, or 10.7.7.3 of this regulation, such service will be nonqualified service if recognition of such service would cause a Plan participant to receive a retirement benefit for the same service under more than one plan.

10.7.9 In the case of a trustee-to-trustee transfer after December 31, 2001, to §403(b)(13)(A) or 457(e)(17)(A) of the Internal Revenue Code of 1986 applies (without regard to whether the transfer is made between plans maintained by the same employer).

10.7.10 The limitations of subsection 10.7 of this regulation will not apply in determining whether the transfer is for the purchase of permissive service credit; and

10.7.11 The distribution rules applicable under federal law to the Pension Fund will apply to such amounts and any benefits attributable to such amounts.

10.7.12 For an eligible Plan participant, the limitation of §415(c)(1) of the Internal Revenue Code of 1986 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 the Delaware Code as in effect on August 5, 1997. For purposes of subsection 4.7 .10 of this regulation, an eligible plan participant is an individual who first became a plan participant in the Pension Fund before January 1, 1998.

10.8 For purposes of §415 of the Internal Revenue Code of 1986, the limitation year is January 1 through December 31.

Notes

19 Del. Admin. Code § 2005-10.0

25 DE Reg. 272 (9/1/2021) (final)