§ 4-20-2. Limitations on 25 highest paid employees.

A.

Definitions. For purposes of this section:

1.

Annual compensation means, for each participant, either:

a.

His or her average annual compensation;

b.

Such average annual compensation over the last five years; or

c.

His or her last annual compensation if such compensation is reasonably similar to his or her average regular annual compensation for the five preceding years.

2.

Benefit means, for each participant, an amount which includes:

a.

Any periodic income;

b.

Any withdrawal values payable to a living participant; and

c.

The cost of any death benefits which may be payable after retirement on behalf of a participant, but shall not include the cost of any death benefits with respect to a participant before retirement nor the amount of any death benefit actually payable after the death of a participant whether such death occurs before or after retirement.

3.

Full current costs means the normal cost of the plan for all years since the establishment of the plan, plus interest on any unfunded liability during such period. The "normal cost" of the plan for any year refers to the amount actuarially determined which would be required as a contribution by the city for such year to maintain the plan if the plan had been in effect from the beginning of employment of each then included participant and if such costs for prior years had been paid and all actuarial assumptions had been fulfilled.

4.

Restricted date means the original effective date of the plan or the effective date of any subsequent amendment which substantially increases benefits.

5.

Unrestricted date means the tenth anniversary of any restricted date.

B.

Application. The limits in subsection C of this section shall apply to a participant only if both:

1.

His or her anticipated annual benefit exceeds $1,500.00; and

2.

Such participant was among the 25 highest paid employees as of a restricted date; and either

3.

The plan is terminated before an unrestricted date; or

4.

The benefit of such participant becomes payable before an unrestricted date; or

5.

The benefit of such participant becomes payable after an unrestricted date but before the full current costs of the plan for the first ten years of the plan have been met.

If subsection (B)(4) of this section is applicable, the limitations shall remain in effect until the later of the expiration of the ten-year period commencing with the applicable restricted date or the date on which the full current costs have been met. If subsection (B)(5) of this section is applicable, the limitations shall continue to apply until the full current costs have been met for the first time.

C.

Benefit limitations. A participant's benefits shall not exceed the amount which can be provided from whichever of the following is greater:

1.

A dollar amount equal to the present value of the benefit guaranteed for such participant under ERISA section 4022, determined in accordance with regulations of the pension benefit guaranty corporation ("PBGC") on the date this plan terminates or, if earlier, on the date the participant's benefit commences, as if this plan had terminated on such date, provided the participant is a substantial owner within the meaning of ERISA section 4022(b)(5);

2.

A dollar amount equal to the present value of the maximum benefit described in ERISA section 4022(b)(3)(B), determined in accordance with regulations of the PBGC on the date this plan terminates or, if earlier, on the date the participant's benefit commences, as if this plan had terminated on such date, without regard to any other limitations in ERISA section 4022, provided the participant is not a substantial owner within the meaning of ERISA section 4022(b)(5);

3.

The city contributions, or funds attributable thereto, which would have been applied to provide benefits for the participant, if this plan had not been amended so as substantially to increase benefits;

4.

$20,000.00; or

5.

The sum of:

a.

The city contributions, or funds attributable thereto, which would have been applied to provide benefits for the participant if this plan had been terminated on the date before such amendment (if applicable); and

b.

The amount computed by multiplying the number of years for which the full current costs of this plan were met after the restricted date by 20 percent of the first $50,000.00 of the participant's annual compensation.

D.

Exceeding the limitations. The limitations in subsection C of this section may be exceeded for the purpose of making current benefit payments to retired participants who would otherwise be subject to such restrictions, provided that:

1.

The city contributions which may be used for any such retired participant in accordance with the restrictions in subsection C of this section, are applied to provide either a level amount of benefits in the normal form provided for under this plan, or a level amount of benefits in an optional form of benefit not greater in amount than the level amount under the normal form of benefit payment; and

2.

The benefit thus provided is supplemented by monthly payments to the extent necessary to provide the full pension in the normal form called for by this plan; and

3.

Such supplemental payments are made only if the full current costs of this plan have been met or if the aggregate of such supplemental payments for all such retired participants does not exceed the aggregate city contributions already made under this plan for the current plan year.

E.

After meeting full current costs. If city contributions are sufficient to meet the full current costs of the plan at the unrestricted date, or if the full current costs are met for the first time after the unrestricted date, the excess of the benefit payable under the plan over the amounts actually paid under the limits of subsection C of this section shall be paid in a lump sum to the retired or terminated participant, if living, or if deceased, to his or her spouse or, if no spouse, his or her child.

F.

Plan termination. If the plan is terminated while the limitations of this section are in effect, that portion of the assets of the trust fund arising from city contributions in excess of the foregoing limitations shall be allocated to satisfy the liabilities for the benefit of participants, including retired participants, whose benefits are not limited by this section; provided, if assets remain after the satisfaction of all liabilities for the benefits of such participants, such remaining assets shall be allocated in a nondiscriminatory manner, for the benefit of all participants, including participants whose benefits are otherwise limited by this section.

G.

Change in law, regulation or ruling. The limitations provided in this section automatically shall become inoperative and of no further force and effect if Congress provides by law or the United States Department of the Treasury provides by regulations or the Internal Revenue Service provides by ruling that the limitations imposed by this section are not required.

(Code 1985, § 25-51; Ord. No. 3907, § 1, 12-5-1989)