La. Admin. Code tit. 58 § III-1707

Current through Register Vol. 50, No. 11, November 20, 2024

Section III-1707 - Limitations on Contributions and Benefits

A. Adjustments for Form of Benefit

1. 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 adjustment under R.S. 11:784.1(B)(3)(a) is applied by either reducing the section 415(b) of the Internal Revenue Code limit applicable at the annuity starting date or adjusting the form of benefit to an actuarially equivalent amount [determined using the assumptions specified in treasury regulation section 1. 415(b)-1(c)(2)(ii)] that takes into account the additional benefits under the form of benefit as described in Subparagraphs A.1.a and b below, as applicable.

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

i. 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

ii. 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 percent interest assumption (or the applicable statutory interest assumption) and:

(a). for years prior to January 1, 2009, the applicable mortality tables described in treasury regulation section 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

(b). for years after December 31, 2008, the applicable mortality tables described in section 417(e)(3)(B) of the Internal Revenue Code (Notice 2008-85 or any subsequent Internal Revenue Service guidance implementing section 417(e)(3)(B) of the Internal Revenue Code).

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

i. 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 experience;

ii. 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 five and one-half percent interest assumption (or the applicable statutory interest assumption); and

(a). for years prior to January 1, 2009, the applicable mortality tables for the distribution under treasury regulation section 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

(b). for years after December 31, 2008, the applicable mortality tables described in section 417(e)(3)(B) of the Internal Revenue Code (notice 2008-85 or any subsequent Internal Revenue Service guidance implementing section 417(e)(3)(B) of the Internal Revenue Code); or

iii. 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 section 1. 417(e)-1(d)(3) (using the rate in effect for the November prior to the one-year stabilization period, which is the limitation year); and

(a). for years prior to January 1, 2009, the applicable mortality tables for the distribution under treasury regulation section 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

c. The actuary may adjust the Section 415(b) of the Internal Revenue Code limit at the annuity starting date in accordance with Subparagraphs A.1.a and b above.

d. Benefits For Which No Adjustment of the 415(b) Limit is Required

i. For purposes of this Section, the following benefits shall not be taken into account in adjusting these limits:

(a). any ancillary benefit which is not directly related to retirement income benefits;

(b). that portion of any joint and survivor annuity that constitutes a qualified joint and survivor annuity; and

(c). any other benefit not required under section 415(b)(2) of the Internal Revenue Code and treasury regulations thereunder to be taken into account for purposes of the limitation of section 415(b)(1) of the Internal Revenue Code.

B. Section 415(c) Limitations on Contributions and Other Additions

1. After-tax member contributions or other annual additions with respect to a member may not exceed the lesser of $40,000 (as adjusted pursuant to section 415(d) of the Internal Revenue Code) or 100 percent of the member's compensation.

a. For the purposes of this Section, the following definition shall apply.

Annual Additions-the sum (for any year) of employer contributions to a defined contribution plan, member contributions, and forfeitures credited to a member's individual account. Member contributions are determined without regard to rollover contributions and to picked-up employee contributions that are paid to a defined benefit plan.

b. For purposes of applying section 415(c) of the Internal Revenue Code 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 regulatio n section 1. 415(c)- 2, or successor regulation; provided, however, that member contributions picked up under section 414(h) of the Internal Revenue Code shall not be treated as compensation.

c. Compensation will be defined as wages within the meaning of section 3401(a) of the Internal Revenue Code 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 sections 6041(d), 6051(a)(3) and 6052 of the Internal Revenue Code and will be determined without regard to any rules under section 3401(a) of the Internal Revenue Code 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 section 3401(a)(2) of the Internal Revenue Code).

i. 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 section 125(a), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b) of the Internal Revenue Code.

ii. For limitation years beginning after December 31, 2000, compensation shall also include any elective amounts that are not includible in the gross income of the member by reason of section 132(f)(4) of the Internal Revenue Code.

iii. For limitation years beginning on and after January 1, 2009, compensation for the limitation year shall also include compensation paid by the later of two and one-half months after a member's severance from employment or the end of the limitation year that includes the date of the member's severance from employment if the payment is regular compensation for services during the member's regular working hours, or compensation for services outside the member'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 member while the member continued in employment with the employer.

(a). Any payments not described in Clause B.1.c.iii above are not considered compensation if paid after severance from employment, even if they are paid within two and one-half 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 section 414(u)(1) of the Internal Revenue Code) 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.

(b). An employee who is in qualified military service (within the meaning of section 414(u)(1) of the Internal Revenue Code) 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 month period immediately preceding the qualified military service (or, if shorter, the period of employment immediately preceding the qualified military service).

iv. Back pay, within the meaning of treasury regulation section 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 otherwis e be included under this definition.

d. If the annual additions for any member for a plan year exceed the limitation under section 415(c) of the Internal Revenue Code, the excess annual addition will be corrected as permitted under the employee plans compliance resolution system (or similar IRS correction program).

e. For limitation years beginning on or after January 1, 2009, a member's compensation for purposes of this Subsection shall not exceed the annual limit under section 401(a)(17) of the Internal Revenue Code.

C. Service Purchases under Section 415(n)

1. Effective for permissive service credit contributions made in limitation years beginning after December 31, 1997, if a member makes one or more contributions to purchase permissive service credit under the plan, then the requirements of section 415(n) of the Internal Revenue Code will be treated as met only if:

a. the requirements of section 415(b) of the Internal Revenue Code are met, determined by treating the accrued benefit derived from all such contributions as an annual benefit for purposes of section 415(b) of the Internal Revenue Code; or

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

2. For purposes of applying this section, the system will not fail to meet the reduced limit under section 415(b)(2)(C) of the Internal Revenue Code solely by reason of this Subsection and will not fail to meet the percentage limitation under section 415(c)(1)(B) of the Internal Revenue Code solely by reason of this Subsection.

3. For purposes of this Subsection, the following definition shall apply.

a.Permissive Service Credit-service credit:

i. recognized by the system for purposes of calculating a member's benefit under the system;

ii. which such member has not received under the system; and

iii. which such member may receive only by making a voluntary additional contribution, in an amount determined under the system, which does not exceed the amount necessary to fund the benefit attributable to such service credit.

b. 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 Clause C.3.a.ii above, may include service credited in order to provide an increased benefit for service credit which a member is receiving under the system.

4. The system will fail to meet the requirements of this Subsection if:

a. more than five years of nonqualified service credit are taken into account for purposes of this Subsection; or

b. any nonqualified service credit is taken into account under this Subsection before the member has at least five years of participation under the system.

5. For purposes of Paragraph C.4 above, effective for permissive service credit contributions made in limitation years beginning after December 31, 1997, the following definit ion shall apply.

a.Nonqualified Service Credit-permissive service credit other than that allowed with respect to:

i. 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 section 415(k)(3) of the Internal Revenue Code);

ii. service (including parental, medical, sabbatical, and similar leave) as an employee (other than as an employee described in Clause C.5.a.i above) of an education organization described in section 170(b)(1)(A)(ii) of the Internal Revenue Code 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;

iii. service as an employee of an association of employees who are described in Clause C.5.a.i above; or

iv. military service (other than qualified military service under section 414(u) of the Internal Revenue Code) recognized by the system.

b. In the case of service described in Clause C.5.a.i, ii or iii above, such service will be nonqualified service if recognition of such service would cause a member to receive a retirement benefit for the same service under more than one plan.

6. In the case of a trustee-to-trustee transfer after December 31, 2001, to which section 403(b)(13)(A) of the

Internal Revenue Code or section 457(e)(17)(A) of the Internal Revenue Code applies (without regard to whether the transfer is made between plans maintained by the same employer):

a. the limitations of Paragraph C.4 above will not apply in determining whether the transfer is for the purchase of permissive service credit; and

b. the distribution rules applicable under federal law to the system will apply to such amounts and any benefits attributable to such amounts.

7. For an eligible member, the limitation of section 415(c)(1) of the Internal Revenue Code 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 a Plan as in effect on August 5, 1997. For purposes of this Paragraph, an eligible member is an individual who first became a member in the system before January 1, 1998.

D. Modification of Contributions for 415(c) and 415(n) Purposes

1. Notwithstanding any other provision of law to the contrary, the system may modify a request by a member to make a contribution to the system if the amount of the contribution would exceed the limits provided in section 415 of the Internal Revenue Code by using the following methods.

a. If the law requires a lump sum payment for the purchase of service credit, the system may establish a periodic payment plan for the member to avoid a contribution in excess of the limits under section 415(c) or 415(n) of the Internal Revenue Code.

b. If payment pursuant to Subparagraph a. of this Paragraph will not avoid a contribution in excess of the limits imposed by section 415(c) or 415(n) of the Internal Revenue Code, the system may either reduce the member's contribution to an amount within the limits of those sections or refuse the member's contribution.

E. Repayments of Cashouts

1. Any repayment of contributions (including interest thereon) to the plan with respect to an amount previously refunded upon a forfeiture of service credit under the plan or another governmental plan maintained by the retirement system shall not be taken into account for purposes of section 415 of the Internal Revenue Code, in accordance with applicable treasury regulations.

F. Limitation of Benefits Priority

1. Reduction of benefits and/or contributions to all defined benefit plans sponsored by the state in which the member participated, where required, shall be accomplished by first reducing the member's benefit under the defined benefit plan in which the member most recently accrued benefits and thereafter in such priority as shall be determined by the plan and the plan administrator of such other plans. Necessary reductions may be made in a different manner andpriority pursuant to the agreement of the plan and the plan administrator of all other plans covering such member.

G . Limitation Year

1. For purposes of applying the limitations of section 415 of the Internal Revenue Code, the limitation year shall be the calendar year.

La. Admin. Code tit. 58, § III-1707

Promulgated by the Department of the Treasury, Board of Trustees of the Teachers Retirement System of Louisiana, LR 41:398 (February 2015).

AUTHORITY NOTE: Promulgated in accordance with R.S. 11:826.