San Jose Municipal Code Part 5.5 Benefits Generally

A. General. Notwithstanding any other law, the benefits payable to any person who becomes a member of this plan on or after January 1, 1990, shall be subject to the limitations set forth in Section 415 of the Internal Revenue Code as applicable to governmental plans and as set forth in this Section 3.36.730.

B. Prior to January 1, 1990. Notwithstanding any other law, the benefits payable to any person who became a member of this plan prior to January 1, 1990, shall be limited as provided in Section 415(b)(10) of the Internal Revenue Code to be no less than the accrued benefit of the member determined without regard to any benefit increases pursuant to any amendment of this plan adopted after October 14, 1987.

C. Participation in other qualified plans: aggregation of limits. The 415(b) limit with respect to any member who at any time has been a member in any other defined benefit plan as defined in Section 414(j) of the Internal Revenue Code maintained by the member's employer in this plan shall apply as if the total benefits payable under all such defined benefit plans in which the member has been a member were payable from one plan.

D. Basic 415(b) limitation.

1. Before January 1, 1995, a member may not receive an annual benefit that exceeds the limits specified in Section 415(b) of the Internal Revenue Code, subject to the applicable adjustments in that section. On and after January 1, 1995, a member may not receive an annual benefit that exceeds the dollar amount specified in Section 415(b)(1)(A) of the Internal Revenue Code, subject to the applicable adjustments in Section 415(b) of the Internal Revenue Code and subject to any additional limits that may be specified in the retirement system. In no event shall a member's benefit payable under the plan in any limitation year be greater than the limit applicable at the annuity starting date, as increased in subsequent years pursuant to Section 415(d) of the Internal Revenue Code and the regulations thereunder.

2. For purposes of Section 415(b) of the Internal Revenue Code, the "annual benefit" means a benefit payable annually in the form of a straight life annuity (with no ancillary benefits) without regard to the benefit attributable to after-tax employee contributions (except pursuant to Section 415(n) of the Internal Revenue Code) and to rollover contributions (as defined in Section 415(b)(2)(A) of the Internal Revenue Code). The "benefit attributable" shall be determined in accordance with treasury regulations.

E. Adjustments to basic 415(b) limitation for form of benefit.

1. If the benefit under the plan is other than the form specified in Subsection D.2., then the benefit shall be adjusted so that it is the equivalent of the annual benefit, using factors prescribed in treasury regulations.

2. 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 either reducing the Section 415(b) of the Internal Revenue Code limit applicable at the annuity starting date as specified in Subsection c. below, 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 follows:

a. For a benefit paid in a form to which Section 417(e)(3) of the Internal Revenue Code does not apply (i.e., 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 five percent 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 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 (ii) 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 (i.e., 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 (i) for years prior to January 1, 2009, the applicable mortality table 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 (ii) 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) (the thirty-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 rate 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 (ii) 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), divided by 1.05.

c. The actuary may adjust the 415(b) limit at the annuity starting date in accordance with the above Subsections a. and b.

F. Benefits for which no adjustment of 415(b) limit is required. For purposes of this section, the following benefits shall not be taken into account in adjusting these limits:

1. Any ancillary benefit which is not directly related to retirement income benefits;

2. That portion of any joint and survivor annuity that constitutes a qualified joint and survivor annuity;

3. 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.

G. Other adjustments in 415(b) limitation.

1. In the event the member's retirement benefits become payable before age sixty-two, the limit prescribed by this section shall be reduced in accordance with treasury regulations pursuant to the provisions of Section 415(b) of the Internal Revenue Code, so that such limit (as so reduced) equals an annual straight life benefit (when such retirement income benefit begins) which is equivalent to a one hundred sixty thousand dollar (as adjusted) annual benefit beginning at age sixty-two.

2. In the event the member's benefit is based on at least fifteen years of service as a full-time employee of any police or fire department, on fifteen years of military service, or on any combination of these two types of service, the adjustments provided for in Subsection 1. above shall not apply.

3. The reductions provided for in Subsection 1. above, shall not be applicable to pre-retirement disability benefits or pre-retirement death benefits.

H. Less than ten years of service adjustment for 415(b) limitations. The maximum retirement benefits payable to any member who has completed less than ten years of participation shall be the amount determined under Subsection D. multiplied by a fraction, the numerator of which is the number of the member's years of service and the denominator of which is ten. The reduction provided by this subsection cannot reduce the maximum benefit below ten percent. The reduction provided for in this subsection shall not be applicable to pre-retirement disability benefits or pre-retirement death benefits.

I. Ten thousand dollar limit. Notwithstanding the foregoing, the retirement benefit payable with respect to a member shall be deemed not to exceed the 415 limit if the benefits payable, with respect to such member under this plan and under all other qualified defined benefit pension plans to which the member's employer contributes, do not exceed ten thousand dollars for the applicable limitation year and for any prior limitation year and the employer has not at any time maintained a qualified defined contribution plan in which the member participated.

J. Effect of COLA without a lump sum component on 415(b) testing. Effective on and after January 1, 2008, for purposes of applying the limits under Section 415(b) of the Internal Revenue Code (the "limit") to a member with no lump sum benefit, the following shall apply:

1. A member's applicable limit shall be applied to the member's annual benefit in the member's first limitation year without regard to any cost of living adjustments under Section 3.44.150;

2. To the extent that the member's annual benefit equals or exceeds the limit, the member shall 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

3. Thereafter, in any subsequent limitation year, a member's annual benefit, including any cost of living increases under Section 3.44.150, shall be tested under the then applicable benefit limit, including any adjustment to the Section 415(b)(1)(A) of the Internal Revenue Code dollar limit under Section 415(d) of the Internal Revenue Code, and the regulations thereunder.

K. Reduction of benefits priority. Reduction of benefits and/or contributions to all plans, where required, shall be accomplished by first reducing the member's benefit under any defined benefit plans in which the member participated, such reduction to be made first with respect to the 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, and next, by reducing or allocating excess forfeitures for defined contribution plans in which the member participated, such reduction to be made first with respect to the plan in which the member most recently accrued benefits and thereafter in such priority as shall be established by the plan and the plan administrator for such other plans provided, however, that necessary reductions may be made in a different manner and priority pursuant to the agreement of the plan and the plan administrator of all other plans covering such member.

L. Notwithstanding Subsections A. and B. above, in the event Section 415 of the Internal Revenue Code is repealed, amended or qualified, by statute or otherwise, to permit all or any members of this plan or such members' beneficiaries to receive benefits that are not subject to the limitations set forth in Section 415, then immediately thereupon, such benefits shall be paid to such members or their beneficiaries.

M. Section 415(c) limitations on contributions and other additions. After-tax member contributions or other annual additions with respect to a member may not exceed the lesser of forty thousand dollars (as adjusted pursuant to Section 415(d) of the Internal Revenue Code) or one hundred percent of the member's compensation. Annual additions are defined to mean 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 picked-up employee contributions that are paid to the retirement system.

"Compensation" for purposes of this section, subject to annual limits under Section 401(a)(17) of the Internal Revenue Code, shall be as defined under Treasury Regulation Section 1.415(c).

(Ords. 23284, 23316, 28773, 28886.)

A. Notwithstanding any other law, except as provided in Subsection A.3 and B. below, for any person who becomes a member of this plan on or after January 1, 1996, the annual compensation taken into account under this plan shall be subject to the limitation set forth in Section 401(a)(17) of the Internal Revenue Code of 1986, as amended.

1. Effective with respect to plan years beginning on and after January 1, 1996, and before January 1, 2002, the annual compensation of a plan member which exceeds one hundred fifty thousand dollars (as adjusted for cost-of-living increases under Section 401(a)(17)(B) of the Internal Revenue Code), shall be disregarded for purposes of computing employee contributions to or benefits due from the retirement plan. Effective only for the 1996 plan year, in determining the compensation of an employee eligible for consideration under this provision, the rules of Section 414(g)(6) of the Internal Revenue Code shall apply, except that in applying such rules, the term "family" shall include only the spouse of the member and any lineal descendants of the employee who have not attained age nineteen before the close of the year.

2. Effective with respect to plan years beginning on and after January 1, 2002, the annual compensation of a plan member which exceeds two hundred thousand dollars (as adjusted for cost-of-living increases in accordance with Section 401(a)(17)(B) of the Internal Revenue Code), may not be taken into account in determining benefits or employee contributions due for any plan year. "Annual compensation" means compensation during the plan year or such other consecutive twelve-month period over which compensation is otherwise determined under the plan (the determination period). The cost-of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year. If the determination period consists of fewer than twelve months, the annual compensation limit is an amount equal to the otherwise applicable annual compensation limit multiplied by a fraction, the numerator of which is the number of months in the short determination period, and the denominator of which is twelve. If the compensation for any prior determination period is taken into account in determining a plan member's contributions or benefits for the current plan year, the compensation for such prior determination period is subject to the applicable annual compensation limit in effect for that prior period.

3. As used in this Paragraph 3., the term "eligible member" means a person who first became a member of the retirement plan prior to January 1, 1996. Pursuant to Section 13212(d)(3)(A) of OBRA '93, and the regulations issued under that section, eligible members are not subject to the limits of Section 401(a)(17) of the Internal Revenue Code.

B. In the event Section 401(a)(17) of the Internal Revenue Code is repealed, amended or qualified, by statute or otherwise, to relieve all or any members of this plan described in Subsection A. from the limitation set forth in Section 401(a)(17), then, for those members no longer subject to the limitation, the annual compensation taken into account under the plan shall be calculated without such limitation.

(Ords. 25000, 28886.)

A. This section shall apply only in a case in which a court has ordered an amount or percentage of the service credit of a participant to be credited to an alternate payee's separate account pursuant to a plan-approved domestic relations order which meets the requirements of Section 3.36.3600 of this chapter.

B. Solely for the purpose of meeting the minimum service requirements for a participant's or eligible survivor's qualification for retirement benefits, monthly allowances, survivors' benefits, medical benefits and dental benefits under this Plan, the service credit of the participant shall be aggregated with the service credit awarded the alternate payee.

C. Solely for the purpose of determining whether the participant is eligible to retire in order that an alternate payee may begin distribution from the alternate payee's separate account under Section 3.36.3630, the service credit of the participant shall be aggregated with the service credit awarded the alternate payee.

D. For the purposes of this section, the terms "participant" and "alternate payee" shall have the meanings set forth in Part 17 of this chapter.

(Ords. 25989, 27712.)

A. The purpose of the plan is to secure contributions for the city and from employees, and to distribute plan assets only to members, retired members, and their beneficiaries, pursuant to the plan's plan of benefits and to pay reasonable expenses of administration.

B. Prior to the satisfaction of all liabilities with respect to members, former members and their beneficiaries, no part of the plan's assets or income may be used for, or diverted to, purposes other than for the exclusive benefit of members, former members, or their beneficiaries.

C. In conformity with Section 410(a)(8) of the Internal Revenue Code, forfeitures arising from termination of employment, death, or for any other reason will not be applied to increase the benefits any member, former member, or beneficiary would otherwise have received from the plan at any time prior to the termination of the plan.

D. Upon termination of the plan or upon the complete discontinuance of contributions to the plan, the rights of each member, former member and beneficiary to benefits accrued to the date of such termination or discontinuance are non-forfeitable.

(Ords. 27768, 28886.)

Notwithstanding any other provision of this chapter, the distribution of a retirement allowance shall be subject to a good faith interpretation of the minimum distribution rules of Section 401(a)(9) of the Internal Revenue Code and the regulations promulgated thereunder, as applicable to a governmental plan within the meaning of Section 414(d) of the Internal Revenue Code. In addition, payment of a member's retirement allowance shall commence no later than the later of the following:

A. The April 1 following the end of the calendar year in which the member attains age seventy and one-half; or

B. The April 1 following the end of the calendar year in which the member retires. If a member fails to apply for retirement benefits by the later of either of those dates, the board shall begin distribution of the monthly benefit in the form provided under the applicable provision of Part 6 of Chapter 36.

C. The member's entire interest must be distributed over the member's life or the lives of the member and a designated beneficiary, or over a period not extending beyond the life expectancy of the member, or of the member and a designated beneficiary.

D. For purposes of this section, the retirement plan pursuant to a qualified domestic relations order, may establish separate benefits for a member and nonmember.

E. If a member dies after the required distribution of benefits has begun, the remaining portion of the member's interest must be distributed at least as rapidly as under the method of distribution before the member's death.

F. If a member dies before required distribution of the member's benefits has begun, the member's entire interest must be distributed within five years of his death, unless it is to be distributed in accordance with the following rules:

1. If the member's surviving spouse is the sole designated beneficiary, the member's remaining interest in the plan is distributed or begins to be distributed by December 31 of the calendar year immediately following the calendar year in which the member died or by December 31 of the calendar year in which the participant would have attained age seventy and one-half, if later, and if the surviving spouse dies before the distribution to the surviving spouse begins, this section shall be applied as if the surviving spouse were the plan member; or

2. If the member's surviving spouse is not the sole designated beneficiary, the member's remaining interest is to be distributed over the life of the designated beneficiary or over a period not extending beyond the life expectancy of the designated beneficiary; and such distribution begins no later than December 31 of the calendar year immediately following the calendar year of the member's death.

G. The amount of an annuity paid to a member's beneficiary may not exceed the maximum determined under the incidental death benefit requirement of Section 401(a)(9)(G) of the Internal Revenue Code, and the minimum distribution incidental benefit rule under Treasury Regulation Section 1.401(a)(9)-6, Q&A-2.

H. The death and disability benefits provided by the retirement system are limited by the incidental benefit requirement set forth in Section 401(a)(9)(G) of the Internal Revenue Code and Treasury Regulation Section 1.401-1(b)(1)(i) or any successor regulation thereto. These incidental death and disability benefits include any lump sum death benefits and any disability benefits. As a result, the total death or disability benefits payable may not exceed twenty-five percent of the cost for all of the members' benefits received from the retirement plan.

I. Notwithstanding the other provisions of this rule or the provisions of the treasury regulations, benefit options may continue so long as the option satisfies Section 401(a)(9) of the Internal Revenue Code based on a reasonable and good faith interpretation of that section.

(Ords. 27768, 28886.)

A. A member shall be one hundred percent vested in his or her service retirement benefit upon attaining eligibility for a service retirement benefit under the applicable provisions of the retirement system.

B. A plan member shall be one hundred percent vested in his or her accumulated contributions at all times.

C. An affected plan member shall be one hundred percent vested in his or her accrued benefit, to the extent then funded, in the event the retirement system is terminated in whole or in part or contributions are completely discontinued.

D. For the purpose of this Section 3.36.747 "vested" shall mean the nonforfeitable right to the benefit the member has accrued.

E. Nothing contained in this Section 3.36.747 shall be construed or interpreted to limit modification of benefits, to the extent that such modification is otherwise allowed under federal and state law.

F. Any changes to tier 2 retirement or post-employment benefits enacted after those adopted March 31, 2017 that result in benefit increases or decreases shall only be applied prospectively and except for the changes adopted on March 31, 2017 shall not have retroactive effect. All such changes shall be subject to applicable California pension and other laws. Without limitation of any type, the city shall have the right to make any modifications, alterations or amendments necessary or appropriate to maintain the tax qualification of the benefits provided under this retirement plan to tier 2 members.

(Ords. 28886, 29266, 29879.)