3307:1-12-02 Maximum permissible benefits.

Applicability of the final 415 regulations effective beginning on the limitation year commencing on January 1, 2008.

(A) In general. The final regulations for section 415 of the Internal Revenue Code are accelerated and applicable to distributions to members and beneficiaries as of January 1, 2008. Effective January 1, 2008 and pursuant to section 3307.58 of the Revised Code and section 415 of the Internal Revenue Code, the maximum annual benefit distributed to a member or beneficiary shall be determined as of the date the benefit commences and shall be limited to the maximum amounts permitted under section 415(b)(1)(A) of the Internal Revenue Code. In general, section 415 limits a member's maximum annual benefit to one hundred eighty-five thousand dollars (one hundred ninety-five thousand dollars for 2009, which amount shall be increased to reflect cost of living increases pursuant to Internal Revenue Code section 415) payable in a straight life annuity but if the member has not completed ten years of participation, such maximum annual dollar limitation is reduced by the ratio which the number of his years of participation bears to ten. The maximum dollar limitation applies to a benefit payable at age sixty-two and shall be adjusted in accordance with cost of living increases in the amount determined by the commissioner of Internal Revenue. The limits of this paragraph do not apply to benefits attributable to rollover contributions made pursuant to paragraph (N) of rule 3307:1-3-11 of the Administrative Code and the annual benefit attributable to any such rollover contributions shall be determined in accordance with section 1.415(b) -1(b)(2)(v) of the Treasury Regulation.

(B) No adjustment shall be made for any benefit payment which is to commence after age sixty-two.

(C) For any benefits paid prior to age sixty-two, the maximum dollar limit shall be reduced as follows:

(1) For annuity starting dates on or before December 31, 2007. The maximum annual benefit shall be reduced to an annual straight-life annuity beginning at the annuity starting date that is the actuarial equivalent of the maximum annual benefit (adjusted for members with fewer than ten years of participation, if necessary), using whichever of the following produces a smaller annual amount: (a) an interest rate and mortality table determined and adjusted periodically by the state teachers retirement board, or (b) a five per cent interest rate assumption and the modified unisex version of the mortality tables for the plan year in which the annuity begins as prescribed by the secretary of the treasury for use in determining present value under subparagraphs (A) and (B) of section 417(e)(3) of the Internal Revenue Code. Such mortality tables shall be based on the actual experience of pension plans and projected trends in such experience as specified in subparagraph (A) of section 430(h)(3) of the Internal Revenue Code without regard to subparagraphs (C) and (D) of that section.

(2) For annuity starting dates after December 31, 2007. The maximum annual benefit shall be reduced to the lesser of:

(a) An annual straight-life annuity beginning at the annuity starting date that is the actuarial equivalent of the maximum annual benefit (adjusted for members with fewer than ten years of participation, if necessary), using for this purpose a five per cent interest rate assumption and the modified unisex version of the mortality tables for the plan year in which the annuity begins as prescribed by the secretary of the treasury for use in determining present value under subparagraphs (A) and (B) of section 417(e)(3) of the Internal Revenue Code. Such mortality tables shall be based on the actual experience of pension plans and projected trends in such experience as specified in subparagraph (A) of section 430(h)(3) of the Internal Revenue Code without regard to subparagraphs (C) and (D) of that section; or

(b) The maximum annual benefit (adjusted for members with fewer than ten years of participation, if necessary), multiplied by the ratio of the annual amount of the immediately commencing straight life annuity at the annuity starting date to the annual amount of the immediately commencing straight life annuity at age sixty-two.

(3) The member's age for the purposes of calculating the benefits to be paid prior to age sixty-two shall be expressed as the age of the member, in completed calendar year months, as of the annuity starting date.

(D) No actuarial adjustment to the maximum annual benefit shall be made for the following:

(1) Survivor benefits payable to a spouse under a qualified joint and survivor annuity pursuant to section 3307.60 of the Revised Code, to the extent such benefits would not be payable if the member's benefit were paid in another form;

(2) Any benefits provided to members that are not directly related to retirement benefits, including qualified disability benefits or allowances set forth in sections 3307.63 and 3307.631 of the Revised Code and health benefits set forth in section 3307.39 of the Revised Code; or

(3) The inclusion of automatic periodic increases to benefits calculated in the manner set forth in section 3307.67 of the Revised Code, provided that the form of benefit is not subject to section 417(e)(3) of the Internal Revenue Code (which applies based on the form of benefit and not the status of the plan described in sections 3307.50 to 3307.79 of the Revised Code), would otherwise satisfy this rule, and complies with the determination of benefit increases as calculated in paragraph (B) of rule 3307:1-10-01 of the Administrative Code.

(E) If an adjustment is required because the member selects a form of payment under section 3307.60 of the Revised Code to which section 415(b)(2)(E) of the Internal Revenue Code applies based on the form of benefit and not the status of the plan described in sections 3307.50 to 3307.79 of the Revised Code and that is not subject to section 417(e)(3) of the Internal Revenue Code, the value of the equivalent straight-life annuity for testing purposes of section 415(b) is the greater of (i) the annual amount of the straight-life annuity (if any) payable to the member commencing at the same annuity starting date as the form of benefit payable to the member and (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 per cent interest assumption and the modified unisex version of the mortality tables for the plan year in which the annuity begins as prescribed by the secretary of the treasury for use in determining present value under subparagraphs (A) and (B) of section 417(e)(3) of the Internal Revenue Code. Such mortality tables shall be based on the actual experience of pension plans and projected trends in such experience as specified in subparagraph (A) of section 430(h)(3) of the Internal Revenue Code without regard to subparagraphs (C) and (D) of that section.

(F) If an adjustment is required because the member selects a form of payment under section 3307.60 of the Revised Code to which sections 415(b)(2)(E) and 417(e)(3) of the Internal Revenue Code apply based on the form of benefit and not the status of the plan described in sections 3307.50 to 3307.79 of the Revised Code, the actuarial straight-life annuity for testing under 415(b) for annuity starting dates on and after January 1, 2008 is determined by calculating the greatest annual 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 (i) an interest rate and mortality table determined and adjusted periodically by the state teachers retirement board, (ii) a 5.5 per cent interest rate assumption and the modified unisex version of the mortality tables for the plan year in which the annuity begins as prescribed by the secretary of the treasury for use in determining present value under subparagraphs (A) and (B) of section 417(e)(3) of the Internal Revenue Code, and such mortality tables shall be based on the actual experience of pension plans and projected trends in such experience as specified in subparagraph (A) of section 430(h)(3) of the Internal Revenue Code without regard to subparagraphs (C) and (D) of that section, and (iii) the applicable interest rate and the modified unisex version of the mortality tables for the plan year in which the annuity begins as prescribed by the secretary of the treasury for use in determining present value under subparagraphs (A) and (B) of section 417(e)(3) of the Internal Revenue Code, and such mortality tables shall be based on the actual experience of pension plans and projected trends in such experience as specified in subparagraph (A) of section 430(h)(3) of the Internal Revenue Code without regard to subparagraphs (C) and (D) of that section , with the result divided by 1.05 .

(G) For a member who has or will have distributions commencing at more than one annuity starting date, the maximum annual benefit shall be determined as of each such annuity starting date (and shall satisfy the limits in section 415 of the Internal Revenue Code as of each starting date), actuarially adjusting for past and future distributions of benefits commencing at the other annuity starting dates as required under the application authority.

(H) The application of the provisions of this rule shall not cause the maximum annual benefit provided to a member to be less than the member's accrued benefit as of the end of December 31, 2007 under provisions of Chapter 3307. of the Revised Code and division 3307:1 of the Administrative Code that were both adopted and in effect prior to April 5, 2007.

(I) Effective January 1, 2009, the term "compensation" as defined in section 3307.01 of the Revised Code includes differential wage payments as defined in section 3401(h)(2) of the Internal Revenue Code.

Effective: 08/07/2014
R.C. 119.032 review dates: 03/24/2019
Promulgated Under: 111.15
Statutory Authority: 3307.04
Rule Amplifies: 3307.46 , 3307.58 , 3307.63 , 3307.67
Prior Effective Dates: 07/16/2009, 09/03/2012