[Ord. 1924, 2/2/2009]
This amended and restated plan is made effective as of January
1, 2016, except as provided otherwise in § 1-1102.d(2),
by the Borough of State College, a governmental agency of the Commonwealth
of Pennsylvania.
[Ord. 1924, 2/2/2009]
a.
References.
(1)
ACT 205 — The Municipal Pension Plan Funding Standard
and Recovery Act, act of December 18, 1984, P.L. 1005, No. 205, as
amended, 53 P.S. § 895.101 et seq., as enacted by the Commonwealth
of Pennsylvania.
(2)
ACT 600 — The Police Pension Fund Act, act of May 29,
1956, P.L. 1804, No. 600, as amended, 53 P.S. § 767 et seq.,
as enacted by the Commonwealth of Pennsylvania. Cites herein to this
Act shall use the Purdon Statute instead of the section number.
(3)
ERISA — The Employee Retirement Income Security Act of
1974, as amended.
(4)
IRC — The Internal Revenue Code of 1986, as it may be
amended from time to time.
b.
Actuarial Equivalent.
(1)
The present value of any benefit under the terms of this plan
will be the actuarial equivalent of the accrued benefit in the normal
form of benefit commencing at normal retirement date.
(2)
To the extent that the Plan provides for a late retirement benefit,
an early retirement benefit, or optional forms of benefit payment,
the actuarial equivalent of the accrued benefit paid in the normal
form commencing at the normal retirement date shall be determined
as set forth below.
(a)
(Reserved)
(b)
The Early Retirement Benefit is the actuarial equivalent of
the accrued benefit paid in the normal form commencing at the normal
retirement date using the following mortality and interest:
Mortality table: UP 1984 Table
Interest rate: 8.00%
(c)
The Monthly Pension Payment Options shall be determined by multiplying
the amount of the normal form monthly pension by the factors set forth
in Appendix O.[1] In the event no factor is specified for the difference
between the age of the participant and the age of his designated second
annuitant under a joint and survivor annuity, actuarial equivalence
for the monthly pension payment option shall be determined based on
the following mortality and interest assumptions:
Mortality table: UP 1984 Table
Interest rate: 8.00%
[1]
Editor's Note: Appendix O, Actuarial Equivalence Factors for Monthly Pension Options, is included as an attachment to this chapter.
(3)
Limitations on Benefits. For the purpose of implementing the
limitations on benefits of IRC Section 415, actuarial equivalence
shall be determined based on the following mortality and interest
assumptions:
Mortality table: UP-1984 (-2)
Interest rate: 5.00% per annum compounded annually
For the purpose of applying the limitations on benefits of § 1-1108.a,
the applicable mortality table is the applicable mortality table described
in Treasury Regulation Section 1.417(e)-1(d)(2) in effect for the
plan year that contains the annuity starting date. The applicable
interest rate is the annual rate of interest as determined under Treasury
Regulation Section 1.417(e)-1(d)(3) for the second month preceding
the first day of the plan year that contains the annuity starting
date.
c.
Compensation/Average Monthly Compensation.
(1)
Compensation definition, exclusions, and calculation.
(a)
Compensation means any earnings reportable as W-2 wages for
federal income tax withholding purposes, plus elective contributions,
for the applicable period. Elective contributions are amounts excludable
from the employee's gross income and contributed by the employer,
at the employee's election to:
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A cafeteria plan (excludable under IRC Section 125 and as provided
in Section 1108.a(5)(c));
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A tax sheltered annuity (excludable under IRC Section 403(b));
or
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A deferred compensation plan (excludable under IRC Section 457).
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Picked-up contributions under IRC Section 414(h)(2) shall be
included in the participant's compensation.
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Any reference in this plan to compensation shall be a reference
to the definition in this section 1102.c, unless the plan reference
specifies a modification to this definition. The plan administrator
shall take into account only compensation actually paid by the employer
for the relevant period. A compensation payment includes compensation
by the employer through another person under the common paymaster
provisions in IRC Sections 3121 and 3306. Compensation from a related
employer that is not a participating employer under this plan shall
be excluded.
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(b)
Exclusions From Compensation. Notwithstanding the provisions
of Section 1102.c(a), the following types of remuneration shall be
excluded from the participant's compensation:
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Unused vacation, personal day, and sick pay paid on account
of termination of employment
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Any lump sum payment made upon termination of employment
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(c)
Compensation for Officers Hired On or After January 1, 2016.
Compensation for officers hired on or after January 1, 2016 shall
be calculated using base salary rather than W-2 wages.
(2)
Limitations on Compensation. For any plan year beginning after
December 31, 2001, the plan administrator shall take into account
only the first $200,000 (or beginning January 1, 2003, as adjusted
for cost-of-living increases in accordance with IRC Section 401(a)(17)(B))
of any participant's annual compensation for determining all benefits
provided under the plan for the applicable twelve-month period. The
compensation dollar limitation in effect for a plan year shall be
the limitation amount in effect on January 1 of the calendar year
in which the plan year begins. In determining benefits in plan years
beginning on or after January 1, 2002, the annual compensation limit
for determination periods beginning before January 1, 2002, shall
be $150,000 for any determination period beginning in 1996 or earlier;
$160,000 for any determination period beginning in 1997, 1998, or
1999; and $170,000 for any determination period beginning in 2000
or 2001. For any plan year beginning after December 31, 1995, the
plan administrator shall take into account only the first $150,000
(or beginning January 1, 1995, as adjusted for cost-of-living increases
in accordance with IRC Section 401(a)(17)(B)) of any participant's
compensation for determining all benefits provided under the plan
for a determination period. If the plan should determine compensation
on a period of time that contains less than 12 calendar months (such
as for a short plan year), the annual compensation dollar limitation
shall be an amount equal to the otherwise applicable annual compensation
dollar limit for the plan year multiplied by the ratio obtained by
dividing the number of full months in the period by 12.
Notwithstanding the preceding, in the case of an eligible participant,
the annual compensation dollar limitation shall not apply to the extent
that the application of the limitation would reduce the amount of
compensation that is allowed to be taken into account under the plan
below the amount that was allowed to be taken into account under this
plan as in effect on July 1, 1993. For this purpose, an eligible participant
is an individual who first became a participant in the plan during
a plan year prior to the first day of the first plan year beginning
after December 31, 1995.
(3)
Average Monthly Compensation means the average of a participant's
monthly compensation over the thirty-six-consecutive-month period
ending on the date of employment termination. If a participant's entire
period of service for the employer is less than the specified period,
compensation shall be averaged on a monthly basis over the participant's
entire period of service.
However, Average Monthly Compensation for officers hired on
or after January 1, 2016 shall mean the average of a participant's
monthly compensation over the sixty-consecutive-month period ending
on the date of employment termination. If a participant's entire period
of service for the employer is less than the specified period, compensation
shall be averaged on a monthly basis over the participant's entire
period of service.
The annual compensation taken into account in determining average
annual compensation shall be subject to the compensation dollar limitation
described in § 1-1102.c(2) as in effect for each particular
year.
d.
Dates/Years.
(1)
ACCOUNTING DATE — The last day of the plan year.
(2)
THE EFFECTIVE DATE OF THE PLAN IS JUNE 1, 1953 — The effective
date of this amendment and restatement is January 1, 2016; provided,
however that the plan provisions required to comply with the Tax Reform
Act of 1986 (TRA '86), the Omnibus Budget Reconciliation Act of 1986
(OBRA '86), the Omnibus Budget Reconciliation Act of 1987 (OBRA '87),
and the Technical and Miscellaneous Revenue Act of 1988 (TAMRA) shall
generally be effective on the first day of the plan year beginning
after December 31, 1988, except as specified otherwise in this plan
or in TRA '86, OBRA '86, OBRA '87 or TAMRA for a government sponsored
plan. The plan provisions required to comply with the 1989 Revenue
Reconciliation Act shall generally be effective on the first day of
the plan year beginning after December 31, 1989, except as specified
otherwise in this plan or in said Act. The plan provisions required
to comply with the Unemployment Compensation Amendments of 1992 shall
be effective on January 1, 1993, except as specified otherwise for
a government sponsored plan. The plan provisions required to comply
with the Omnibus Budget Reconciliation Act of 1993 shall generally
be effective on the first day of the plan year beginning after December
31, 1993, except as specified otherwise in said Act.
The plan provision required to comply with the Family and Medical
Leave Act shall be effective August 5, 1993, the plan provisions required
to comply with the Uniformed Services Employment and Re-Employment
Rights Act of 1994 shall be effective December 12, 1994, the plan
provisions required to comply with the Retirement Protection Act of
1994 shall generally be effective on the first day of the first limitation
year beginning after December 31, 1994, the plan provisions required
to comply with the Small Business Job Protection Act of 1996 shall
generally be effective on the first day of the plan year beginning
after December 31, 1996, the plan provisions required to comply with
the Taxpayer Relief Act of 1997 shall generally be effective on the
first day of the plan year beginning after August 5, 1997, the plan
provisions required to comply with the Economic Growth and Tax Relief
Reconciliation Act of 2001 shall generally be effective on the first
day of the plan year beginning after December 31, 2001, the plan provisions
required to comply with the Pension Funding Equity Act of 2004 (PFEA)
shall be effective for distributions made during the plan year beginning
on or after January 1, 2004 and the plan year beginning on or after
January 1, 2005, and the plan provisions required to comply with the
Pension Protection Act of 2006 that are effective prior to the first
day of the first plan year beginning on or after January 1, 2008 shall
be effective as of the first day of the first plan year beginning
on or after January 1, 2006, except as specified otherwise in this
plan or in said Acts for a government sponsored plan.
(3)
PLAN ENTRY DATE — The participation date(s) specified
in § 1-1103.
(4)
PLAN YEAR — The twelve-consecutive-month period beginning
on January 1 and ending on December 31.
(5)
LIMITATION YEAR — The plan year.
e.
Employee.
(1)
EMPLOYEE — Any person employed by the employer. The term
employee shall include any employee of the employer maintaining the
plan or of any other employer required to be aggregated with such
employer under IRC Sections 414(b), (c), (m) or (o), as such provisions
may be interpreted to apply to a governmental entity by the Internal
Revenue Service. The term employee shall also include any leased employee
deemed to be an employee of any such employer as provided in IRC Sections
414(n) or (o) and as defined in § 1-1102.e(2).
(2)
LEASED EMPLOYEE — An individual (who otherwise is not
an employee of the employer) who, pursuant to a leasing agreement
between the employer and any other person, has performed services
for the employer (or for the employer and any persons related to the
employer within the meaning of IRC Section 414(n)(6)) on a substantially
full time basis for at least one year and such services are performed
under the primary direction or control of the employer. If a leased
employee is treated as an employee by reason of this section 1102.e(2),
compensation from the leasing organization that is attributable to
services performed for the employer shall be considered as compensation
under the plan. Contributions or benefits provided a leased employee
by the leasing organization that are attributable to services performed
for the employer shall be treated as provided by the employer.
f.
EMPLOYER
Employer.
Borough of State College, a political subdivision of the
Commonwealth of Pennsylvania, or any successor entity that may assume
the obligations of this plan with respect to its employees by becoming
a party to this plan.
g.
Fiduciaries.
(1)
CHIEF ADMINISTRATIVE OFFICER — The person appointed by
the employer or the pension board as described in § 1-1109.b
who has primary responsibility for the execution of the administrative
affairs of the plan.
(2)
PLAN ADMINISTRATOR — The Chief Administrative Officer.
(3)
INVESTMENT MANAGER — A person or corporation other than
a trustee appointed for the investment of plan assets.
h.
Participant/Beneficiary/Spouse.
(1)
PARTICIPANT — An eligible employee of the employer who
becomes a member of the plan pursuant to the provisions of § 1-1103,
or a former employee who has an accrued benefit under the plan.
(2)
BENEFICIARY — A person designated by a participant who
is or may become entitled to a benefit under the plan. The beneficiary
may be someone other than the participant's spouse, but only to the
extent that this plan provides for a benefit to be payable to a non-spouse
beneficiary. A beneficiary who becomes entitled to a benefit under
the plan remains a beneficiary under the plan until the trustee has
fully distributed his benefit to him. A beneficiary's right to (and
the plan administrator's, or a trustee's duty to provide to the beneficiary)
information or data concerning the plan shall not arise until he first
becomes entitled to receive a benefit under the plan.
(3)
SPOUSE — The person married to the participant at the
time of the determination as evidenced by a marriage license valid
under the laws of the place of issuance.
i.
PLAN
Plan.
Borough of State College Police Pension Plan as set forth
herein and as it may be amended from time to time.
j.
Service.
(1)
SERVICE — Any period of time the employee is in the employ
of the employer, including any period the employee is absent due to
vacation, holidays, or sickness. Separation from service means that
the employee no longer has an employment relationship with the employer.
(2)
HOUR OF SERVICE — Each hour for which an employee is paid
or entitled to payment for the performance of duties for the employer.
(3)
BREAK IN SERVICE — Any period of severance.
(4)
PERIOD OF SEVERANCE — A continuous period of time during
which the employee is not employed by the employer and is not credited
with an hour of service. Such period begins on the date the employee
retires, terminates service, or if earlier, the date on which the
employee was otherwise first absent from service.
(5)
CREDIT FOR MILITARY SERVICE — Any employee employed as
a member of the police force who has been a regularly appointed employee
for a period of at least six months and who thereafter enters into
the military service of the United States shall receive credit for
all such military service, if he returns to employment with the employer
within six months after his separation from military service.
Further, any employee hired before January 1, 2016 who entered
into the military service of the United States before employment with
the employer shall receive credit for each year of military service
or fraction thereof for a period not to exceed five years. Such service
shall not be credited if the employee fails to make the required payment.
The required payment for such crediting shall be computed by: (a)
applying the lesser of 10% or the average normal cost rate for Borough
and township police pension plans as certified by the Public Employee
Retirement Study Commission to the employee's average annual rate
of compensation over the first three years of service and (b) multiplying
the result by the number of years and fractional parts of years of
creditable non-intervening military service being purchased together
with interest at the rate of 4.75% compounded annually from the date
of employment to the date of payment, as provided under Act 600, 53
P.S. § 770(b). Employees hired on or after January 1, 2016
shall not be eligible to purchase this service credit for non-intervening
military service.
No service shall be credited under this § 1-1102.j(5)
if the employee is entitled to receive retirement benefits for such
service under a retirement system administered and wholly or partially
paid for by any other governmental agency with the exception of an
employee eligible to receive military retirement pay earned by a combination
of active duty and nonactive duty with a reserve or national guard
component of the armed forces which retirement pay is payable only
upon attainment of a specified age and period of service under 10
U.S.C. Ch. 67 (relating to retired pay for non-regular service).
Notwithstanding the preceding, effective December 12, 1994,
contributions, benefits, and service credit with respect to qualified
military service will be provided in accordance with IRC Section 414(u)
and the applicable Pennsylvania statutes. An employee reemployed after
qualified military service shall not be treated as having incurred
a break in service, for purposes of vesting and benefit accruals,
solely because of an absence due to qualified military service.
(6)
OTHER SERVICE CREDITED — If the employer is a member of
an affiliated service group under IRC Section 414(m) or a controlled
group of corporations under IRC Section 414(b), or any other entity
required to be aggregated with the employer pursuant to IRC Section
414(o) as these Internal Revenue Code provisions are applied to a
governmental entity, service shall be credited for any employment
for any period of time for any other member of such group. Service
shall also be credited for any leased employee who is considered an
employee for purposes of this plan under IRC Section 414(n) or (o).
(7)
YEARS OF SERVICE —
(a)
YEAR OF SERVICE — Twelve months of service, excluding
any breaks in service. For purposes of determining an employee's initial
year of service upon his employment, the initial year of service shall
commence on the employee's first day of employment. The first day
of employment is the first day the employee performs an hour of service.
The first day of re-employment is the first day the employee performs
an hour of service following a break in service. An initial year of
service shall end on the day immediately preceding the first anniversary
of the employee's date of hire or rehire. Any subsequent year of service
shall commence on the day following the completion of the immediately
preceding year of service.
(b)
CREDITING YEARS OF SERVICE — Service may be credited for
the purpose of eligibility to participate, vesting, benefit accrual,
or determining the benefit payable under the normal retirement benefit
formula. Generally, no service shall be credited for periods during
which the employee performs no services for the employer. Further,
no more than one year of service will be credited for any twelve-consecutive-month
period.
(c)
PREDECESSOR SERVICE — If the employer maintains the plan
of a predecessor employer, service with such predecessor employer
shall be treated as service for the employer. If the employer does
not maintain the plan of a predecessor employer, then service as an
employee of a predecessor employer shall not be considered as service
under the plan. The plan may be amended to provide for the crediting
of service performed for a disbanded police force under an intermunicipal
agreement pursuant to the Intergovernmental Cooperation Law as provided
in 53 P.S. § 770(e) and (f).
[Ord. 1924, 2/2/2009]
a.
Plan Participation.
(1)
Eligibility. An employee who is a member of the eligible class
of employees shall be eligible for plan participation provided that
he agrees to make the mandatory contributions as set forth in § 1-1107.b.
(2)
Eligible Class of Employees. Employees of the employer who are
employed as police officers on a regularly scheduled, full time basis
for at least 40 hours per week throughout the year shall be eligible
to be covered under the plan. Any police officer employed as a temporary,
special, part-time, or permanent part-time officer of the employer
shall not be considered a member of the eligible class of employees.
(3)
Entry Date. An eligible employee shall participate in the plan
on the first day he performs one hour of service.
b.
Termination of Participation. A participant shall continue to be
an active participant of the plan so long as he is a member of the
eligible class of employees and he does not terminate employment.
He shall become an inactive participant immediately if he ceases to
be a member of the eligible class of employees or terminates employment.
He shall cease participation completely upon the later of his receipt
of a total distribution of his nonforfeitable accrued benefit under
the plan or the forfeiture of the nonvested portion of the accrued
benefit.
c.
Reparticipation.
(1)
If a participant becomes an inactive participant, because he
is no longer a member of the eligible class of employees; such inactive
participant shall become an active participant immediately upon returning
to the eligible class of employees. In the event an employee who is
not a member of an eligible class of employees becomes a member of
an eligible class, such employee shall participate immediately.
(2)
If a participant incurs a break in service, he shall become
an active participant immediately upon returning to employment.
[Ord. 1924, 2/2/2009]
a.
Service Rules.
(1)
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(a)
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Year of Vesting Service. For purposes of determining the nonforfeitable
interest in the participant's accrued benefit, the employee shall
receive credit for the aggregate of all time periods commencing with
the employee's first day of employment or re-employment as a police
officer and ending on the date a break in service begins, except for
periods of service disregarded below. The first day of employment
or re-employment is the first day the employee performs an hour of
service. Fractional periods of a year will be expressed in terms of
days. One year of vesting service shall be credited for each three-hundred-sixty-five-day
period.
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(b)
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Break in Service Rules.
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(i)
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Vested Participant. A former participant who had a nonforfeitable
right to all or a portion of his accrued benefit derived from employer
contributions at the time of his termination from service and who
did not receive a distribution of his accumulated contributions shall
retain credit for all years of vesting service prior to a break in
service.
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(ii)
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Nonvested Participant or Employee. In the case of a former participant
or employee who did not have any nonforfeitable right to his accrued
benefit derived from employer contributions at the time of his termination
from service or who received a distribution of his accumulated contributions,
years of vesting service before a break in service shall not be taken
into account in computing service, except as provided in Section 1106.c.
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(2)
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Year of Benefit Service. For the purpose of determining the
participant's benefit under the pension benefit formula, the participant
shall receive credit for the aggregate of all time periods commencing
with the participant's first day of active participation or active
reparticipation and ending on the date a break in service begins or
the participant is no longer a member of an eligible class of employees,
except for periods of service disregarded herein. One year of benefit
service shall be credited for each three-hundred-sixty-five-day period.
Any years of service disregarded under Section 1106.c Accumulated
Contribution Distribution and Restoration shall be disregarded for
this purpose.
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b.
Normal Retirement.
(1)
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(a)
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Normal Retirement Age. The normal retirement age of each participant
shall be the day on which he satisfies both of the following requirements:
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(i)
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He attains age 50; and
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(ii)
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He completes 25 years of vesting service.
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However, in the case of a participant who was employed prior
to January 1, 2001, his normal retirement age shall be the day on
which he satisfies both of the following requirements:
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(i)
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He attains age 50; and
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(ii)
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He completes 20 years of vesting service.
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Provided further, in the case of a participant hired on or after
January 1, 2016, his normal retirement age shall be the day on which
he satisfies both of the following requirements:
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(i)
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He attains age 55; and
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(ii)
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He completes 25 years of vesting service.
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An actively employed participant's right to his normal retirement
benefit shall be 100% vested and nonforfeitable upon attainment of
the normal retirement age, notwithstanding the plan's vesting schedule.
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Retired participants shall be subject to service, from time
to time, as a police reserve, in cases of riot, tumult, or preservation
of public peace until unfitted for such service, when they may be
finally discharged by reason of age or disability.
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(b)
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Normal Retirement Date. The normal retirement date of each participant
shall be the first day of the month coincident with or next following
the day on which he attains his normal retirement age as defined in
§ 1-1104.b(1)(a).
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(2)
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(a)
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Normal Retirement Benefit. The normal retirement benefit of
each participant shall not be less than the largest periodic benefit
that would have been payable to the participant upon separation from
service at or prior to his normal retirement date under the plan exclusive
of social security supplements, premiums on disability or term insurance,
and the value of disability benefits not in excess of the normal retirement
benefit, but taking into account any decrease in average monthly compensation.
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(b)
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Normal Form of Payment. The normal form of retirement benefit
for each participant shall be a level monthly pension payable during
the participant's lifetime, with payments commencing on his normal
retirement date, and continuing after the participant's death during
the lifetime of his spouse, if any, at the rate of 50% of the amount
payable to the participant.
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(3)
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Pension Benefit Formula. Each eligible participant shall receive
a monthly benefit payable at his normal retirement date equal to 50%
of average monthly compensation.
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(4)
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Social Security Offset for Officers Hired On or After January
1, 2016. Benefits distributed under this Plan to officers hired on
or after January 1, 2016 shall be offset by 75% of the Social Security
normal retirement benefit for which they are eligible to receive based
on their employment with the Borough. Such offset will occur on the
participant's Social Security normal retirement date.
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(5)
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Service Increment Benefit. Each eligible participant shall receive
a service increment benefit of $20 per month for each completed year
of benefit service in excess of 25. The total service increment benefit
shall not exceed $100 per month. This benefit shall be payable in
addition to the monthly benefit payable under the pension benefit
formula, provided the participant is eligible.
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However, in the case of a participant who was employed prior
to January 1, 2001, the service increment benefit shall be equal to
2.0% of average monthly compensation for each completed year of benefit
service in excess of 20. The total service increment benefit shall
not exceed 20.0% of average monthly compensation.
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Provided further, participants hired on or after January 1,
2016 shall not receive a service increment benefit in addition to
their normal retirement benefit.
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(6)
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IRC Section 415 Limitation on Benefits. Notwithstanding the
benefits set forth in this section, the annual benefit otherwise payable
to a participant under this plan at any time shall be limited as provided
in § 1-1108.a.
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c.
Accrued Benefit. A participant's accrued benefit at any time equals:
(a) the product of the normal retirement benefit determined in accordance
with § 1-1104.b(3) multiplied by a fraction, the numerator
of which is the number of years of benefit service at such date, and
the denominator of which is the number of years of benefit service
the participant would have as of the year containing his normal retirement
date if he continues to work until such date; plus (b) any service
increment benefit.
Notwithstanding the above, for a participant who was employed
prior to January 1, 2001, and who has completed 20 or more years of
benefit service, the accrued benefit at any time equals the product
of the sum of the normal retirement benefit determined in accordance
with § 1-1104.b(3), plus any service increment benefit,
multiplied by a fraction, the numerator of which is the number of
years of benefit service at such date, and the denominator of which
is the number of years of benefit service the participant would have
as of the year containing his normal retirement date if he continues
to work until such date.
If a participant begins receiving benefits at a time other than
his normal retirement date, the participant's benefit will be determined
in accordance with Section 1104.d if benefits commence after his normal
retirement date and in accordance with Section 1104.e if benefits
commence before his normal retirement date.
d.
Late Retirement.
(1)
Nonforfeitability. If a participant remains employed after his
normal retirement date, his benefits shall remain 100% vested and
nonforfeitable. Payment of benefits shall not commence until his actual
retirement date.
(2)
Suspension of Benefits Until Payment. Payment of normal retirement
benefits shall be suspended for each calendar month during which the
participant remains employed after his normal retirement date. The
amount of benefits that are paid later than his normal retirement
date shall be computed under the pension benefit formula, and shall
be increased by any service increment benefit. The participant's pension
benefit shall be determined on the basis of the participant's years
of service for benefit accrual completed before and during the period
of suspension; and the participant's compensation with the employer
during the period of suspension shall be included in any relevant
determination of average monthly compensation.
e.
Early Retirement. An early retirement benefit shall be provided to
a participant who was employed prior to January 1, 2001, and who has
completed 12 or more years of vesting service who terminates employment
prior to the completion of normal retirement age and service requirements
and who files a written application for an early retirement benefit
with the governing body of the employer. The early retirement benefit
shall become effective as of the first day of the month coincident
with or next following the date the application is filed with the
governing body or the date designated on the application, whichever
is later, and shall be equal to the actuarial equivalent of the accrued
benefit at the participant's early retirement date.
However, participants hired on or after January 1, 2016 shall
not be eligible to retire prior to their normal retirement date.
f.
Disability Retirement. If an actively employed participant suffers
a service-connected disability and is unable to perform his normal
duties prior to his normal retirement date, he may receive a disability
benefit under the plan.
Effective for an active participant becoming disabled on or
after April 17, 2002, such disabled participant shall be entitled
to a monthly disability benefit equal to 50% of the participant's
monthly salary at the time the disability was incurred.
Disability benefit payments shall cease upon death or upon recovery
from disability prior to the date on which the disabled participant
would have reached his normal retirement date if he had continued
as an active participant under the plan. If disability benefits cease
due to death before the participant's attainment of his normal retirement
date, the death benefit payable shall be the appropriate preretirement
death benefit described in § 1-1105.b, without any reduction
with respect to disability payments that have been made. For the purpose
of determining whether there has been a recovery, the plan administrator
may require evidence of continued disability. Such evidence may include
examination by a doctor selected by the plan administrator. The participant's
refusal to submit to medical examinations shall render him ineligible
for disability benefits.
If disability continues until attainment of normal retirement
date, the disability benefit shall continue until death.
Disability means inability to engage in any substantial gainful
activity for which the participant is reasonably fitted through training,
education, and experience by reason of any medically determinable
physical or mental impairment that can be expected to result in death
or that has lasted or can be expected to last for a continuous period
of not less than 12 months and that is the result of the performance
of police services for the employer.
The permanence and degree of the impairment shall be supported
by medical evidence. The plan administrator shall determine whether
the participant is disabled as defined hereunder after consultation
with a physician chosen by the plan administrator. The physician shall
examine the participant at the participant's place of residence or
at a place mutually agreed upon. In the administration of this section,
all employees shall be treated in a uniform manner in similar circumstances.
g.
Benefit Distribution.
(1)
Commencement of Benefits. Subject to the limitations of this
plan, the benefit distribution shall commence as soon as administratively
feasible after the later of the participant's termination of employment
or his satisfaction of the normal retirement date requirements, provided
that he files a written application for the retirement benefit.
(2)
Optional Forms of Payment. A participant who was employed prior
to January 1, 2001, may elect to receive distribution of his accrued
benefit in one of the optional forms of payment outlined below, provided
that such distribution complies with the Distribution Requirements
of § 1-1108.b. The participant shall file a written request
for benefits with the plan administrator before payments will commence.
Optional forms of payment include:
(a)
Lifetime Pension. A monthly pension payable for the lifetime
of the participant with payments guaranteed for the first 0, 60, or
120 months.
(b)
Joint and Survivor Pension. A monthly pension payable as long
as the participant or his designated survivor annuitant live. The
amount of monthly pension continued after the participant's death
during the lifetime of the survivor annuitant may be 100%, 66 2/3%,
or 50% of the actuarially adjusted amount payable during the participant's
lifetime. The plan administrator shall reject the designation of a
survivor annuitant if the age of such person would cause a monthly
pension to violate the Distribution Requirements of § 1-1108.b(4)(6).
A participant who was not employed prior to January 1, 2001,
shall not be eligible to elect to receive distribution of his accrued
benefit in an optional form of payment.
(3)
General Payment Provisions.
(a)
If any person entitled to receive benefits hereunder is physically
or mentally incapable of receiving or acknowledging receipt thereof,
and if a legal representative has been appointed for him, the plan
administrator may direct the benefit payment to be made to such legal
representative.
(b)
At the direction of the plan administrator, the trustee may
make pension payments directly from the fund or may take such steps
as may be required to purchase an annuity contract from an insurance
company for the participant, provided that the annuity contract purchased
on behalf of such participant shall be sufficient to provide the benefits
to which the participant is entitled. The ownership of the annuity
contract shall remain with the trustee, unless the plan administrator
determines otherwise. Any annuity contract distributed herefrom shall
be non-transferable. The application and directions to the insurance
company for such annuity contract shall be made by the plan administrator.
The terms of any such annuity contract purchased by the plan shall
comply with the requirements of this plan. Any dividend, refund or
recovery on an annuity contract shall be used to reduce subsequent
employer contributions.
(c)
The benefits due any participant on account of his most recent
period of employment shall not duplicate any benefits due the same
participant under this plan on account of previous employment with
the employer.
(d)
The participant's election of a form of benefit payment shall
be irrevocable as of the annuity starting date.
h.
Suspension of Benefits. Subject to the requirements of § 1-1108.b,
benefits in pay status shall be suspended if a participant returns
to employment as a full-time police officer with the Borough of State
College; however, there shall be no suspension if the participant
is required to perform services for the employer from time to time
as a police reserve in compliance with 53 P.S. § 769. If
the participant accrues an additional benefit, the plan shall offset
the actuarial value of the distributions made to the participant by
the last day of the preceding plan year against the retirement benefit
as of such date. However, to determine the benefit payable to the
participant on or after his succeeding termination of employment,
the plan shall offset the actuarial value of such benefit distributions
that are made to the participant by the date of his succeeding termination
of employment against his retirement benefit determined as of such
date.
i.
Domestic Relations Orders. Nothing contained in this plan prevents
the trustee, in accordance with the direction of the plan administrator,
from complying with the provisions of an acceptable domestic relations
order that creates or recognizes the existence of an alternate payee's
right to, or assigns to an alternate payee the right to receive all
or a portion of the benefits payable with respect to a participant
under the plan.
A distribution under an acceptable domestic relations order
will not be made to an alternate payee until the participant is entitled
to a distribution under this plan and commences such distribution.
Nothing in this section permits the alternate payee to receive a form
of payment not otherwise permitted under the plan.
The plan administrator shall establish reasonable procedures
to determine the acceptability of a domestic relations order in accordance
with IRC Section 414(p). Upon receiving a domestic relations order,
the plan administrator promptly will notify the participant and any
alternate payee named in the order, in writing, of the receipt of
the order and the plan's procedures for determining the acceptability
of the order. Within a reasonable period of time after receiving the
domestic relations order, the plan administrator shall determine the
acceptability of the order and shall notify the participant and each
alternate payee, in writing, of its determination. The plan administrator
shall provide notice under this paragraph by mailing to the individual's
address specified in the domestic relations order.
If any portion of the participant's nonforfeitable accrued benefit
is payable during the period the plan administrator is making its
determination of the acceptability of the domestic relations order,
the plan administrator shall make a separate accounting of the amounts
payable. If the plan administrator determines the order is an acceptable
domestic relations order within 18 months of the date amounts first
are payable following receipt of the order, it shall direct the trustee
to distribute the payable amounts in accordance with the order. If
the plan administrator does not make its determination of the acceptability
of the order within the eighteen-month determination period, it shall
direct the trustee to distribute the payable amounts in the manner
the plan would distribute if the order did not exist and will apply
the order prospectively if it later determines the order is an acceptable
domestic relations order.
[Ord. 1924, 2/2/2009]
a.
Death Benefit with Respect to Employee Contributions.
(1)
Benefit Payable. If a participant dies prior to his annuity
starting date (as defined in § 1-1108.a(5)(1) and if no
death benefit is payable under § 1-1105.b, an amount equal
to the participant's accumulated contributions as determined under
§ 1-1107.b shall be payable to the participant's designated
beneficiary in one lump sum.
(2)
Beneficiary Designation. The participant shall have the right
to designate his beneficiaries, including a contingent beneficiary,
and shall have the right at any time to change such beneficiaries.
The designation shall be made in writing on a form supplied by the
plan administrator. No designation shall be effective until filed
with the plan administrator. If the participant fails to designate
a beneficiary, or if the designated person or persons predeceases
the participant, "beneficiary" shall mean the surviving spouse. If
there is neither a named beneficiary nor a surviving spouse, then
the benefit shall be payable to any eligible child (or children) of
the participant. In the case of multiple eligible children, the benefit
payable shall be divided equally among the children. If there is no
named beneficiary, no surviving spouse, and no eligible child, the
benefit shall be payable to the estate of the participant. However,
in the event that no letters have been taken out on the estate within
six months after death and the death benefit payable is less than
$100, the death benefit shall be paid to the undertaker or any person
or municipality that paid the claim of the undertaker.
(3)
Eligible Child. For purposes of this § 1-1105, an
eligible child is a child of the participant who is under the age
of 18 or, if attending college, under or attaining the age of 23.
Child shall include the adopted child of the participant. For this
purpose, attending college means being registered at an accredited
institution of higher learning and carrying a minimum course load
of seven credit hours per semester.
b.
Killed in Service Benefit and Survivor Benefit.
(1)
Killed-in-Service Benefit. Effective with respect to deaths
occurring on or after January 1, 2013, the killed-in-service death
benefit shall no longer be payable under this plan or by the employer.
A deceased participant's surviving spouse or eligible child who is
eligible to receive such benefit due to the qualifying death of a
participant on or after April 17, 2002, and prior to January 1, 2013,
shall continue to receive the benefit as formerly awarded.
[Ord. 1996]
(2)
Survivor Benefit. If a retired or disabled participant who is
receiving a pension benefit dies or if a participant after satisfying
the requirements for retirement whether or not he had previously terminated
employment, the participant's surviving spouse or eligible child (if
any and as further described in § 1-1105.2(3)) shall receive
a benefit equal to 50% of the retirement benefit that the participant
was receiving or would have been receiving if the participant had
been retired on the date of death.
If a participant who was employed prior to January 1, 2001,
dies after the completion of 12 years of vesting service whether or
not he had previously terminated employment, the participant's surviving
spouse (if any) shall receive a benefit equal to 50% of the participant's
accrued benefit on the date of death.
(3)
Payment shall be in the form of a pension (without actuarial
adjustment with respect to the age of the beneficiary) and shall commence
as of the first day of the month following the date of death. Payment
to the surviving spouse shall cease upon the death of the surviving
spouse.
If there is no surviving spouse or if the surviving spouse dies
(thereby ceasing to be the surviving spouse of the participant), then
the benefit shall be payable to any eligible child (or children) of
the participant as defined in § 1-1105.a(3). In the case
of multiple eligible children, the benefit payable shall be divided
equally among the children. Payment shall cease upon the earlier of
death or attainment of age 18 (or under or attaining the age of 23
if attending college).
The participant's spouse cannot waive receipt of this benefit.
In the case of an unmarried participant who has no children under
the age of 18 (or under or attaining the age of 23 if attending college),
no death benefit shall be payable under this § 1-1105.b,
but a death benefit may be payable under § 1-1105.a. The
death benefit payable shall not be less than the benefit payable under
§ 1-1105.a. In the event that there is no spouse or child
eligible to receive the death benefit payable under this § 1-1105.b,
the death benefit provided under § 1-1105.a shall be paid
as described therein. The distribution shall comply with the Distribution
Requirements of § 1-1108.b(4)(b).
If there is an acceptable domestic relations order in force
with respect to the participant, the alternate payee shall receive
a portion of the death benefit to the extent provided in the order,
but only if the alternate payee has not died. However, no order shall
be accepted if it provides that the alternate payee shall be the surviving
spouse creating a right to a death benefit under this § 1-1105.b
as the death benefit payable hereunder is only payable with respect
to a widow or widower or an eligible child.
c.
Postretirement Death Benefit. Notwithstanding the above, upon the
death of a participant who was employed prior to January 1, 2001,
after his annuity starting date, no death benefit shall be payable,
except such benefit as is provided by the particular form of pension
payment under which pension benefits are being distributed.
[Ord. 1924, 2/2/2009]
a.
Vesting. If a participant separates from the service of the employer
other than by retirement or disability, he shall forfeit any benefit
accrued under § 1-1104.c unless he has been credited with
12 years of vesting service. A participant who has been credited with
12 years of vesting service shall be entitled to a vested deferred
pension if he files with the plan administrator a written notice of
his intention to vest within 90 days of the date he terminates employment
or ceases to be a member of the eligible class of employees. Such
vested deferred pension shall be equal to the benefit accrued to the
date of termination.
However, participants hired on or after January 1, 2016 who
terminate prior to meeting the eligibility requirements for normal
retirement will not be entitled to any benefits from the plan beyond
a refund of their accumulated employee contributions with interest.
b.
Payment of Benefits.
(1)
Payment as of Normal Retirement Date. If the participant terminates
his employment on or before his normal retirement date, payment of
the vested accrued pension may begin at his normal retirement date.
If payments do not commence until after his normal retirement date,
distribution must begin by the required beginning date for minimum
required distributions and the amount of the benefit payable shall
be determined as provided in § 1104.d.
(2)
Payment as of Early Retirement Date. Upon the request of an
eligible terminated participant who was employed prior to January
1, 2001, and who has completed 12 years of vesting service, payment
of the vested accrued pension may begin on or after his early retirement
date. In the event of such earlier commencement of benefits, the benefit
shall be paid pursuant to the early retirement provisions of § 1-1104.e.
(3)
Payment Prior to Early Retirement Date. No accrued benefit is
payable before the early retirement date, except in the event of death
or disability. Nevertheless, if the participant is not eligible to
receive his benefit accrued under § 1-1104.c at the time
of his termination of employment (either due to his years of vesting
service or his failure to file a written notice under § 1-1106.a),
he shall receive an amount equal to his accumulated contributions
as soon as administratively possible after severance of employment
as provided in § 1-1107.b.
(4)
Death Before Retirement. If a participant terminates employment
and dies before beginning to receive retirement benefits, a pre-retirement
death benefit may be payable, to the extent provided under § 1-1105.
(5)
Forfeiture for Malfeasance. Notwithstanding any other provision
of this plan, a participant who is convicted or pleads guilty to engaging
in criminal misconduct which constitutes a "crime related to public
office or public employment," as that phrase is defined in Pennsylvania
Pension Forfeiture Act, 43 P.S. § 1311-1314 and interpreted
thereunder, shall forfeit his right to receive a pension benefit under
this plan. In such a case, the participant shall only be entitled
to receive the contributions, if any, he made under § 1-1107.b,
without interest.
c.
Accumulated Contribution Distribution and Restoration.
(1)
Accumulated Contribution Distribution. If an employee receives
a distribution of his accumulated contributions under § 1-1107.b,
the employee's vested accrued benefit shall be zero. For purposes
of this section, if the value of an employee's accumulated contributions
is zero, he shall be deemed to have received a distribution of such
vested accrued benefits. In determining the participant's accrued
benefit after the occurrence of such a distribution, the plan shall
disregard all years of benefit service performed by such employee
before the date of distribution.
(2)
Restoration. If a participant receives a distribution pursuant
to this section and if he resumes covered employment under the plan,
he shall have the right to restore his accrued benefit under § 1-1104.b
upon the repayment to the plan of the full amount of the distribution
plus interest, compounded annually from the date of distribution at
the rate set forth in § 1-1107.b(3). In order to make a
total or partial repayment, the employee may transfer to the plan
the account balance of the individual retirement account or annuity
to which the distribution being repaid was transferred, provided that
both transfers are accomplished in compliance with IRC Section 408(d).
Such repayment must be made within five years after the participant
returns to active participation.
If a participant is eligible to restore his accrued benefit,
but such restoration has not been made; then, for the purpose of determining
years of benefit service and years of vesting service, years of service
before the employee's break-in-service shall be disregarded. If an
employee is deemed to receive a distribution pursuant to § 1-1106.c(1),
and he resumes covered employment under this plan at any time thereafter,
upon the re-employment of such employee the plan shall take into account
all years of benefit service performed by such employee before the
date of such deemed distribution.
[Ord. 1924, 2/2/2009]
a.
Contributions Other Than Employee Contributions.
(1)
Application of Certain Receipts. The amounts of the payments
made by the Treasurer of the Commonwealth from the monies received
from taxes paid upon premiums by foreign casualty insurance companies
and foreign fire insurance companies that are determined by the employer
to be deposited in the fund shall be applied as follows:
(a)
To pay expenses incurred for the administration of the fund
and the plan.
(b)
To reduce any unfunded liability. Unfunded liability means the
present value of the liability of the fund on account of retirement
benefits payable under this plan that accrued prior to the date as
of which mandatory employee contributions were first required, offset
by the value of any assets in the fund.
(c)
After the unfunded liability has been funded, to apply against
the annual obligation of the employer for future service cost. Future
service cost means the amount of money required to be contributed
annually into the fund on account of benefits payable under the plan
with respect to years of service credited after the establishment
of the plan.
(d)
To the extent that the payments may be in excess of such obligation,
to reduce mandatory employee contributions hereunder. Any other monies
paid into the fund including gifts, grants, devises or bequests granted
to the trust fund pursuant to 53 P.S. § 768 shall be applied
equally against the participant mandatory employee contribution obligation
and the employer obligation for future service cost.
(2)
Employer Contributions. The Chief Administrative Officer of
the plan shall determine the financial requirements of the plan on
the basis of the most recent actuarial report and shall determine
the minimum obligation of the employer with respect to funding the
plan for any given plan year. The Chief Administrative Officer shall
submit the financial requirements of the plan and the minimum obligation
of the employer to the employer (or its governing body) annually and
shall certify the accuracy of such calculations and their conformance
with Act 205. To the extent that the payments received under § 1-1109.d(1)(b)
do not exceed the employer's annual obligation for future service
cost, as determined by the actuary in accordance with Act 205, the
employer shall be obligated to make such contribution to the trust
by annual appropriations.
(3)
Funding of Plan. The Plan shall be funded in the following order:
(a)
By payments made by the Treasurer of the Commonwealth to the
Borough from the monies received from taxes paid upon premiums by
foreign casualty insurance companies and from foreign fire insurance
companies. The Borough's obligations to apply such monies to the Plan
shall be limited, annually, to those monies flowing from the Commonwealth
to the Borough because the Borough has a police force. The Borough
is not required to direct all, or a part, of such monies into the
Plan except that there shall be no "charge" against police officer
compensation, as described in § 1-1107.b(1), in any year
in which the Borough does not apply all of the foreign casualty and
foreign fire insurance tax monies coming to it because it has a police
force to the Plan;
(b)
By a charge against each police officer's compensation in the
amount determined to be necessary by an actuary, which amount shall
not, however, exceed 5.00% of the officer's compensation;
(c)
When necessary, by annual appropriations made by the Borough
(i.e. when an actuary determines that the Plan needs a greater infusion
of funds than will be provided through employee contributions and
the foreign casualty and foreign fire insurance monies which are applied
to the Plan).
b.
Mandatory Employee Contributions.
(1)
Mandatory Contribution Amount. As a condition of participation
in this plan, each active participant must contribute, on an after-tax
basis, a percentage of his compensation as established each year.
In general, this mandatory contribution shall be 5.00% of the participant's
compensation.
The employer may reduce or eliminate the contribution required
provided any reduction or elimination of contributions is authorized
on an annual basis by an ordinance or resolution by the employer.
(2)
Effective January 1, 1997, the employer shall contribute an
amount equal to the mandatory employee contribution amount set forth
in § 1-1107.b(1) as a pick-up contribution (pursuant to
IRC Section 414(h)(2)) in lieu of the prior mandatory employee contribution.
The contribution shall be made on a pre-tax basis, and there shall
be a corresponding reduction in compensation paid to the participant.
Notwithstanding, officers hired on or after January 1, 2016
must contribute the maximum amount of base salary permitted by law
to assist in funding the Plan benefits.
(3)
Determination of Accumulated Contributions. The participant's
accumulated contributions shall be equal to his mandatory employee
contributions with interest. The interest rate to be credited shall
be 5.000% per annum. Such interest shall be credited annually in the
form of a compound interest rate. A participant shall be 100% vested
in his accumulated contributions.
(4)
Withdrawal of Accumulated Contributions. Upon termination of
employment, a participant who is not vested in his benefit accrued
under § 1-1104.c shall receive an amount that is equal to
his total accumulated contributions. The withdrawal shall be payable
in one lump sum. Thereafter, the former participant shall have no
further right to any benefit under this plan.
In no event may any amount be withdrawn or distributed until
the participant's retirement, disability, death or termination of
employment, regardless of the income tax accounting treatment required
by IRC Section 72(e)(8)(D).
(a)
Eligible Rollover Distribution. Effective for distributions
made on or after January 1, 1993, a distributee may elect, at the
time and in the manner prescribed by the plan administrator, to have
any eligible portion of a lump sum distribution paid directly to an
eligible retirement plan specified by the distributee in a direct
rollover payment.
(i)
Eligible Rollover Distribution. An eligible rollover distribution
is any distribution of all or any portion of the balance to the credit
of the distributee, except that an eligible rollover distribution
does not include: any distribution to the extent such distribution
is required under IRC Section 401(a)(9) and the portion of any distribution
that is not includable in gross income; and any other distribution(s)
that is reasonably expected to total less than $200 during a year.
A portion of a distribution shall not fail to be an eligible
rollover distribution merely because the portion consists of after-tax
employee contributions which are not includable in gross income. However,
such portion may be transferred only to: (A) an individual retirement
account or annuity described in IRC Section 408(a) or (b); (B) for
taxable years beginning after December 31, 2001 and before January
1, 2007, to a qualified defined contribution plan described in IRC
Section 401(a) or 403(a) that agrees to separately account for amounts
so transferred, including separately accounting for the portion of
such distribution which is includable in gross income and the portion
of such distribution which is not so includable; or (C) for taxable
years beginning after December 31, 2006, to a qualified trust or to
an annuity contract described in IRC Section 403(b), if such trust
or contract provides for separate accounting for amounts so transferred
(including interest thereon), including separately accounting for
the portion of such distribution which is includable in gross income
and the portion of such distribution which is not so includable.
(ii)
Eligible Retirement Plan. An eligible retirement
plan is an individual retirement account described in IRC Section
408(a), an individual retirement annuity described in IRC Section
408(b), an annuity plan described in IRC Section 403(a), an annuity
contract described in IRC Section 403(b), an eligible plan under IRC
Section 457(b) that is maintained by a state, political subdivision
of a state, or any agency or instrumentality of a state or political
subdivision of a state and that agrees to separately account for amounts
transferred into such plan from this plan, or a qualified plan described
in IRC Section 401(a), that accepts the distributee's eligible rollover
distribution.
Effective for distributions made on or after January 1, 2008,
an eligible retirement plan includes a Roth individual retirement
account (Roth IRA) described in IRC Section 408A. However, for distributions
before January 1, 2010, a distributee shall not be allowed to make
a qualified rollover contribution to a Roth IRA from the plan if,
for the taxable year of the distribution to which such contribution
relates the distributee's adjusted gross income exceeds $100,000,
or the distributee is a married individual filing a separate return.
(iii)
Distributee. A distributee includes an employee
or former employee. In addition, the employee's or former employee's
surviving spouse and the employee's or former employee's spouse or
former spouse who is the alternate payee under a qualified domestic
relations order, as defined in IRC Section 414(p), are distributees
with regard to the interest of the spouse or former spouse. Effective
for death benefit distributions made on or after January 1, 2007,
a distributee shall include a nonspouse beneficiary but only with
respect to a direct transfer to an inherited individual retirement
account or annuity that is established on his behalf and that will
be treated as an inherited individual retirement account or annuity
pursuant to the provisions of IRC Section 402(c)(11).
(iv)
Direct Rollover. A direct rollover is a payment
by the plan to the eligible retirement plan specified by the distributee.
(b)
Special Rule Relating to Time for Written Explanation. Effective
for distributions made on or after January 1, 1993, for any distribution
in excess of $200 that may be paid in the form of a lump sum, the
plan administrator shall give the participant written notice of his
eligible rollover distribution rights as required under IRC Section
402(f) no less than 30 days and no more than 90 days before the annuity
starting date with respect to the distribution. Effective for distributions
made on or after January 1, 1994, such distribution may commence less
than 30 days after the notice is given, provided that:
(i)
The participant is provided with information that clearly states
that the participant has a right to a period of at least 30 days after
receiving the written explanation and notice to consider the decision
of whether or not to elect a distribution;
(ii)
The participant, after receiving the written notice,
affirmatively elects a distribution.
(5)
Forfeiture. If a death benefit is payable under Section 1105.a,
it shall not be less than the participant's accumulated contributions.
c.
Rollover/Transfer Contributions. Rollover and transfer contributions
shall not be permitted under this plan and there shall be no rollover/transfer
account.
[Ord. 1924, 2/2/2009]
a.
Limitation on Benefits Under IRC Section 415. The limitations of
this section 1109.a. shall apply in limitation years beginning on
or after July 1, 2007, except as otherwise provided herein.
(1)
Annual Benefit Limitation. The annual benefit otherwise payable
to a participant at any time under the plan shall not exceed the maximum
permissible benefit.
(2)
Limitations on Employee Contributions. If a participant has
made mandatory employee contributions, under the terms of this plan,
the amount of such contributions shall be treated as an annual addition
to a qualified defined contribution plan. If the mandatory employee
contribution the participant would otherwise make in a limitation
year would exceed the maximum permissible annual addition, the contribution
shall be limited to a contribution that does not exceed the maximum
permissible annual addition.
(a)
Prior to determining the participant's actual compensation for
the limitation year, the employer may determine the maximum permissible
annual addition for a participant on the basis of a reasonable estimation
of the participant's compensation for the limitation year, uniformly
determined for all participants similarly situated.
(b)
As soon as is administratively feasible after the end of the
limitation year, the maximum permissible annual addition for the limitation
year will be determined on the basis of the participant's actual compensation
for the limitation year.
(3)
Combined Limitations: Other Defined Benefit Plans.
(a)
If a participant is, or has ever been, a participant in another
qualified defined benefit plan maintained by the employer or a predecessor
employer, the sum of the participant's annual benefits from all such
plans may not exceed the maximum permissible benefit. If the maximum
permissible benefit is exceeded solely due to the benefit payable
under a frozen or terminated defined benefit plan, the annual benefit
otherwise payable under this plan shall be reduced so that the maximum
permissible benefit is not exceeded.
(b)
Where the participant's employer-provided benefits under all
qualified defined benefit plans ever maintained by the employer (determined
as of the same age) would exceed the maximum permissible benefit applicable
at that age, the method by which the plans will limit a participant's
annual benefit otherwise payable in such cases shall be as provided
in § 1-1104.b(6).
(4)
Protection of Accrued Benefit. In the case of an individual
who was a participant in one or more defined benefit plans of the
employer as of the first day of the first limitation year beginning
after December 31, 1986, the application of the limitations of IRC
Section 415 shall not cause the maximum permissible benefit amount
for such individual under all such defined benefit plans to be less
than the individual's Tax Reform Act of 1986 (TRA '86) accrued benefit.
The preceding sentence applies only if all such defined benefit plans
met the requirements of IRC Section 415, for all limitation years
beginning before January 1, 1987.
The application of the provisions of this section 1108.a shall
not cause the maximum permissible benefit for any participant to be
less than the participant's accrued benefit under all the defined
benefit plans of the employer or a predecessor employer as of the
end of the last limitation year beginning before July 1, 2007 under
provisions of the plans that were both adopted and in effect before
April 5, 2007. The preceding sentence applies only if the provisions
of such defined benefit plans that were both adopted and in effect
before April 5, 2007 satisfied the applicable requirements of statutory
provisions, regulations, and other published guidance relating to
IRC Section 415 in effect as of the end of the last limitation year
beginning before July 1, 2007, as described in Treasury Regulation
Section 1.415(a)-1(g)(4).
(5)
Definitions (IRC Section 415 Limitations).
(a)
Annual Additions. The sum of the following amounts credited
to a participant's account for the limitation year: (A) employer contributions;
(B) employee contributions; (C) forfeitures; (D) allocations under
a simplified employee pension; and (E) amounts allocated, after March
31, 1984, to an individual medical account that is part of a pension
or annuity plan maintained by the employer. Also amounts derived from
contributions paid or accrued after December 31, 1985 (in taxable
years ending after such date), that are attributable to post-retirement
medical benefits, allocated to the separate account of a key employee
(as defined in IRC Section 419A(d)(3)) under a welfare benefit fund.
For limitation years beginning before January 1, 1987, employee
contributions shall only be taken into account for this purpose up
to the lesser of the amount of employee contributions in excess of
6% of compensation for the limitation year, or 1/2 of the employee
contributions for that year. Picked-up contributions under IRC Section
414(h)(2) shall not be included as an annual addition with respect
to a participant.
(b)
Annual Benefit. A benefit
under the plan that is payable annually in the form of a straight
life annuity. The annual benefit shall include any picked-up contributions
made by the employer under IRC Section 414(h)(2). Except as provided
below, where a benefit is payable in a form other than a straight
life annuity, the benefit shall be adjusted to an actuarially equivalent
straight life annuity that begins at the same time as such other form
of benefit and is payable on the first day of each month, before applying
the limitations of this section 1108.a. For a participant who has
or will have distributions commencing at more than one annuity starting
date, the annual benefit shall be determined as of each such annuity
starting date (and shall satisfy the limitations of this section 1108.a
as of each such date), actuarially adjusting for past and future distributions
of benefits commencing at the other annuity starting dates. For this
purpose, the determination of whether a new starting date has occurred
shall be made without regard to Treasury Regulation Section 1.401(a)-20,
Q&A 10(d), and with regard to Treasury Regulation Section 1.415(b)-1(b)(1)(iii)(B)
and (C).
No actuarial adjustment to the benefit is required for (A) survivor
benefits payable to a surviving spouse under a qualified joint and
survivor annuity to the extent such benefits would not be payable
if the participant's benefit were paid in another form; (B) benefits
that are not directly related to retirement benefits (such as a qualified
disability benefit, preretirement incidental death benefits, and postretirement
medical benefits); and (C) the inclusion in the form of benefit of
an automatic benefit increase feature, provided the form of benefit
is not subject to IRC section 417(e)(3) and would otherwise satisfy
the limitations of this section 1108.a, and the plan provides that
the amount payable under the form of benefit in any limitation year
shall not exceed the limits of this § 1-1108.a applicable
at the annuity starting date, as increased in subsequent years pursuant
to IRC Section 415(d). For this purpose, an automatic benefit increase
feature is included in a form of benefit if the form of benefit provides
for automatic, periodic increases to the benefits paid in that form.
The determination of the annual benefit shall take into account
social security supplements described in IRC Section 411(a)(9) and
benefits transferred from another defined benefit plan, other than
transfers of distributable benefits pursuant Treasury Regulation Section
1.411(d)-4, Q&A-3(c), but shall disregard benefits attributable
to employee contributions or rollover contributions.
Effective for distributions in plan years beginning after December
31, 2003, the determination of actuarial equivalence of forms of benefit
other than a straight life annuity shall be made in accordance with
§ 1-1108.a(5)(b)(i) or § 1-1108.a(5)(b)(ii).
(i)
Benefit Forms Not Subject to IRC Section 417(e)(3). The straight
life annuity that is actuarially equivalent to the participant's form
of benefit shall be determined under this § 1-1108.a(5)(b)(i)
if the form of the participant's benefit is either (i) a nondecreasing
annuity (other than a straight life annuity) payable for a period
of not less than the life of the participant (or, in the case of a
preretirement survivor annuity, the life of the surviving spouse),
or (ii) an annuity that decreases during the life of the participant
merely because of (a) the death of the survivor annuitant (but only
if the reduction is not below 50% of the annual benefit payable before
the death of the survivor annuitant), or (b) the cessation or reduction
of Social Security supplements or qualified disability payments (as
defined in IRC Section 401(a)(11)).
a.
Limitation Years beginning before July 1, 2007. For limitation
years beginning before July 1, 2007, the actuarially equivalent straight
life annuity shall be equal to the annual amount of the straight life
annuity commencing at the same annuity starting date that has the
same actuarial present value as the participant's form of benefit
computed using whichever of the following produces the greater annual
amount: (a) the interest rate and the mortality table stated in § 1-1102.b(3);
and (b) a 5% interest rate assumption and the applicable mortality
table defined in § 1-1102.b(3) for that annuity starting
date.
b.
Limitation Years beginning on or after July 1, 2007. For limitation
years beginning on or after July 1, 2007, the actuarially equivalent
straight life annuity is equal to the greater of: (a) the annual amount
of the straight life annuity (if any) payable to the participant under
the plan commencing at the same annuity starting date as the participant's
form of benefit; and (b) the annual amount of the straight life annuity
commencing at the same annuity starting date that has the same actuarial
present value as the participant's form of benefit, computed using
a 5% interest rate assumption and the applicable mortality table defined
in § 1-1102.b(3) for that annuity starting date.
(ii)
Benefit Forms Subject to IRC Section 417(e)(3).
The straight life annuity that is actuarially equivalent to the participant's
form of benefit shall be determined under this paragraph if the form
of the participant's benefit is other than a benefit form described
in § 1-1108.a(5)(b)(i). In this case, the actuarially equivalent
straight life annuity shall be determined as follows:
a.
Annuity Starting Date in Plan Years Beginning After
2005. If the annuity starting date of the participant's form of benefit
is in a plan year beginning after December 31, 2005, the actuarially
equivalent straight life annuity shall be equal to the greatest of:
(a) the annual amount of the straight life annuity commencing at the
same annuity starting date that has the same actuarial present value
as the participant's form of benefit, computed using the interest
rate and the mortality table stated in § 1-1102.b(3); (b)
the annual amount of the straight life annuity commencing at the same
annuity starting date that has the same actuarial present value as
the participant's form of benefit, computed using a 5.5% interest
rate assumption and the applicable mortality table defined in § 1-1102.b(3);
and (c) the annual amount of the straight life annuity commencing
at the same annuity starting date that has the same actuarial present
value as the participant's form of benefit, computed using the applicable
interest rate and the applicable mortality table as defined in § 1-1102.b(3),
divided by 1.05.
b.
Annuity Starting Date in Plan Years Beginning in
2004 or 2005. If the annuity starting date of the participant's form
of benefit is in a plan year beginning in 2004 or 2005, the actuarially
equivalent straight life annuity shall be equal to the annual amount
of the straight life annuity commencing at the same annuity starting
date that has the same actuarial present value as the participant's
form of benefit, computed using whichever of the following produces
the greater annual amount: (a) the interest rate and the mortality
table stated in § 1-1102.b(3); and (b)a 5.5% interest rate
assumption and the applicable mortality table as defined in § 1-1102.b(3).
Notwithstanding the preceding, if the annuity starting date
of the participant's benefit is on or after the first day of the first
plan year beginning in 2004 and before December 31, 2004, the application
of this § 1-1108.a(5)(b)(ii)b shall not cause the amount
payable under the participant's form of benefit to be less than the
benefit calculated under the plan, taking into account the limitations
of this § 1-1108.a except that the actuarially equivalent
straight life annuity shall be equal to the annual amount of the straight
life annuity commencing at the same annuity starting date that has
the same actuarial present value as the participant's form of benefit,
computed using whichever of the following produces the greatest annual
amount:
1.
The interest rate and the mortality table stated
in § 1-1102.b(3);
2.
The applicable interest rate and the applicable
mortality table as defined in § 1-1102.b(3); and
3.
The applicable interest rate defined in § 1-1102.b(3)
(as in effect on the last day of the last plan year beginning before
January 1, 2004) and the applicable mortality table defined in § 1-1102.b(3).
(c)
Compensation. A participant's earned income and any earnings
reportable as W-2 wages for federal income tax withholding purposes
that are paid by the employer. W-2 wages means wages as defined in
IRC Section 3401(a) but determined without regard to any rules that
limit the remuneration included in wages based on the nature or location
of the employment or the services performed. Picked-up contributions
under IRC Section 414(h)(2) shall not be included in the participant's
compensation.
For limitation years beginning after December 31, 1991, for
purposes of applying the limitations of this section 1108.a, compensation
for a limitation year is the compensation actually paid or includable
in gross income during such limitation year. Compensation for a limitation
year shall include amounts earned but not paid during the limitation
year solely because of the timing of pay periods and pay dates, provided
the amounts are paid during the first few weeks of the next limitation
year, the amounts are included on a uniform and consistent basis with
respect to all similarly situated employees, and no compensation is
included in more than one limitation year.
In order to be taken into account for a limitation year, compensation
must be paid or treated as paid prior to severance from employment
with the employer. 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 otherwise be included
under this definition. Further, effective for limitation years beginning
on or after January 1, 2008, compensation in excess of the limitations
of Section 1102.c(2) shall not be taken into account.
For limitation years beginning after December 31, 1997, compensation
shall include elective contributions. Elective contributions are amounts
excludable from the employee's gross income and contributed by the
employer, at the employee's election to a cafeteria plan excludable
under IRC Section 125, a IRC Section 401(k) arrangement (excludable
under IRC Section 402(e)(3)), a simplified employee pension (excludable
under IRC Section 402(h)), a tax sheltered annuity (excludable under
IRC Section 403(b)), a deferred compensation plan (excludable under
IRC Section 457(b)), a IRC Section 501(c)(18) plan, or a IRC Section
132(f)(4) qualified transportation fringe benefit plan.
Elective contribution amounts under a cafeteria plan excludable
under IRC Section 125 shall include any amounts not available to a
participant in cash in lieu of group health coverage because the participant
is unable to certify that he has other health coverage (deemed Section
125 compensation). An amount will be treated as an amount under IRC
Section 125 only if the employer does not request or collect information
regarding the participant's other health coverage as part of the enrollment
process for the health plan.
(d)
Projected Annual Benefit. The annual benefit as defined in § 1-1108.a(5)(6),
to which the participant would be entitled under the terms of the
plan assuming:
(i)
The participant will continue employment until his normal retirement
date under the plan (or current age, if later); and
(ii)
The participant's compensation for the current
limitation year and all other relevant factors used to determine benefits
under the plan will remain constant for all future limitation years.
Straight life annuity means an annuity payable in equal installments
for the life of the participant that terminates upon the participant's
death.
(e)
Defined Benefit Dollar Limitation. Effective for limitation
years ending after December 31, 2001, the defined benefit dollar limitation
is $160,000, automatically adjusted under IRC Section 415(d), effective
January 1 of each year, in such manner as the Secretary of the Treasury
shall prescribe, and payable in the form of a straight life annuity.
The new limitation shall apply to limitation years ending with or
within the calendar year for which the adjustment applies, but a participant's
benefits shall not reflect the adjusted limit prior to January 1 of
that calendar year. The automatic annual adjustment of the defined
benefit dollar limitation under IRC Section 415(d) shall apply to
participants who have had a separation from employment.
(f)
Employer. For purposes of this section 1108.a, employer shall
mean the employer that adopts this plan and any entity required to
be aggregated with the employer pursuant to regulations.
(g)
Excess Annual Addition. The excess of the participant's annual
additions for the limitation year over the maximum permissible annual
addition.
(h)
Limitation Year. The twelve-consecutive-month period defined
in Section 1102.d(5).
(i)
Maximum Permissible Annual Addition. The maximum annual addition
that may be contributed or allocated to a participant's account under
a plan for any limitation year shall not exceed the lesser of:
(i)
The defined contribution dollar limitation, that is $40,000,
as adjusted under IRC Section 415(d) for limitation years beginning
after December 31, 2002; or
(ii)
One hundred percent of the participant's compensation
for the limitation year.
If a short limitation year is created because of an amendment
changing the limitation year to a different twelve-consecutive-month
period, the maximum permissible annual addition will not exceed the
defined contribution dollar limitation multiplied by the following
fraction:
Number of months in the short limitation year\12
(j)
Maximum
Permissible Benefit. The maximum permissible benefit is the defined
benefit dollar limitation.
(i)
Adjustment for Less Than 10 Years of Participation or Service.
If the participant has less than 10 years of participation in the
plan, the defined benefit dollar limitation shall be multiplied by
a fraction: (i) the numerator of which is the number of years (or
part thereof, but not less than one year) of participation in the
plan, and (ii) the denominator of which is 10.
This § 1-1108.a(5)(j)(i) shall not apply to disability
benefit paid in accordance with § 1-1104.f or to benefits
payable under § 1-1105.
(ii)
Adjustment of Defined Benefit Dollar Limitation
for Benefit Commencement Before Age 62 or After Age 65. Effective
for benefits commencing in limitation years ending after December
31, 2001, the defined benefit dollar limitation shall be adjusted
if the annuity starting date of the participant's benefit is before
age 62 and the participant has not completed 15 years of service or
if the annuity starting date is after age 65. If the annuity starting
date is before age 62, the defined benefit dollar limitation shall
be adjusted under § 1-1108.a(5)(j)(ii)a, as modified by
§ 1-1108.a(5)(j)(ii)c. If the annuity starting date is after
age 65, the defined benefit dollar limitation shall be adjusted under
§ 1-1108.a(5)(j)(ii)b, as modified by § 1-1108.a(5)(j)(ii)c.
a.
Adjustment of Defined Benefit Dollar Limitation
for Benefit Commencement Before Age 62.
1.
Limitation years beginning before July 1, 2007.
If the annuity starting date for the participant's benefit is prior
to age 62 and occurs in a limitation year beginning before July 1,
2007 and the participant has not completed 15 years of service, the
defined benefit dollar limitation for the participant's annuity starting
date is an annual amount of a benefit payable in the form of a straight
life annuity commencing at the participant's annuity starting date
that is the actuarial equivalent of the defined benefit dollar limitation
(adjusted under § 1-1108.a(5)(j)(i) for years of participation
less than 10, if required) with actuarial equivalence computed using
whichever of the following produces the smaller annual amount: (1)
the interest rate and the mortality table (or the tabular factor)
specified in § 1-1102.b for an early retirement benefit;
or (2) a 5% interest rate assumption and the applicable mortality
table as defined in § 1-1102.b(3).
2.
Limitation years beginning on or after July 1, 2007.
a.
Plan does not have immediately commencing straight
life annuity payable at both age 62 and the age of benefit commencement.
If the annuity starting date for the participant's benefit is prior
to age 62 and occurs in a limitation year beginning on or after July
1, 2007, the participant has not completed 15 years of service, and
the plan does not have an immediately commencing straight life annuity
payable at both age 62 and the age of benefit commencement, the defined
benefit dollar limitation for the participant's annuity starting date
is the annual amount of a benefit payable in the form of a straight
life annuity commencing at the participant's annuity starting date
that is the actuarial equivalent of the defined benefit dollar limitation
(adjusted under § 1-1108.a(5)(j)(i) for years of participation
less than 10, if required) with actuarial equivalence computed using
a 5% interest rate assumption and the applicable mortality table for
the annuity starting date as defined in § 1-1102.b(3) (and
expressing the participant's age based on completed calendar months
as of the annuity starting date).
b.
Plan has immediately commencing straight life annuity
payable at both age 62 and the age of benefit commencement. If the
annuity starting date for the participant's benefit is prior to age
62 and occurs in a limitation year beginning on or after July 1, 2007,
the participant has not completed 15 years of service, and the plan
has an immediately commencing straight life annuity payable at both
age 62 and the age of benefit commencement, the defined benefit dollar
limitation for the participant's annuity starting date is the lesser
of the limitation determined under § 1-1108.a(5)(j)(ii)a.2.a.
and the defined benefit dollar limitation (adjusted under § 1-1108.a(5)(j)(i)
for years of participation less than 10, if required) multiplied by
the ratio of the annual amount of the immediately commencing straight
life annuity under the plan at the participant's annuity starting
date to the annual amount of the immediately commencing straight life
annuity under the plan at age 62, both determined without applying
the limitations of this § 1-1108.a.
3.
This § 1-1108.a(5)(j)(ii)a shall not apply
to disability benefit paid in accordance with § 1-1104.f
or to benefits payable under § 1-1105.
b.
Adjustment of Defined Benefit Dollar Limitation
for Benefit Commencement After Age 65.
1.
Limitation years beginning before July 1, 2007.
If the annuity starting date for the participant's benefit is after
age 65 and occurs in a limitation year beginning before July 1, 2007,
the defined benefit dollar limitation for the participant's annuity
starting date is the annual amount of a benefit payable in the form
of a straight life annuity commencing at the participant's annuity
starting date that is the actuarial equivalent of the defined benefit
dollar limitation (adjusted under § 1-1108.a(5)(j)(i) for
years of participation less than 10, if required) with actuarial equivalence
computed using whichever of the following produces the smaller annual
amount: (1) the interest rate and the mortality table (or other tabular
factor) specified in § 1-1102.b(2) for a late retirement
benefit; or (2) a 5% interest rate assumption and the applicable mortality
table as defined in § 1-1102.b(3).
2.
Limitation years after July 1, 2007.
a.
Plan does not have immediately commencing straight
life annuity payable at both age 65 and the age of benefit commencement.
If the annuity starting date for the participant's benefit is after
age 65 and occurs in a limitation year beginning on or after July
1, 2007, and the plan does not have an immediately commencing straight
life annuity payable at both age 65 and the age of benefit commencement,
the defined benefit dollar limitation at the participant's annuity
starting date is the annual amount of a benefit payable in the form
of a straight life annuity commencing at the participant's annuity
starting date that is the actuarial equivalent of the defined benefit
dollar limitation (adjusted under § 1-1108.a(5)(j)(i) for
years of participation less than 10, if required), with actuarial
equivalence computed using a 5% interest rate assumption and the applicable
mortality table for that annuity starting date as defined in § 1-1102.b(3)
(and expressing the participant's age based on completed calendar
months as of the annuity starting date).
b.
Plan has immediately commencing straight life annuity
payable at both age 65 and the age of benefit commencement. If the
annuity starting date for the participant's benefit is after age 65
and occurs in a limitation year beginning on or after July 1, 2007,
and the plan has an immediately commencing straight life annuity payable
at both age 65 and the age of benefit commencement, the defined benefit
dollar limitation at the participant's annuity starting date is the
lesser of the limitation determined under § 1-1108.a(5)(j)(ii).b.2.a.
and the defined benefit dollar limitation (adjusted under § 1-1108.a(5)(j)(i)
for years of participation less than 10, if required) multiplied by
the ratio of the annual amount of the adjusted immediately commencing
straight life annuity under the plan at the participant's annuity
starting date to the annual amount of the adjusted immediately commencing
straight life annuity under the plan at age 65, both determined without
applying the limitations of this § 1-1108.a. For this purpose,
the adjusted immediately commencing straight life annuity under the
plan at the participant's annuity starting date is the annual amount
of such annuity payable to the participant, computed disregarding
the participant's accruals after age 65 but including actuarial adjustments
even if those actuarial adjustments are used to offset accruals; and
the adjusted immediately commencing straight life annuity under the
plan at age 65 is the annual amount of such annuity that would be
payable under the plan to a hypothetical participant who is age 65
and has the same accrued benefit as the participant.
c.
Notwithstanding the other requirements of this § 1108.a(5)(j)(ii),
no adjustment shall be made to the defined benefit dollar limitation
to reflect the probability of a participant's death between the annuity
starting date and age 62, or between age 65 and the annuity starting
date, as applicable, if benefits are not forfeited upon the death
of the participant prior to the annuity starting date. To the extent
benefits are forfeited upon death before the annuity starting date,
such an adjustment shall be made. For this purpose, no forfeiture
shall be treated as occurring upon a participant's death if the plan
does not charge participants for providing a qualified preretirement
survivor annuity upon the participant's death.
(iii)
Minimum Benefit Permitted. Notwithstanding anything
else in this section to the contrary, the benefit otherwise accrued
or payable to a participant under this plan shall be deemed not to
exceed the maximum permissible benefit if:
a.
The retirement benefits payable for a plan year
under the actuarially equivalent straight life annuity with respect
to such participant under this plan and under all other defined benefit
plans (regardless of whether terminated) ever maintained by the employer
does not exceed $10,000 multiplied by a fraction: (1) the numerator
of which is the participant's number of years (or parts thereof, but
not less than one year) of benefit service (not to exceed 10) with
the employer; and (2) the denominator of which is 10; and
b.
The employer (or a predecessor employer) has not
at any time maintained a defined contribution plan in which the participant
participated. For this purpose, mandatory employee contributions shall
not be considered a separate defined contribution plan maintained
by the employer. Similarly, individual medical accounts under IRC
Section 401(h) and accounts for postretirement medical benefits established
under IRC Section 419A(d)(1) shall not be considered a separate defined
contribution plan.
(k)
Year of Participation. For the purpose of this section 1108.a,
a participant shall be credited with a year of participation (computed
to fractional parts of a year) for each accrual computation period
for which the following conditions are met: (1) the participant is
credited with at least the period of service for benefit accrual purposes,
required under the terms of the plan in order to accrue a benefit
for the accrual computation period, and (2) the participant is included
as a participant under the eligibility provisions of the plan for
at least one day of the accrual computation period. If these two conditions
are met, the portion of a year of participation credited to the participant
shall equal the amount of benefit accrual service credited to the
participant for such accrual computation period. A participant who
is permanently and totally disabled within the meaning of IRC Section
415(c)(3)(C)(i) for an accrual computation period shall receive a
year of participation with respect to that period. In addition, for
a participant to receive a year of participation (or part thereof)
for an accrual computation period, the plan must be established no
later than the last day of such accrual computation period. In no
event will more than one year of participation be credited for any
twelve-month period.
(l)
Annuity Starting Date. The first day of the first period for
which an amount is paid as an annuity or in any other form.
b.
Distribution Requirements. The requirements of this § 1-1108.b
shall apply to any distribution of a participant's interest. With
respect to distributions under the plan made on or after January 1,
2005 for calendar years beginning on or after January 1, 2005, the
plan will apply the minimum distribution requirements of IRC Section
401(a)(9) as set forth in this § 1-1108.b. Distributions
made prior to January 1, 2005 are subject to the provisions of the
plan as in effect before this amendment and restatement of the plan.
(1)
Time and Manner of Distribution.
(a)
Required Beginning Date. The entire interest of a participant
must be distributed or begin to be distributed no later than the participant's
required beginning date.
(b)
Limits on Distribution Periods. As of the first distribution
calendar year, distributions to a participant, if not made in a single-sum,
may only be made over one of the following periods (or a combination
thereof):
(i)
The life of the participant,
(ii)
The joint lives of the participant and a designated
beneficiary,
(iii)
A period certain not extending beyond the life
expectancy of the participant, or
(iv)
A period certain not extending beyond the joint
life and last survivor expectancy of the participant and a designated
beneficiary.
(c)
Death of Participant Before Distributions Begin. If the participant
dies before distributions begin, the participant's entire interest
will be distributed, or begin to be distributed, no later than as
follows:
(i)
If the participant's surviving spouse is the participant's sole
designated beneficiary, then distributions to the surviving spouse
will begin by December 31 of the calendar year immediately following
the calendar year in which the participant died, or by December 31
of the calendar year in which the participant would have attained
age 70U, if later.
(ii)
If the participant's surviving spouse is not the
participant's sole designated beneficiary, then distributions to the
designated beneficiary will begin by December 31 of the calendar year
immediately following the calendar year in which the participant died.
(iii)
If there is no designated beneficiary as of September
30 of the year following the year of the participant's death or if
a lump sum death benefit is otherwise payable, the participant's entire
interest will be distributed by December 31 of the calendar year containing
the fifth anniversary of the participant's death.
(iv)
If the participant's surviving spouse is the participant's
sole designated beneficiary and the surviving spouse dies after the
participant but before distributions to the surviving spouse begin,
this § 1-1108.b(1)(c), other than § 1-1108.b(1)(c)(i),
will apply as if the surviving spouse were the participant if this
plan otherwise provides for the payment of a death benefit.
For purposes of this § 1-1108.b(1)(c) and § 1-1108.b(4),
distributions are considered to begin on the participant's required
beginning date (or, if § 1-1108.b(1)(c)(iv) applies, the
date distributions are required to begin to the surviving spouse under
§ 1-1108.b(1)(c)(i)). If annuity payments irrevocably commence
to the participant before the participant's required beginning date
(or to the participant's surviving spouse before the date distributions
are required to begin to the surviving spouse under § 1-1108.b(1)(c)(i)),
the date distributions are considered to begin is the date distributions
actually commence.
(d)
Forms of Distribution. Unless the participant's interest is
distributed in the form of an annuity purchased from an insurance
company or in a single sum on or before the required beginning date,
as of the first distribution calendar year distributions will be made
in accordance with § 1-1108.b(2), (3) and (4). If the participant's
interest is distributed in the form of an annuity purchased from an
insurance company, distributions thereunder will be made in accordance
with the requirements of IRC Section 401(a)(9) and Regulation Section
1.401(a)(9)-6.
(2)
Determination of Amount to Be Distributed Each Year.
(a)
General Annuity Requirements.
If the participant's interest is to be paid in the form of annuity
distributions under the plan, payments under the annuity shall satisfy
the following requirements:
(i)
The annuity distribution must be paid in periodic payments made
at intervals not longer than one year;
(ii)
The distribution period must be over a life (or
lives) or over a period certain not longer than the period described
in § 1-1108.b(3) or (4).
(iii)
Once payments have begun over a period certain,
the period certain may only be changed as permitted under Regulation
Section 1.401(a)(9)-6, A-13;
(iv)
Payments must either be nonincreasing or increase
only as follows:
a.
By an annual percentage increase that does not exceed
the annual percentage increase in a cost-of-living index that is based
on prices of all items and issued by the Bureau of Labor Statistics;
b.
To provide cash refunds of employee contributions
upon the participant's death;
c.
To pay increased benefits that result from a plan
amendment; or
d.
To the extent increases are permitted in accordance
with Regulation Section 1.401(a)(9)-6, A-14(c) or (d).
(b)
Amount Required to be Distributed by Required Beginning Date.
The amount that must be distributed on or before the participant's
required beginning date (or, if the participant dies before distributions
begin, the date distributions are required to begin under § 1-1108.b(1)(a)
or (c)) is the payment that is required for one payment interval.
The second payment need not be made until the end of the next payment
interval even if that payment interval ends in the next calendar year.
Payment intervals are the periods for which payments are received,
e.g., bimonthly, monthly, semi-annually, or annually. All of the participant's
benefit accruals as of the last day of the first distribution calendar
year will be included in the calculation of the amount of the annuity
payments for payment intervals ending on or after the participant's
required beginning date.
In the case of a lump sum distribution of the participant's
accrued benefit on or before the participant's required beginning
date, the minimum required distribution shall be determined by expressing
the participant's benefit as a pension payable in the normal form
of payment with an annuity starting date as of the first day of the
distribution calendar year and multiplying the monthly benefit by
12. If the distribution is being made before the April 1 required
beginning date but in such year, both the first and second years required
minimum distribution shall be determined and shall not be eligible
for rollover.
(c)
Additional Accruals After First Distribution Calendar Year.
Any additional benefits accruing to the participant in a calendar
year after the first distribution calendar year will be distributed
beginning with the first payment interval ending in the calendar year
immediately following the calendar year in which such amount accrues.
(3)
Requirements For Annuity Distributions That Commence During
Participant's Lifetime. The participant's interest cannot be distributed
in the form of a joint and survivor annuity under the terms of this
plan. Further, no death benefit can be paid in the form of a period
certain annuity.
(4)
Requirements For Minimum Distributions Where Participant Dies
Before Date Distributions Begin.
(a)
Participant Survived by Designated Beneficiary. If the participant
dies before the date distribution of his or her interest begins and
there is a designated beneficiary, the participant's entire interest
will be distributed, beginning no later than the time described in
§ 1-1108.b(1)(c)(i) or (ii), over the life of the designated
beneficiary or over a period certain not exceeding:
(i)
Unless the annuity starting date is before the first distribution
calendar year, the life expectancy of the designated beneficiary determined
using the beneficiary's age as of the beneficiary's birthday in the
calendar year immediately following the calendar year of the participant's
death; or
(ii)
If the annuity starting date is before the first
distribution calendar year, the life expectancy of the designated
beneficiary determined using the beneficiary's age as of the beneficiary's
birthday in the calendar year that contains the annuity starting date.
(b)
No Designated Beneficiary. If the participant dies before the
date distributions begin and there is no designated beneficiary as
of September 30 of the year following the year of the participant's
death, distribution of the participant's entire interest will be completed
by December 31 of the calendar year containing the fifth anniversary
of the participant's death.
(c)
Death of Surviving Spouse Before Distributions to Surviving
Spouse Begin. If the participant dies before the date distribution
of his or her interest begins, the participant's surviving spouse
is the participant's sole designated beneficiary, and the surviving
spouse dies before distributions to the surviving spouse begin, this
§ 1-1108.c(4) will apply as if the surviving spouse were
the participant, except that the time by which distributions must
begin will be determined without regard to § 1-1108.c(1)(c)(i).
(5)
Definitions (IRC Section 401(a)(9) Requirements).
(a)
Designated Beneficiary. The individual who is designated as
the beneficiary under the plan and is the designated beneficiary under
IRC Section 401(a)(9) and Regulation Section 1.401(a)(9)-4.
(b)
Distribution Calendar Year. A calendar year for which a minimum
distribution is required. For distributions beginning before the participant's
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year that contains the participant's required
beginning date. For distributions beginning after the participant's
death, the first distribution calendar year is the calendar year in
which distributions are required to begin pursuant to § 1-1108.b(1)(c).
(c)
Life Expectancy. Life expectancy as computed by use of the Single
Life Table in Regulation Section 1.401(a)(9)-9.
(d)
Required Beginning Date. The required beginning date of a participant
is the later of: (i) the first day of April of the calendar year following
the calendar year in which the participant attains age 70U and (ii)
the first day of April of the calendar year following the calendar
year in which the participant retires.
[Ord. 1924, 2/2/2009]
a.
Fiduciary Responsibility.
(1)
Management and Control of Plan Assets. The governing body of
the employer shall designate the persons responsible for the management
and control of plan assets. Such persons shall discharge their duties
with respect to the plan in accordance with the documents and instruments
governing the plan insofar as such documents and instruments are consistent
with the applicable provisions of the Internal Revenue Code.
(2)
A fiduciary of this plan is required to exercise the judgment
and care under the circumstances then prevailing that men of prudence,
discretion, and intelligence exercise in the management of their own
affairs, not in regard to speculation but in regard to the permanent
disposition of their funds, considering the probable income as well
as the probable safety of their capital.
(3)
Allocation of Responsibility.
(a)
When the plan administrator is required to follow the directions
of the trustee or the trustee is required to follow the directions
of the plan administrator, they shall not be deemed to share such
responsibility. Instead, the responsibility of the person giving the
directions shall be deemed to be his sole responsibility and the responsibility
of the person receiving directions shall be to follow those directions
insofar as such instructions on their face are proper under applicable
law.
(b)
The plan administrator or trustee under this plan may employ
one or more persons, including independent accountants, attorneys,
and actuaries to render advice with regard to any responsibility such
person has under the plan.
(4)
Liability and Indemnification. Subject to Act 205, no past,
present, or future officer of the employer nor of any participating
employer shall be personally liable to any participant, beneficiary,
or other person under any provision of the plan or trust or any insurance
policy or contract issue pursuant thereto. No individual fiduciary
shall be liable for any act or omission of any other fiduciary. Unless
resulting from the gross negligence, willful misconduct or lack of
good faith on the part of the fiduciary, the employer shall indemnify
and save harmless such fiduciary from, against, for and in respect
of any and all damages, losses, obligations, liabilities, liens, deficiencies,
costs, and expenses, including without limitation, reasonable attorney's
fees and other costs and expenses incident to any suit, action, investigation,
claim or proceedings suffered in connection with his acting as a fiduciary
under the plan.
b.
Chief Administrative Officer.
(1)
Appointment of Chief Administrative Officer. The governing body
of the employer shall be responsible for the administration of the
plan. It shall appoint the chief administrative officer. The employer
shall review at regular intervals the performance of the person appointed
to be the chief administrative officer and shall re-evaluate the appointment
of such chief administrative officer.
(2)
Duties and Powers of Chief Administrative Officer. The chief
administrative officer shall be the plan administrator and as such
shall have the following duties and discretionary powers and such
other duties and discretionary powers as relate to the administration
of the plan:
(a)
To determine in a non-discriminatory manner all questions relating
to the eligibility of employees to become participants.
(b)
To determine in a non-discriminatory manner eligibility for
benefits and to determine and certify the amount and kind of benefits
payable to participants.
(c)
To authorize all disbursements from the fund.
(d)
To appoint or employ, upon approval of the employer, any independent
person to perform necessary plan functions and to assist in the fulfillment
of administrative responsibilities as he deems advisable, including
the retention of a third party administrator, custodian, auditor,
accountant, actuary, or attorney.
(e)
When appropriate, to select an insurance company and annuity
contracts that, in his opinion, will best carry out the purposes of
the plan.
(f)
To construe and interpret any ambiguities in the plan and to
make, publish, interpret, alter, amend or revoke rules for the regulation
of the plan that are consistent with the terms of the plan and with
the applicable provisions of the Internal Revenue Code.
(g)
To prepare and distribute, in such manner as determined to be
appropriate, information explaining the plan.
(3)
Miscellaneous Provisions.
(a)
Expenses. The chief administrative officer shall serve without
compensation for service as such. All reasonable expenses of the chief
administrative officer shall be paid by the plan.
(b)
Examination of Records. The chief administrative officer shall
make available to any participant for examination during business
hours such of the plan records as pertain only to the participant
involved.
(c)
Information to the Chief Administrative Officer. To enable the
chief administrative officer to perform the administrative functions,
the employer shall supply full and timely information to the chief
administrative officer on all participants as the chief administrative
officer may require.
c.
Claims Procedure.
(1)
Notification of Claim Determination. The chief administrative
officer shall notify each participant in writing of his determination
of benefits. If the chief administrative officer denies any benefit,
such written denial shall include:
•
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The specific reasons for denial;
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•
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Reference to provisions on which the denial is based;
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•
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A description of and reason for any additional information needed
to process the claim; and
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•
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An explanation of the claims procedure.
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(2)
Appeal. The participant or his duly authorized representative
may:
•
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Request a review of the participant's case in writing to the
employer;
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•
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Review pertinent documents;
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•
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Submit issues and comments in writing.
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The written request for review must be submitted no later than
60 days after receiving written notification of denial of benefits.
|
(3)
Review. The employer must render a decision no later than 60
days after receiving the written request for review, unless circumstances
make it impossible to do so; but in no event shall the decision be
rendered later than 120 days after the request for review is received.
(4)
Limitation on Time Period for Litigation of a Benefit Claim.
Following receipt of the written rendering of the employer's decision
under § 1-1109.c(3), the participant shall have 365 days
in which to file suit in the appropriate court. Thereafter, the right
to contest the decision shall be waived.
d.
Trust Fund.
(1)
Creation and Maintenance of the Fund. The trust fund shall be
created and maintained in the following manner:
(a)
All funds on deposit and held for pension or retirement benefits
of the participants shall continue to be part of the trust fund created
and maintained hereby subject to any liabilities that may exist against
such fund.
(b)
The employer shall allocate to the fund the payments made by
the Treasurer of the Commonwealth of Pennsylvania from monies received
from taxes paid upon premiums by foreign casualty insurance companies
and foreign fire insurance companies pursuant to the General Municipal
Pension System State Aid Program.
(c)
The employer shall also allocate to the fund any mandatory employee
contributions received in accordance with the plan.
(d)
The fund shall accept and maintain any payments made by other
gifts, grants, devises, or bequests to the fund.
(e)
The employer shall contribute to the fund such other payments
as may, from time to time, be authorized to be made from the general
revenue of the employer.
All such payments received shall be part of the trust fund and
shall not be applied to any other account or disbursed in any manner
except as provided by this plan. Payments required under the plan
shall be a charge only upon the trust fund and not upon other monies
or funds of the employer.
(2)
Appointment of Trustee. The employer, or its delegee, shall
appoint a trustee for the proper care and custody of all funds, securities
and other properties in the trust, and for investment of plan assets
(or for execution of such orders as it receives from an investment
manager appointed for investment of plan assets). The duties and powers
of the trustee shall be set forth in a trust agreement executed by
the employer that is incorporated herein by reference. The employer
shall review at regular intervals the performance of the trustee and
shall reevaluate the appointment of such trustee. After the employer
has appointed the trustee and has received a written notice of acceptance
of its responsibility, the responsibility with respect to the proper
care and custody of plan assets shall be considered as the responsibility
of the trustee. Unless otherwise allocated to an investment manager,
the responsibility with respect to investment of plan assets shall
likewise be considered as the responsibility of the trustee.
(3)
Appointment of Corporate Custodian. The employer, or its delegee,
may appoint a corporate custodian to hold and invest the fund. The
corporate custodian shall carry out its responsibilities in accordance
with the terms of the custodial agreement and the investment policy
and guidance as the employer shall, from time to time, provide. The
employer shall review at regular intervals no less frequently than
annually, the performance of such corporate custodian and shall reevaluate
the appointment of such corporate custodian.
(4)
Appointment of Investment Manager. The employer, or its delegee,
may appoint an investment manager who is other than the trustee, which
investment manager may be a bank or an investment advisor registered
with the Securities and Exchange Commission under the Investment Advisors
Act of 1940. Such investment manager, if appointed, shall have sole
discretion in the investment of plan assets, subject to the funding
policy. The employer shall review at regular intervals no less frequently
than annually, the performance of such investment manager and shall
reevaluate the appointment of such investment manager. After the employer
has appointed an investment manager and has received a written notice
of acceptance of his responsibility, the responsibility with respect
to investment of plan assets shall be considered as the responsibility
of the investment manager.
(5)
Funding Policy. The employer, or its delegee, shall determine
and communicate in writing to the person responsible for investment
of plan assets the funding policy for the plan. The funding policy
shall set forth the plan's short-range and long-range financial needs,
so that said person may coordinate the investment of plan assets with
the plan's financial needs.
(6)
Valuation of the Fund. The fund shall be valued by the trustee
as of the last day of each plan year and as of any interim accounting
date determined by the plan administrator. The valuation shall be
made on the basis of the current fair market value of all property
in the fund.
e.
Actuarial Valuation and Funding.
(1)
Actuarial Valuation. In compliance with Act 205, the actuarial
valuation report shall be prepared and filed under the supervision
of the chief administrative officer of the municipality or of the
association of municipalities cooperating pursuant to the Intergovernmental
Cooperation Act and named as the sponsoring employer of this plan.
The actuary shall perform an actuarial valuation at least biennially.
Each biennial actuarial valuation report shall be made as of the beginning
of such plan year and shall be prepared and certified by an approved
actuary. An approved actuary means a person who has at least five
years of actuarial experience with public pension plans and who is
either enrolled as a member of the American Academy of Actuaries or
enrolled as an actuary pursuant to ERISA.
If the employer is applying or has applied for Supplemental
State Assistance pursuant to Section 603 of the Act, the actuarial
valuation report shall be made annually.
(2)
Allowable Administrative Expenses. The expenses attributable
to the preparation of any actuarial valuation report or investigation
required by Act 205 or any other expense that is permissible under
the terms of Act 205 and that are directly associated with administering
the plan shall be an allowable administrative expense payable from
the assets of the trust.
(3)
Benefit Modifications. Prior to the adoption of any benefit
plan modification by the employer, the chief administrative officer
shall provide to the employer a cost estimate of the proposed benefit
plan modification prepared by an approved actuary. Such estimate shall
disclose to the employer the impact of the proposed benefit plan modification
on the future financial requirements of the plan and the future minimum
obligation of the employer with respect to the plan.
[Ord. 1924, 2/2/2009]
a.
Right to Discontinue and Amend. It is the expectation of the employer
that it will continue this plan indefinitely and make the payments
of its contributions hereunder, unless permitted to terminate under
the provisions of Act 600.
b.
Amendments. Except as herein limited, the employer shall have the
right to amend this plan at any time to any extent that it may deem
advisable. Such amendment shall be stated in writing and shall be
by ordinance or resolution of the governing body of the employer.
The employer's right to amend the plan shall be limited as follows:
(1)
No amendment shall be adopted in violation of Act 600, nor any
other law of the Commonwealth of Pennsylvania.
(2)
No amendments shall have the effect of vesting in the employer
any interest in or control over any contracts issued pursuant hereto
or any other property in the fund.
(3)
No amendment to the vesting schedule adopted by the employer
hereunder shall deprive a participant of his vested portion of his
employer-derived accrued benefit to the date of such amendment.
c.
Protection of Benefits in Case of Plan Merger. In the event of a
merger or consolidation with, or transfer of assets or liabilities
to any other plan, each participant will receive a benefit immediately
after such merger, consolidation or transfer (if the plan then terminated)
that is at least equal to the benefit the participant was entitled
to immediately before such merger, consolidation or transfer (if the
plan had terminated).
d.
Termination of Plan.
(1)
When Plan Terminates. This plan shall terminate upon the legal
dissolution of the employer or the termination of the plan by the
amendment action of the employer. Subject to the provisions of the
Municipal Pension Plan Funding Standard and Recovery Act (P.L. 1005,
Act 205 of 1984) governing financially distressed municipalities,
the liability of the employer to make contributions to the plan shall
automatically terminate upon liquidation or dissolution of the employer,
upon its adjudication as a bankrupt, or upon the making of a general
assignment for the benefit of its creditors.
(2)
Allocation of Assets. Upon termination or partial termination,
the accrued benefit of each affected participant who is an active
participant or who is not an active participant but has not incurred
a one-year break in service shall be 100% vested and nonforfeitable;
however, no participant or other individual shall have recourse towards
the satisfaction of any benefit accrued under the plan other than
from the fund. The amount of the fund assets shall be allocated to
participants and beneficiaries subject to provisions for expenses
of administration of liquidation. The allocation of assets shall be
in accordance with the following (to the extent assets are sufficient).
(a)
There shall be allocated an amount equal to that portion of
each individual's accrued benefit that is derived from the participant's
voluntary contributions.
(b)
There shall be allocated an amount equal to that portion of
each individual's accrued benefit that is derived from the participant's
mandatory contributions.
(c)
Pension allocations.
(i)
There shall be allocated amounts sufficient to provide the pension
of each participant or beneficiary who was receiving such a benefit
three years before the date of termination.
(ii)
There shall likewise be allocated amounts sufficient
to provide the normal form of pension for each participant who was
eligible to retire three years before the date of termination but
had not done so.
In both cases, the benefits shall be based upon the plan provisions
in effect during the five years before the date of termination under
which such benefits would be the least.
(d)
There shall be allocated amounts sufficient to provide all vested
benefits due participants.
(e)
There shall be allocated amounts sufficient to provide all other
benefits of the plan.
If assets are insufficient to provide all benefits within any
one of the above paragraphs (a) through (e), they shall be allocated
pro rata among the participants or beneficiaries within that paragraph
on the basis of the present value of such benefits.
The allocation of assets, when determined by the actuary, may
be implemented through the continuation of the existing fund or through
the purchase of insurance company annuity contracts, or by a combination
of these media.
(3)
Remaining Fund Balance. Notwithstanding any provision in this
plan to the contrary, upon the termination of the plan, but only after
all liabilities to the participants and their respective beneficiaries
have been satisfied, the employer shall be entitled to any balance
of the net assets of the fund that shall remain by reason of erroneous
actuarial computations or overpayments during the life of the plan.
[Ord. 1924, 2/2/2009]
a.
Exclusive Benefit — Non-Reversion. The plan is created for
the exclusive benefit of the employees of the employer and shall be
interpreted in a manner consistent with its being a qualified plan
as defined in IRC Section 401(a). The corpus or income of the trust
may not be diverted to or used for other than the exclusive benefit
of the participants or their beneficiaries.
Notwithstanding the above, any contribution made by the employer
because of a mistake of fact must be returned to the employer within
one year of the contribution. Further, a reversion to the employer
is permissible upon plan termination in accordance with § 1-1110.d(3).
b.
Inalienability of Benefits. No benefit or interest available hereunder
including any annuity contract distributed herefrom shall be subject
to assignment or alienation, either voluntarily or involuntarily.
The preceding sentence shall also apply to the creation, assignment,
or recognition of a right to any benefit payable with respect to a
participant pursuant to a domestic relations order, unless such order
is determined to be an acceptable domestic relations order as defined
in IRC Section 414(p), or any domestic relations order entered before
January 1, 1985.
c.
Employer-Employee Relationship. This plan is not to be construed
as creating or changing any contract of employment between the employer
and its employees, and the employer retains the right to deal with
its employees in the same manner as though this plan had not been
created.
d.
Binding Agreement. This plan shall be binding on the heirs, executors,
administrators, successors and assigns as such terms may be applicable
to any or all parties hereto, and on any participants, present or
future.
e.
Inconsistency or Conflict of Prior Ordinances or Resolutions. Any
ordinance or resolution with an effective date prior to the adoption
date of this amendment and restatement of the plan shall be of no
effect.
f.
Separability. If any provision of this plan shall be held invalid
or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereof and this plan shall be construed and enforced
as if such provision had not been included.
g.
Construction. The plan shall be construed in accordance with the
laws of the Commonwealth of Pennsylvania and with the applicable portions
of the Internal Revenue Code. It is intended that the plan comply
with the interpretations of P.L. 1804, as amended (53 P.S. § 767)
(Act 600), issued by the judicial and regulatory bodies of the Commonwealth
of Pennsylvania.
h.
Copies of Plan. This plan may be executed in any number of counterparts,
each of which shall be deemed as an original, and said counterparts
shall constitute but one and the same instrument that may be sufficiently
evidenced by any one counterpart.
i.
Interpretation. Wherever appropriate, words used in this plan in
the singular may include the plural or the plural may be read as singular,
and the masculine may include the feminine.
[Ord. 2069, 12/21/2015, §§ 1, 2; as amended
by Ord. No. 2179, 12/20/2021]
a.
DROP
EFFECTIVE DATE OF PARTICIPATION
MEMBER
PARTICIPANT
PLAN
SUBSIDIARY DROP PARTICIPANT ACCOUNT
Definitions. As used in this section, the following terms shall have
the meanings indicated:
The Deferred Retirement Option Plan created as an optional
form of benefit under the existing State College Borough Police Pension
Plan.
The day following the effective date of the member's regular
retirement.
A full-time State College Borough police officer covered
by the plan.
A police officer who is eligible for normal retirement pursuant
to the pension plan and who has elected to participate in the DROP
program.
The State College Borough Police Pension Plan.
A separate, interest-bearing, subsidiary DROP participant
account established to accumulate the DROP pension benefit for a DROP
participant.
b.
DROP Provisions.
(1)
Eligibility. Members of the State College Borough police officers'
bargaining unit hired prior to January 1, 2016, may enter into the
DROP after attainment of age 50 and completion of 25 or more years
of credited service with the State College Borough Police Department.
Effective January 1, 2022, all members of the State College Borough
police officers' bargaining unit may enter into the DROP after attainment
of age 55 and completion of 30 or more years of credited service with
the State College Borough Police Department.
(a)
An election window will occur annually beginning on June 1 and
will close on June 30. Members who meet the eligibility requirements
by August 31 of a plan year are eligible to participate in the DROP
program.
(2)
Written Election. An eligible member of the plan electing to
participate in the DROP program must submit a written request to DROP,
which shall evidence the member's participation in the DROP program,
and document the participant's rights and obligations under the DROP.
The written request must be signed by the member and submitted to
the Borough between June 1 and June 30 of the plan year and at least
30 days prior to the member's effective date of retirement. In addition,
election to participate in the DROP program must be effective between
July 1 and August 31 of any plan year. For members hired prior to
January 1, 2016, who enter the DROP after attainment of age 50 and
completion of 25 or more years of credited service, the written election
shall include an irrevocable notice to the Borough that the member
shall terminate from employment with the State College Borough Police
Department effective on a specific date ("resignation date") no later
than 36 months from the effective date of the DROP election. Such
member's maximum DROP participation period shall be 36 months. As
such, a member who defers participation in the DROP program for one
year after becoming eligible for DROP participation shall thereafter
be eligible for a remaining DROP period of 24 months, and a member
who defers participation in the DROP program for two years after becoming
eligible for DROP participation shall thereafter be eligible for a
remaining DROP period of 12 months. For members who enter the DROP
after attainment of age 55 and completion of 30 or more years of credited
service, the written election shall include an irrevocable notice
to the Borough that the member shall terminate from employment with
the State College Borough Police Department effective on a specific
date ("resignation date") no later than 12 months from the effective
date of the DROP election. Such member's maximum DROP participation
period shall be 12 months. An officer shall cease work as a State
College Borough police officer on the officer's resignation date,
unless the employer terminates or honorably discharges the officer
prior to the resignation date. In addition, all retirement documents
required by the Police Pension Plan Administrator must be filed and
presented to the Borough for approval of retirement and commencement
of the monthly pension benefit. Once the retirement application has
been approved by the Police Pension Plan Administrator, it shall become
irrevocable.
After a member enters a DROP program, contributions to the pension
plan by the participant and the Borough on behalf of the participant
will cease, and the amount of the monthly benefits will be frozen
except for any applicable cost- of-living adjustment (COLA) increases
awarded to all pension recipients.
Members may consult a tax advisor, of their choice, prior to
considering the DROP program, as there may be serious tax implications
and/or consequences to participating in the DROP program.
(3)
Limitation on Pension Accrual. After the effective date of the
DROP election, the participant shall no longer earn or accrue additional
years of continuous service for pension purposes.
(4)
Benefit Calculation. For all plan purposes, continuous service
of a member participating in the DROP program shall remain as it existed
on the effective date of commencement of participation in the DROP
program. Service thereafter shall not be recognized or used for the
calculation or determination of any benefits payable by the plan.
The average monthly compensation of the member for pension calculation
purposes shall remain as it existed on the effective date of commencement
of participation in the DROP program.
(5)
Payments to DROP Account. The monthly retirement benefits that
would have been payable had the member elected to cease employment
and receive a normal retirement benefit shall, upon the member commencing
participation in the DROP program, be credited on the first day of
each month into a separate subsidiary DROP participant ledger account
established to track and accumulate the participant's monthly pension
benefits. Interest shall be credited to the DROP account. The rate
of interest shall be the actual rate of return on the DROP account,
but no less than 0% and no more than 4% per year. The DROP account
balance shall be accounted for separately and segregated from other
pension trust fund assets.
(6)
Early Termination. A participant may change the DROP termination
date to an earlier date and thereby effectuate a complete termination
from service. No penalty shall be imposed for early termination of
DROP participation. Participation in the DROP does not guarantee the
DROP participant's employment during the period specified for DROP
participation. It is recognized that the participant shall not be
permitted to make any withdrawals from the DROP account until DROP
participation has ended.
(7)
Payout. Upon the termination date set forth in the DROP election
form or on such date as the participant withdraws or is terminated
from the DROP program, if earlier, the terminating DROP participant,
or if deceased, the participant's survivor or named beneficiary, shall
elect a method of receiving payment of the DROP benefits. Distribution,
regardless of the method specified, shall be made within 45 days following
the actual termination of a participant's employment with the State
College Borough Police Department. The following options for distribution
shall be available to and selected on the approved form by the participant,
participant's survivor or beneficiary:
(a)
The accumulated balance in the subsidiary DROP participant account
shall be paid to the participant (or the participant's survivor or
named beneficiary) in a single lump-sum payment less withholding taxes;
or
(b)
As a direct rollover to an eligible retirement plan as defined
in Section 402(c)(8)(b) of the Internal Revenue Code of 1986; or,
in the case of an eligible retirement plan that is an individual retirement
annuity as described in Section 402(c)(9) of the Internal Revenue
Code of 1986. If the participant, participant's survivor or beneficiary
fails to elect a method of payment within 60 days after the participant's
termination date, the Borough shall pay the balance as a lump sum.
If the participant selects a rollover option, he or she must
submit all appropriate paperwork from the IRA custodian within the
required election period.
Following the termination of DROP participation, the subsequently
paid normal retirement benefits payable to the participant, participant's
survivor or the participant's beneficiary shall no longer be credited
to the DROP account but shall be distributed monthly pursuant to normal
retirement plan rules.
The DROP participant shall be ineligible to re-enroll in the
DROP thereafter even if the former DROP participant is re-employed
by the employer with renewed active membership in the plan.
(8)
Disability During DROP. If a participant becomes eligible for
a disability pension benefit and terminated employment, the monthly
normal retirement benefit to the DROP participant shall terminate.
(9)
Break In Service. In addition to other reasons for termination
of a DROP participant's employment by the Borough or by the participant,
a DROP participant who is on a leave of absence, whether due to a
work-related injury or illness or otherwise, in excess of six months,
and remains unable to perform the essential functions of his/her position
with or without reasonable accommodation shall experience a break
in service and shall terminate employment and participation in the
DROP program.
(10)
Death. If a participant dies before the DROP account balance
is paid, the participant's surviving spouse or beneficiary shall have
the same rights as the participant to withdraw the DROP account balance.
The monthly benefit credited to the participant's DROP account during
the month of the participant's death shall be the final monthly benefit
for DROP participation. In addition, the DROP participant's survivor
shall be eligible to receive the retirement system death benefits
normally payable in the event of the death of the retired employee.
(11)
Eligibility for Other Benefits. In accordance with the provisions
of Act No. 44 of 2009, 53 P.S. §§ 895.1101 through
895.1131, a DROP participant shall be eligible for all preretirement
benefits for employees provided by law, including but not limited
to the Workers' Compensation Act, Public Safety Officers' Benefit
Act of 1976, etc.
(12)
Amendment. Any amendments to the DROP ordinance shall be consistent
with the provisions covering deferred retirement option plans set
forth in any applicable collective bargaining agreement or state or
federal law, and shall be binding upon all future participants and
upon all participants who have balances in their DROP accounts.