Borough of Athens, PA Article VII Additional Qualification Rules

§ 91-23 Limitation on benefits under IRC § 415.

A. Single defined benefit plan limitations.

(1) This section applies regardless of whether any participant is or has ever been a participant in another qualified plan maintained by the adopting employer. If any participant is or has ever been a participant in another qualified plan maintained by the employer, or a welfare benefit fund maintained by the employer [as defined in IRC § 419(e)] under which amounts attributable to postretirement medical benefits are allocated to separate accounts of key employees [as defined in IRC § 419A(d)(3)], maintained by the employer, or an individual medical account [as defined in IRC § 415(9(2)] maintained by the employer, or a simplified employee pension [as defined in IRC § 408(k)] maintained by the employer, that provides an annual addition as defined in Subsection E(1); Subsection E(1) is also applicable to that participant's benefits.

(2) The annual benefit otherwise payable to a participant at any time shall not exceed the maximum permissible benefit. If the benefit the participant would otherwise accrue in a limitation year would produce an annual benefit in excess of the maximum permissible benefit, the rate of accrual shall be reduced so that the annual benefit will equal the maximum permissible benefit.

B. Defined contribution plan limitations. If a participant has made mandatory employee contributions [as defined in IRC § 411(c)(2)(C)], under the terms of this plan, the amount of such contributions shall be treated as an annual addition to a qualified defined contribution plan.

(1) The amount of annual additions that may be credited to the participant's employee nondeductible contribution account for any limitation year will not exceed the lesser of the maximum permissible amount or any other limitation contained in this plan. If a contribution that would otherwise be contributed to the participant's account would cause the annual additions for the limitation year to exceed the maximum permissible amount, the amount contributed will be reduced so that the annual additions for the limitation year will equal the maximum permissible amount.

(a) Prior to determining the participant's actual compensation for the limitation year, the employer may determine the maximum permissible amount 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 amount for the limitation year will be determined on the basis of the participant's actual compensation for the limitation year.

(c) If there is an excess amount, the mandatory employee contributions shall be reduced.

(2) This Subsection B(2) shall apply if, in addition to this plan, the participant is covered under a plan maintained by the employer that is a qualified defined contribution plan, a welfare benefit fund, a simplified employee pension, or an individual medical account that provides an annual addition as defined in Subsection E(1), during any limitation year. The annual additions that may be credited to a participant's account under this plan for any such limitation year will not exceed the maximum permissible amount reduced by the annual additions credited to a participant's account under the other plans and welfare benefit funds for the same limitation year. If the annual additions with respect to the participant under the defined contribution plans and welfare benefit funds maintained by the employer are less than the maximum permissible amount and the contribution that would otherwise be contributed to the participant's employee nondeductible contribution account under this plan would cause the annual additions for the limitation year to exceed this limitation, the amount contributed will be reduced so that the annual additions under all such plans and funds for the limitation year will equal the maximum permissible amount. If the annual additions with respect to the participant under such defined contribution plans and welfare benefit funds in the aggregate are equal to or greater than the maximum permissible amount, no amount will be contributed to the participant's account under this plan for the limitation year.

(3) If, pursuant to Subsection B(1)(b) or as a result of the allocation of forfeitures under the other plans, a participant's annual additions under this plan and such other plans would result in an excess amount for a limitation year, the excess amount will be deemed to consist of the annual additions last allocated, except that annual additions attributable to a welfare benefit fund or individual medical account will be deemed to have been allocated first regardless of the actual allocation date.

(4) If an excess amount was contributed by a participant as of a date that coincides with an allocation date of another plan, any excess amount shall be disposed of in the manner provided under such other plan.

C. Combined limitations: other plans.

(1) This section applies if any participant is also a participant, or has ever participated in another plan maintained by the employer, including a qualified plan, a simplified employee pension, a welfare benefit fund [as defined in IRC § 419(e)] under which amounts attributable to postretirement medical benefits are allocated to separate accounts of key employees [as defined in IRC § 419A(d)(3)] or an individual medical account that provides an annual addition as described in Subsection E(1).

(2) If a participant is, or has ever been, a participant in more than one defined benefit plan maintained by the 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 accrued benefit under a frozen or terminated defined benefit plan, the benefit accrual under this plan shall be reduced until the maximum permissible benefit is no longer exceeded.

(3) For limitation years beginning before January 1, 2000, if the employer maintains, or at any lime maintained, one or more qualified defined contribution plans in which any participant in this plan participated, a welfare benefit fund maintained by the employer (as defined in IRC § 419(e) under which amounts attributable to postretirement medical benefits are allocated to separate accounts of key employees (as defined in IRC § 419A(d)(3), or an individual medical account, or a simplified employee pension, the sum of the participant's defined contribution fraction and defined benefit fraction shall not exceed 1.0 in any limitation year and, where the sum exceeds 1.0 for a participant for a limitation year, any excess amount attributed to this plan will be disposed of in the manner described in Subsection B(1)(c). Benefit increases resulting from the repeal of IRC § 415(e) shall be provided to all current and former participants [with benefits limited by IRC § 415(e)] who have an accrued benefit under the plan immediately before the first day of the first limitation year beginning in 2000.

(4) Where the participant's employer-provided benefits under all 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 order in which the employer's sponsored plans will be reduced shall be as provided in § 91-7F.

D. 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 this § 91-23 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 § 415, for all limitation years beginning before January 1, 1987.

E. Definitions (IRC § 415 limitations).

(1) Annual additions:

(a) The sum of the following amounts credited to a participant's account for the limitation year: employer contributions; employee contributions; forfeitures; allocations under a simplified employee pension; and amounts allocated, after March 31, 1984, to an individual medical account that is part of a pension or annuity plan maintained by the employer that are treated as annual additions to a defined contribution plan. Also amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, that are attributable to postretirement medical benefits, allocated to the separate account of a key employee, as defined in IRC § 419A(d)(3), under a welfare benefit fund maintained by the employer are treated as annual additions to a defined contribution plan.

(b) Picked-up contributions under IRC § 414(h)(2) shall not be included as an annual addition with respect to a participant.

(c) 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.

[Added 12-18-2006 by Ord. No. 607, approved 12-18-2006]

(2) 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 § 414(h)(2). Except as provided below, a benefit payable in a form other than a straight life annuity must be adjusted to an actuarially equivalent straight life annuity before applying the limitations of this section. For limitation years beginning before January 1, 1995, where a participant's benefit must be adjusted to an actuarially equivalent straight life annuity, the actuarially equivalent straight life annuity shall be equal to the greater of the annuity benefit computed using the interest rate specified in the definition of "actuarial equivalent" in § 91-2 or 5%.

(a) For limitation years beginning on or after January 1, 1995, where a participant's benefit must be adjusted to an actuarially equivalent straight life annuity, the actuarially equivalent straight life annuity, shall be equal to the greater of the annuity benefit computed using the actuarial assumptions specified in Subsection C of the definition of "actuarial equivalent" in § 91-2 and the annuity benefit computed using a 5% interest rate assumption and the IRC § 417 mortality table defined in Subsection C of the definition of "actuarial equivalent" in § 91-2.

(b) For limitation years beginning after December 31, 1994, in the case of a lump sum payment, the actuarially equivalent benefit shall be equal to the greater of the equivalent annual benefit computed using the interest rate and mortality table specified in Subsection C of the definition of "actuarial equivalent" in § 91-2 and the equivalent annual benefit computed using a 5% interest rate assumption and the IRC § 417 mortality table as defined in Subsection C of the definition of "actuarial equivalent" in § 91-2. This determination of the actuarially equivalent benefit shall also apply in determining the actuarially equivalent straight life annuity for any benefit form other than:

[1] A nondecreasing 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

[2] 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 § 401(a)(11)].

(c) The annual benefit does not include any benefits attributable to employee contributions or rollover contributions or the assets transferred from a qualified plan that was not maintained by the employer. No actuarial adjustment to the benefit is required for:

[1] The value of a qualified joint and survivor annuity;

[2] The value of benefits that are not directly related to retirement benefits (such as a qualified disability benefit, pro-retirement death benefits, and postretirement medical benefits); and

[3] The value of postretirement cost-of-living increases made in accordance with IRC § 415(d) and Regulation § 1.4154(c)(2)(iii).

(3) Compensation: a participant's earned income and any earnings reportable as W-2 wages for federal income tax withholding purposes. "W-2 wages" means wages as defined in IRC § 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 § 414(h)(2) shall not be included in the participant's compensation.

(a) For limitation years beginning after December 31, 1991, for purposes of applying the limitations of this section, compensation for a limitation year is the compensation actually paid or includable in gross income during such limitation year.

(b) 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 § 125 or to a IRC § 401(k) arrangement, a simplified employee pension, a tax sheltered annuity excludable under IRC § 402(g)(3), to a IRC § 457 plan, or to IRC § 501(c)(18) plan. Effective for limitation years beginning on or after January 1, 1998, compensation shall also include any elective amounts that are not includable in gross income of the employee by reason of a IRC § 132(f)(4) qualified transportation fringe benefit plan.

(c) Effective for limitation years beginning after December 31, 1997, elective contribution amounts under a cafeteria plan excludable under IRC § 125 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. An amount will be treated as an amount under IRC § 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.

[Added 12-15-2003 by Ord. No. 588, approved 12-15-2003]

(4) TRA '86 accrued benefit: a participant's accrued benefit under the plan, determined as if the participant had separated from service as of the close of the last limitation year beginning before January 1, 1987, when expressed as an annual benefit within the meaning of IRC § 415(b)(2). In determining the amount of a participant's TRA '86 accrued benefit, the following shall be disregarded:

(a) Any change in the terms and conditions of the plan after May 5, 1986; and

(b) Any cost-of-living adjustments occurring after May 5, 1986.

(5) Defined benefit dollar limitation: $90,000 for limitation years beginning before January 1, 2002. Effective January 1, 1988, and each January thereafter, the $90,000 limitation above will be automatically adjusted by multiplying such limit by the cost-of-living adjustment factor prescribed by the Secretary of the Treasury under IRC § 415(d) in such manner as the Secretary shall prescribe, and payable in the form of a straight life annuity. The new limitation will apply to limitation years ending with or within the calendar year of the date of the adjustment. The defined benefit dollar limitation shall be $160,000 for limitation years beginning after January 1, 2001. Effective January 1, 2002, and each January thereafter, the $160,000 limitation above will be automatically adjusted by multiplying such limit by the cost-of-living adjustment factor prescribed by the Secretary of the Treasury under IRC § 415(d) in such manner as the Secretary shall prescribe, and payable in the form of a straight life-annuity. The new limitation will apply to limitation years ending with or within the calendar year of the date of the adjustment.

(6) Defined contribution dollar limitation: $30,000, as adjusted under § 415(d) for limitation years beginning after December 31, 1994 and not beginning before January 1, 2002. For limitation years beginning after December 31, 2001, the defined contribution dollar limitation shall be $40,000, as adjusted under IRC § 415(d) for limitation years beginning after December 31, 2002.

(7) Defined benefit fraction. A fraction, the numerator of which is the sum of the participant's projected annual benefits under all the defined benefit plans (whether or not terminated) maintained by the employer, and the denominator at which is 125% of the defined benefit dollar limitation applicable to the participant determined for the limitation year under IRC § 415(b)(1)(A) and (d) and in accordance with Subsection E(13) below.

(a) However for limitation years beginning before January 1, 1995, the denominator of this fraction will be the lesser of 125% of the defined benefit dollar limitation applicable to the participant determined for the limitation year under IRC § 415(b)(1)(A) and (d) and in accordance with Subsection E(13) below or 140% of the highest average compensation, including any adjustments under IRC § 415(b)(5).

(b) Notwithstanding the above, if the participant was a participant as of the first day of the first limitation year beginning after December 31, 1986, in one or more defined benefit plans maintained by the employer that were in existence on May 6, 1988, the denominator of this fraction will not be less than 125% of the sum of the annual benefits under such plans that the participant had accrued as of the close of the last limitation year beginning before January 1, 1987, disregarding any changes in the terms and conditions of the plan after May 5, 1986. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of IRC § 415 for all limitation years beginning before January 1, 1987.

(8) Defined contribution fraction: a fraction, the numerator of which is the sum of the annual additions to the participant's account under all the defined contribution plans (whether or not terminated) maintained by the employer for the current and all prior limitation years (including the annual additions attributable to the participant's nondeductible employee contributions to this and all other defined benefit plans, whether or not terminated, maintained by the employer, and the annual additions attributable to all simplified employee pensions, welfare benefit funds maintained by the employer [as defined in IRC § 419(e)] under which amounts attributable to postretirement medical benefits are allocated to separate accounts of key employees [as defined in IRC § 419A(d)(3)], and individual medical accounts maintained by the employer, and the denominator of which is the sum of the maximum aggregate amounts for the current and all prior limitation years of service with the employer (regardless of whether a defined contribution plan was maintained by the employer). The maximum aggregate amount in any limitation year is the lesser of 125% of the defined contribution dollar limitation or 35% (1.4 x 25%) of the participant's compensation for such year.

(a) If the employee was a participant as of the end of the first day of the first limitation year beginning after December 31, 1986, in one or more defined contribution plans maintained by the employer that were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this fraction and the defined benefit fraction would otherwise exceed 1.0 under the terms of this plan. Under the adjustment, an amount equal to the product of the excess of the sum of the fractions over 1.0 times the denominator of this fraction will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last limitation year beginning before January 1, 1987, and disregarding any changes in the terms and conditions of the plan made after May 5, 1986, but using the IRC § 415 limitation applicable to the first limitation year beginning on or after January 1, 1987.

(b) The annual addition for any limitation year beginning before January 1, 1987, shall not be recomputed to treat all employee contributions as annual additions.

(9) Employer: for purposes of this section, "employer" shall mean the employer that adopts this plan and any entity required to be aggregated with the employer pursuant to regulations.

(10) Excess amount: the excess of the participant's annual additions for the limitation year over the maximum permissible amount.

(11) Limitation year: the twelve-consecutive-month period defined in Subsection E of the definition of "dates/years" in § 91-2.

(12) Maximum permissible amount.

(a) 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:

[1] The defined contribution dollar limitation as defined in Subsection E(6); or

[2] Twenty-five percent of the participant's compensation for the limitation year for limitation years beginning before January 1, 2002; 100% of the participant's compensation for the limitation year for limitation years beginning after December 31, 2001.

(b) The compensation limitation referred to in Subsection E(12)(a)[2] shall not apply to any contribution for medical benefits [within the meaning of IRC § 401(h) or IRC § 419A(f)(2)] that is otherwise treated as an annual addition under IRC § 415(1)(1) or 419A(d)(2).

(c) 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 amount will not exceed the defined contribution dollar limitation multiplied by the following fraction:

Number of months in the short limitation year 12

(13) Maximum permissible benefit:

(a) The maximum permissible benefit is the defined benefit dollar limitation. However, for limitation years beginning before January 1, 1995, the maximum permissible benefit is the lesser of the defined benefit dollar limitation or 100% of the participant's highest average compensation;

(b) If the participant has less than 10 years of participation in the plan, the defined benefit dollar limitation shall be multiplied by a fraction: the numerator of which is the number of years (or part thereof) of participation in the plan, and the denominator of which is 10. In the case of a participant who has less than 10 years of service with the employer, the defined benefit compensation limitation shall be multiplied by a fraction: the numerator of which is the number of years (or part thereof) of service with the employer, and the denominator of which is 10.

[1] Where a defined benefit plan fraction is calculated, the adjustments of this Subsection E(13)(b) shall be applied in the denominator of the fraction based upon years of service. For purposes of computing the defined benefit plan fraction only, years of service shall include future years of service (or part thereof) commencing before the participant's normal retirement date. Such future years of service shall include the year that contains the date the participant reaches his normal retirement date, only if it can be reasonably anticipated that the participant will receive a year of service for such year, or the year in which the participant terminates employment, if earlier.

[2] This Subsection E(13)(b) shall not apply to disability benefit paid in accordance with § 3.6 or to benefits payable under Article IV.

(c) Effective for distributions made in limitation years ending on or before December 31, 2001, it the annual benefit of the participant commences on or before age 65 but on or after age 62, the defined benefit dollar limitation shall be as determined in Subsection E(13)(a) and (b) above. Effective for distributions made in limitation years ending after December 31, 2001, if the annual benefit of the participant commences on or before age 65, the defined benefit dollar limitation shall be as determined in (a) and (b) above.

(d) Effective for distributions made in limitation years ending on or before December 31, 2001, if the benefit of a participant commences prior to age 62 but on or after age 55, the defined benefit dollar limitation applicable to the participant at such earlier age shall be the greater of: $75,000, or an annual benefit payable in the form of a straight life annuity that is the actuarial equivalent of the defined benefit dollar limitation for age 62, as determined above. The annual benefit beginning prior to age 62 but on or after age 55 shall be determined as the lesser of the actuarial equivalent benefit computed using the interest rate and mortality table specified in Subsection C of the definition of "actuarial equivalent" in § 91-2. This Subsection E(13)(d) shall not apply to disability benefit paid in accordance with § 91-1 or to benefits payable under Article IV.

(e) Effective for distributions made in limitation years ending on or before December 31, 2001, if the benefit of a participant commences prior to age 55, the defined benefit dollar limitation applicable to the participant at such earlier age shall be the greater of the actuarial equivalent of a $75,000 annual benefit beginning at age 55; or an annual benefit that is the actuarial equivalent of the defined benefit dollar limitation for age 62 that is equal to the defined benefit dollar limitation as determined in Subsection E(13)(a) and (b) above. The annual benefit beginning prior to age 55 shall be determined as the lesser of the actuarial equivalent benefit computed using the interest rate and mortality table specified in Subsection C of the definition of "actuarial equivalent" in § 91-2 and the equivalent amount computed using a 5% interest rate assumption and the IRC § 417 mortality table as described in Subsection C of the definition of "actuarial equivalent" in § 91-2. This Subsection E(13)(e) shall not apply to disability benefit paid in accordance with § 91-11 or to benefits payable under Article IV.

(f) If the benefit of a participant commences after age 65, the defined benefit dollar limitation applicable to the participant at the later age shall be the annual benefit payable in the form of a straight life annuity commencing at the later age that is the actuarial equivalent of the defined benefit dollar limitation applicable to the participant [adjusted under Subsection E(13)(a) and (b) above, if necessary] at age 65. The actuarial equivalent annual benefit beginning after age 65 shall be determined as the lesser of the equivalent amount computed using the interest rate and mortality table specified in Subsection C of the definition of "actuarial equivalent" in § 91-2 and the equivalent amount computed using a 5% interest rate assumption and the IRC § 417 mortality table as described in Subsection C of the definition of "actuarial equivalent" in § 91-2.

(g) Notwithstanding the provisions of this Subsection E(13), in limitation years beginning before 1997 for participants who have 15 or more years of full-time service at retirement (including military service), the maximum annual straight life annuity shall not be reduced below $50,000 [as indexed pursuant to IRC § 415(d)], regardless of the participant's age at retirement.

(h) 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:

[1] The retirement benefits payable for a plan year under any form of benefit with respect to such participant under this plan and under all other defined benefit plans (regardless of whether terminated) ever maintained by the employer do not exceed $1,000 multiplied by the participant's number of years of service or parts thereof (not to exceed 10) with the employer; and

[2] The employer has not at any time maintained a defined contribution plan, a welfare benefit fund, under which amounts attributable to postretirement medical benefits are allocated to separate accounts of key employees [as defined in IRC §  419A(d)(3)], or an individual medical account in which the participant participated (for these purposes, employee contributions, whether voluntary or involuntary, under a defined benefit, plan are not treated as a separate defined contribution plan).

(14) Projected annual benefit: the annual benefit as defined in Subsection E(2), to which the participant would be entitled under the terms of the plan assuming:

(a) The participant will continue employment until his normal retirement date under the plan (or current age, if later); and

(b) 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.

(15) Year of participation. For the purpose of this section, 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 number of hours 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 § 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.

§ 91-24 Distribution requirements.

A. Applicability.

(1) The requirements of this section shall apply to any distribution of a participant's interest. All distributions required under this section shall be determined and made in accordance with the proposed regulations under IRC § 401(a)(9), including the minimum distribution incidental benefit requirement of Proposed Treasury Regulation § 1.401(a)(9)-2.

(2) With respect to distributions under the plan made for calendar years beginning on or after January 1, 2002, the plan will apply the minimum distribution requirements of IRC § 401(a)(9) in accordance with the regulations under § 401(a)(9) that were proposed in January 2001, notwithstanding any provision of the plan to the contrary. This preceding sentence shall continue in effect until the end of the last calendar year beginning before the effective date of final regulations under IRC § 401(a)(9) or such other date specified in guidance published by the Internal Revenue Service.

(3) With respect to distributions under the plan made on or after August 1, 2002, for calendar years beginning on or after January 1, 2002, the plan will apply the minimum distribution requirements of IRC § 401(a)(9) in accordance with the regulations under § 401(a)(9) that were made final on April 17, 2002 (the 2002 final regulations) and the provisions of § 91-24H notwithstanding any provision of the plan to the contrary. If the total amount of required minimum distributions made to a participant for 2002 prior to August 1, 2002, are equal to or greater than the amount of required minimum distributions determined under the 2002 final regulations, then no additional distributions are required for such participant for 2002 on or after such date. If the total amount of required minimum distributions made to a participant for 2002 prior to August 1, 2002, are less than the amount determined under the 2002 final regulations, then the amount of required minimum distributions for 2002 on or after such date will be determined so that the total amount of required minimum distributions for 2002 is the amount determined under the 2002 final regulations.

[Added 12-15-2003 by Ord. No. 588, approved 12-15-2003]

(4) 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 § 401(a)(9) in accordance with Regulation § 1.401(a)(9)-6 as made final on June 15, 2004, and the regulations previously made final under § 401(a)(9) on April 17, 2002 (the 2002 Final Regulations), and the provisions of § 7.2(h), notwithstanding any provision of the plan to the contrary.

[Added 12-18-2006 by Ord. No. 607, approved 12-18-2006]

B. 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.

C. Limits on distribution periods. As of the first distribution calendar year, distributions, if not made in a single sum, may only be made over one of the following periods (or a combination thereof):

(1) The life of the participant;

(2) The life of the participant and a designated beneficiary;

(3) A period certain not extending beyond the life expectancy of the participant; or

(4) A period certain not extending beyond the joint life and last survivor expectancy of the participant and a designated beneficiary.

D. Determination of amount to be distributed each year.

(1) 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:

(a) The annuity distribution must be paid in periodic payments made at intervals not longer than one year;

(b) The distribution period must be over a life (or lives) or over a period certain not longer than a life expectancy (or joint life and last survivor expectancy) described in IRC § 401(a)(9)(A)(ii) or IRC § 401(a)(9)(B)(iii), whichever is applicable;

(c) The life expectancy (or joint life and last survivor expectancy) for purposes of determining the period certain shall be determined without recalculation of life expectancy;

(d) Once payments have begun over a period certain, the period certain may not be lengthened even if the period certain is shorter than the maximum permitted;

(e) Payments must either be nonincreasing or increase only as follows:

[1] With any percentage increase in a specified and generally recognized cost-of-living index;

[2] To the extent of the reduction to the amount of the participant's payments to provide for a survivor benefit upon death, but only if the beneficiary whose life was being used to determine the distribution period described in Subsection D(1) above dies and the payments continue otherwise in accordance with that section over the life of the participant;

[3] To provide cash refunds of employee contributions upon the participant's death; or

[4] Because of an increase in benefits under the plan.

(f) If the annuity is a life annuity (or a life annuity with a period certain not exceeding 20 years), the amount that must be distributed on or before the participant's required beginning date (or, in the case of distributions after the death of the participant, the date distributions are required to begin pursuant to Subsection E below) shall be 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, semiannually, or annually. If the annuity is a period certain annuity without a life contingency (or is a life annuity with a period certain exceeding 20 years) periodic payments for each distribution calendar year shall be combined and treated as an annual amount. The amount that must be distributed by the participant's required beginning date (or, in the case of distributions after the death of the participant, the date distributions are required to begin pursuant to Subsection E below) is the annual amount for the first distribution calendar year. The annual amount for other distribution calendar years, including the annual amount for the calendar year in which the participant's required beginning date (or the date distributions are required to begin pursuant to Subsection E below) occurs, must be distributed on or before December 31 of the calendar year for which the distribution is required.

(2) Annuities purchased after December 31, 1988, are subject to the following additional conditions:

(a) If the participant's interest is being distributed in the form of a life annuity with a period certain for the life of the participant, the period certain as of the beginning of the first distribution calendar year may not exceed the applicable period determined using the table set forth in Proposed Treasury Regulation § 1.401(a)(9)-2, Q&A A-4.

(b) Unless the participant's spouse is the designated beneficiary, if the participant's interest is being distributed in the form of a period certain annuity without a life contingency, the period certain as of the beginning of the first distribution calendar year may not exceed the applicable period determined using the table set forth in Proposed Treasury Regulation § 1.401(a)(9)-2, Q&A A-5.

(c) If the participant's interest is being distributed in the form of a joint and survivor annuity for the joint lives of the participant and a nonspouse beneficiary, annuity payments to be made on or after the participant's required beginning date to the designated beneficiary after the participant's death must not at any time exceed the applicable percentage of the annuity payment for such period that would have been payable to the participant using the table set forth in Proposed Regulation § 1.401(a)(9)-2, Q&A A-6.

(3) Transitional rule. If payments under an annuity that complies with Subsection D(2)(a) above began prior to January 1, 1989, the minimum distribution requirements in effect as of July 27 1987, shall apply to such distributions from this plan, regardless of whether the annuity form of payment is irrevocable. This transitional rule also applies to deferred annuity contracts distributed to or owned by the employee prior to January 1, 1989, unless additional contributions are made under the plan by the employer with respect to such contract.

(4) If the form of distribution is an annuity made in accordance with this § 7.2(b)(4), any additional benefits accruing to the participant after his or her required beginning date shall be distributed as a separate and identifiable component of the annuity beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such amount accrues.

(5) Any part of the participant's interest that is in the form of an individual account shall be distributed in a manner satisfying the requirements of IRC § 401(a)(9) and the proposed regulations thereunder.

E. Death distribution provisions.

(1) Distribution beginning before death. If the participant dies after distribution of his interest has begun, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the participant's death.

(2) Distribution beginning after death.

(a) If the participant dies before distribution of his interest begins, distribution of the participant's entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the participant's death except to the extent that an election is made to receive distributions in accordance with Subsection E(2)(a)[1] or [2] below:

[1] If any portion of the participant's interest is payable to a designated beneficiary, distributions may be made over the life or over a period certain not greater than the life expectancy of the designated beneficiary commencing on or before December 31 of the calendar year immediately following the calendar year in which the participant died;

[2] If the designated beneficiary is the participant's surviving spouse, the date distributions are required to begin in accordance with Subsection E(2)(a)[1] above shall not be earlier than the later of:

[a] December 31 of the calendar year immediately following the calendar year in which the participant died; and

[b] December 31 of the calendar year in which the participant would have attained age 70 1/2.

(b) If the participant has not made an election pursuant to this section by the time of his death, the participant's designated beneficiary must elect the method of distribution no later than the earlier of December 31 of the calendar year in which distributions would be required to begin under this Subsection E(2), or December 31 of the calendar year that contains the fifth anniversary of the date of death of the participant. If the participant has no designated beneficiary, or if the designated beneficiary does not elect a method of distribution, distribution of the participant's entire interest must be completed by December 31 of the calendar year containing the fifth anniversary of the participant's death. This provision shall not create a right to an installment payment option providing installments over five or less calendar years.

(3) For purposes of Subsection E(2) above, if the surviving spouse dies after the participant, but before payments to such spouse begin, the provisions of Subsection E(2) with the exception of Subsection E(2)(a)[2] therein, shall be applied as if the surviving spouse were the participant.

(4) For purposes of this Subsection E(2), any amount paid to a child of the participant will be treated as if it had been paid to the surviving spouse if the amount becomes payable to the surviving spouse when the child reaches the age of majority.

(5) For the purposes of this Subsection E, distribution of a participant's interest is considered to begin on the participant's required beginning date [or, if Subsection E(3) above is applicable, the date distribution is required to begin to the surviving spouse pursuant to Subsection E(2)(a)[2] above]. If distribution in the form of an annuity described in Subsection D(1) irrevocably commences to the participant before the required beginning date, the date distribution is considered to begin is the date distribution actually commences.

F. Definitions (IRC § 401(a)(9) requirements).

(1) Designated beneficiary: the individual who is designated as the beneficiary under the plan in accordance with IRC § 401(a)(9) and the proposed regulations thereunder.

(2) Distribution calender 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 Subsection E above.

(3) Life expectancy: life expectancy (or joint life and last survivor expectancy) calculated using the attained age of the participant (or designated beneficiary) as of the participant's (or designated beneficiary's) birthday in the applicable calendar year. The applicable calendar year shall be the first distribution calendar year. If annuity payments commence before the required beginning date, the applicable calendar year is the year such payments commence. Life expectancy and joint and last survivor expectancy are computed by use of the expected return multiples in Tables V and VI of § 1.72-9 of the Income Tax Regulations.

(4) Required beginning date: the required beginning date of a participant is the later of:

(a) The first day of April of the calendar year following the calendar year in which the participant attains age 70 1/2; and

(b) The first day of April of the calendar year following the calendar year in which the participant retires.

G. Transitional rule.

(1) Notwithstanding the other requirements of this section, distribution on behalf or any employee may be made in accordance with all of the following requirements (regardless of when such distribution commences).

(a) The distribution by the trust is one which would not have disqualified such trust under IRC § 401(a)(9) as in effect prior to amendment by the Deficit Reduction Act of 1984.

(b) The distribution is in accordance with a method of distribution designated by the employee whose interest in the trust is being distributed or, if the employee is deceased, by a beneficiary of such employee.

(c) Such designation was in writing, was signed by the employee or the beneficiary, and was made before January 1, 1984.

(d) The employee had accrued a benefit under the plan as of December 31, 1983.

(e) The method of distribution designated by the employee or the beneficiary specifies the time at which distribution will commence, the period over which distributions will be made, and, in the case of any distribution upon the employee's death, the beneficiaries of the employee listed in order of priority.

A distribution upon death will not be covered by this transitional rule unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the employee.

(2) For any distribution that commences before January 1, 1984, but continues after December 31, 1983, the employee, or the beneficiary, to whom such distribution is being made, will be presumed to have designated the method of distribution under which the distribution is being made if the method of distribution was specified in writing and the distribution satisfies the requirements in this Subsection G.

(3) If a designation is revoked, any subsequent distribution must satisfy the requirements of IRC § 401(a)(9) and the proposed regulations thereunder. If a designation is revoked subsequent to the date distributions are required to begin, the trust must distribute by the end of the calendar year following the calendar year in which the revocation occurs the total amount not yet distributed that would have been required to have been distributed to satisfy IRC § 401(a)(9) and the proposed regulations thereunder, but for the election made with respect to § 242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982. For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements in Proposed Regulation § 1.401(a)(9)-2. Any changes in the designation will be considered to be a revocation of the designation. However, the mere substitution or addition of another beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as such substitution or addition does not alter the period over which distributions are to be made under the designation, directly or indirectly (for example, by altering the relevant measuring life). In the case in which an amount is transferred or rolled over from one plan to another plan, the rules in Proposed Regulation § 1.401(a)(9)-1 Q&A J-2 and O&A J-3 shall apply.

H. Compliance with final regulations. The requirements of this Subsection H shall take precedence over any inconsistent provisions of the plan. All distributions required under § 91-24 will be determined and made in accordance with the Treasury regulations under IRC § 401(a)(9). Notwithstanding the other provisions of this Subsection H, distributions may be made under a designation made before January 1, 1984, in accordance with the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) § 242(b)(2) and the provisions of the plan that relate to TEFRA § 242(b)(2).

[Added 12-15-2003 by Ord. No. 588, approved 12-15-2003]

(1) Time and manner of distribution.

(a) Required beginning date. The participant's entire interest will be distributed, or begin to be distributed, to the participant no later than the participant's required beginning date.

(b) Death of participant before distributions begins.

[1] 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:

[a] 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 70 1/2, if later.

[b] 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.

[c] 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 he distributed by December 31 of the calendar year containing the fifth anniversary of the participant's death.

[d] 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 Subsection H(1)(b)[1], other than Subsection H(1)(b)[1][a], will apply as if the surviving spouse were the participant if this plan otherwise provides for the payment of a death benefit.

[Amended 12-18-2006 by Ord. No. 607, approved 12-18-2006]

[2] For purposes of this Subsection H(1)(b) and Subsection H(4), distributions are considered to begin on the participant's required beginning date (or, if Subsection H(1)(b)[1][d] applies, the date distributions are required to begin to the surviving spouse under Subsection H(1)(b)[1][a]. 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 Subsection H(1)(b)[1][a]), the date distributions are considered to begin is the date distributions actually commence.

(c) 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 Subsection H(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 § 401(a)(9) and Regulation § 1.401(a)(9)-6.

[Amended 12-18-2006 by Ord. No. 607, approved 12-18-2006]

(2) Determination of amount to be distributed each year.

(a) General annuity requirements. If the participant's interest is paid in the form of annuity distributions under the plan, payments under the annuity will satisfy the following requirements:

[1] The annuity distributions will be paid in periodic payments made at intervals not longer than one year;

[2] The distribution period will be over a life (or lives) or over a certain period not longer than the period described in Subsection H(3) or (4);

[3] Once payments have begun over a period certain, the period certain may only be changed as permitted under Regulation § 1.401(a)(9)-6, A-13;

[Amended 12-18-2006 by Ord. No. 607, approved 12-18-2006]

[4] Payments will either be nonincreasing or increase only as follows:

[Amended 12-18-2006 by Ord. No. 607, approved 12-18-2006]

[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 participants death;

[c] To pay increased benefits that result from a plan amendment; or

[d] To the extent increases are permitted in accordance with Regulation § 1.401(a)(9)-8, A-14(c) or (d).

(b) Amount required to be distributed by required beginning date.

[Amended 12-18-2006 by Ord. No. 607, approved 12-18-2006]

[1] 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 Subsection H(1)(a) or (b) 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, semiannually, or annually. All of the participants 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.

[2] 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 year's 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 the 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. Section 91-24D(1)(f) shall not apply.

(4) Requirements for minimum distributions where the 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 Subsection H(1)(b)[1][a] or [b], over the life of the designated beneficiary or over a period certain not exceeding:

[1] 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

[2] 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 begins. 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 Subsection H(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 Subsection H(1)(b)[1][b].

(5) Definitions. As used in this subsection, the following terms shall have the meanings indicated:

DESIGNATED BENEFICIARY

The individual who is designated as the beneficiary under § 91-24F(1) and is the designated beneficiary under IRC § 401(e)(9) and Regulation § 1.401(a)(9)-1, A-4.

[Amended 12-18-2006 by Ord. No. 607, approved 12-18-2006]

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 which 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 Subsection H(1)(b).

LIFE EXPECTANCY

Life expectancy as computed by use of the Single Life Table in Regulation § 1.401(a)(9)-9.

REQUIRED BEGINNING DATE

The date specified in § 91-24F(4).