Section 4445.10  Purpose

 

This Part sets forth the procedural requirements for the submission of the annual compliance fee by pension funds to the Department of Insurance as required by Section 1A-112 of the Illinois Pension Code [40 ILCS 5/1A-112]. 

 

Section 4445.20  Applicability

 

This Part applies to every Article 4 firefighter pension fund that is required to file an annual statement with the Department of Insurance pursuant to Section 1A-109 of the Illinois Pension Code [40 ILCS 5/1A-109].

 

Section 4445.30  Definitions

 

"Annual Benefit" means a benefit payable annually in the form of a straight life annuity (with no ancillary benefits) without regard to the benefit attributable to after-tax employee contributions (except pursuant to IRC section 415(n)) and to rollover contributions (as defined in IRC section 415(b)(2)(A)). 

 

"Benefit Attributable" means a benefit determined in accordance with Treasury Regulations (see 26 CFR 1.415(b)(2)(A)).

 

"Department" means the Illinois Department of Insurance.

 

"HEART Act" means the federal Heroes Earnings Assistance and Relief Tax Act of 2008 (Public Law 103-353).

 

"Internal Revenue Code" or "IRC" means 26 USC.

 

"Member" means participant in a firefighter pension fund under Article 4 of the Illinois Pension Code [40 ILCS 5].

 

"Nonqualified Service Credit" means permissive service credit other than that allowed with respect to:

 

service (including parental, medical, sabbatical and similar leave) as an employee of the Government of the United States, any state or political subdivision of the United States, or any agency or instrumentality of any of the foregoing (other than military service or service for credit that was obtained as a result of a repayment described in IRC section 415(k)(3));

 

service (including parental, medical, sabbatical and similar leave) as an employee (other than as an employee described in the preceding paragraph) of an education organization described in IRC section 170(b)(1)(A)(ii) that is a public, private or sectarian school that provides elementary or secondary education (through grade 12), or a comparable level of education, as determined under the applicable law of the jurisdiction in which the service was performed;

 

service as an employee of an association of employees who are described in the first indented paragraph of this definition; or

 

military service (other than qualified military service under IRC section 414(u)) recognized by the plan.

 

"Non-spousal Beneficiary" means minor children, disabled children or dependent parents receiving survivor benefits.

 

"Pension Code" or "Code" means the Illinois Pension Code [40 ILCS 5].

 

"Pension Fund" means any public pension fund established under Article 4 of the Pension Code.

 

"Permissive Service Credit" means service credit:

 

recognized by the plan for purposes of calculating a member's benefit under the plan;

 

that the member has not received under the plan; and

 

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

 

"Public Pension Division" means the Public Pension Division of the Illinois Department of Insurance.

 

"Treasury Regulation" means 26 CFR.

 

"USERRA" means the federal Uniformed Services Employment and Reemployment Rights Act (38 USC 43) (see Public Law 103-353).

 

(Source:  Amended at 39 Ill. Reg. 4968, effective March 23, 2015)

 

Section 4445.40  General Rule

 

Beginning January 1, 1993, pursuant to 40 ILCS 5/1-106(b), a pension fund may, and to the extent required by federal law shall, at the request of any person entitled to receive an eligible rollover distribution from the pension fund, pay any portion of that eligible rollover distribution directly to an eligible retirement plan designated in writing by the person.

 

Section 4445.50  Eligible Rollover Distribution

 

a)         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:

 

1)         any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or the life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of 10 years or more;

 

2)         any distribution to the extent that distribution is required under IRC section 401(a)(9);

 

3)         the portion of any distribution that is not includible in gross income; and

 

4)         any other distribution that is reasonably expected to total less than $200 during the year. 

 

b)         Effective:

 

1)         January 1, 2002, a portion of a distribution will not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions that are not includible in gross income. However, that portion may be transferred only:

 

A)        to an individual retirement account or annuity described in IRC section 408(a) or (b);

 

B)        to a qualified defined contribution plan described in IRC section 401(a); or

 

C)        to a qualified plan described in IRC section 403(a); or

 

2)         on or after January 1, 2007:

 

A)        to a qualified defined benefit plan described in IRC section 401(a); or

 

B)        to an annuity contract described in IRC section 403(b).

 

c)         The provisions of subsection (b) apply only if the account, annuity or plan agrees to separately account for amounts transferred (and earnings on that amount), including separately accounting for the portion of the distribution that is includible in gross income and the portion of the distribution that is not includible. 

 

d)         Effective January 1, 2002, the definition of eligible rollover distribution also includes a distribution to a surviving spouse.

 

Section 4445.60  Eligible Retirement Plan

 

An eligible retirement plan is any of the following that accepts the distributee's eligible rollover distribution: 

 

a)         an individual retirement account described in IRC section 408(a);

 

b)         an individual retirement annuity described in IRC section 408(b);

 

c)         an annuity plan described in IRC section 403(a);

 

d)         a qualified trust described in IRC section 401(a);

 

e)         effective January 1, 2002, an annuity contract described in IRC section 403(b);

 

f)         effective January 1, 2002, a plan eligible 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 a political subdivision of a state that agrees to separately account for amounts transferred into that plan from a plan under this Part; or

 

g)         effective January 1, 2009, to the extent required by federal law and permitted under a retirement or pension system subject to this Part, a Roth IRA described in IRC section 408A.

 

Section 4445.70  Distributee

 

A distributee includes an employee or former employee. It also includes the employee's or former employee's surviving spouse.  Effective January 1, 2008, to the extent permitted under a pension plan subject to this Part, a distributee further includes a nonspouse beneficiary who is a designated beneficiary as defined by IRC section 401(a)(9)(E).  However, a nonspouse beneficiary may roll over the distribution only to an individual retirement account or individual retirement annuity established for the purpose of receiving the distribution, and the account or annuity will be treated as an "inherited" individual retirement account or annuity.

 

Section 4445.80  Direct Rollover

 

A direct rollover is a payment by the pension plan to the eligible retirement plan specified by the distributee.

 

Section 4445.90  General Rule

 

Notwithstanding any other provision to the contrary, and pursuant to 40 ILCS 5/1-116.1, distributions from a pension fund shall conform with a good faith interpretation of IRC section 401(a)(9) and the regulations under that section (26 CFR 1.401(a)(9)) as applicable to a governmental plan within the meaning of IRC section 414(d).

 

Section 4445.100  Minimum Required Distributions

 

Effective on and after January 1, 2003, each pension fund shall be subject to the following provisions:

 

a)         Benefit payments must begin by the required beginning date, which is the later of April 1 of the calendar year following the calendar year in which the plan member reaches 70½ years of age or April 1 of the calendar year following the calendar year in which the plan member terminates employment.  If a plan member fails to apply for retirement benefits by April 1 of the calendar year following the calendar year in which he or she reaches 70½ years of age or April 1 of the calendar year following the calendar year in which he or she terminates employment, whichever is later, the plan will begin distributing the benefit as required by this Section.

 

b)         The plan member's entire interest must be distributed over the plan member's life or the lives of the plan member and a designated beneficiary or beneficiaries, or over a period not extending beyond the life expectancy of the plan member or of the plan member and a designated beneficiary.  Death benefits must be distributed in accordance with IRC section 401(a)(9), including the incidental death benefit requirement in IRC section 401(a)(9)(G), and the regulations implementing that Section. 

 

c)         The life expectancy of a plan member, the plan member's spouse or the plan member's beneficiary may not be recalculated after the initial determination for purposes of determining benefits.

 

d)         If a plan member dies after the required distribution of benefits has begun, the remaining portion of the plan member's interest must be distributed at least as rapidly as under the method of distribution before the plan member's death and no longer than the remaining period over which distributions commenced.

 

e)         If a plan member dies before required distribution of the plan member's benefits has begun, the plan member's entire interest must be either:

 

1)         distributed (in accordance with federal regulations (26 CFR 1.401(a)(9))) over the life or life expectancy of the designated beneficiary, with the distributions beginning no later than December 31 of the calendar year immediately following the calendar year of the plan member's death; or

 

2)         distributed by December 31 of the calendar year containing the fifth anniversary of the plan member's death.

 

Section 4445.110  Incidental Benefit Rule

 

a)         The amount of survivor benefits paid to a plan member's beneficiary may not exceed the maximum determined under the incidental death benefit requirement of the Internal Revenue Code.

 

b)         The death and disability benefits provided by a plan are limited by the incidental benefit rule set forth in IRC section 401(a)(9)(G) and 26 CFR 1.401-1(b)(1)(i). 

 

Section 4445.120  Basic 415 Limitations

 

Notwithstanding any other provisions to the contrary, and pursuant to 40 ILCS 5/1-116, the member contributions made to, and retirement benefits paid from, a pension fund shall be limited to such extent as may be necessary to conform to the requirements of IRC section 415, for a qualified pension plan.

 

Section 4445.130  Limitation Year

 

For purposes of this Part, pursuant to IRC section 415, the limitation year for a Firefighters' Pension Fund is the calendar year. 

 

Section 4445.140  Participation in Other Qualified Plans:  Aggregation of Limits

 

a)         The limit established by IRC section 415(b), with respect to any member who at any time has been a member of any other defined benefit plan as defined in IRC section 414(j), that was maintained by the member's same employer in the pension fund shall apply as if the total benefits payable under all such defined benefit plans in which the member has been a member were payable from one plan.

 

b)         The limit established by IRC section 415(c), with respect to any member who at any time has been a member of any other defined contribution plan, as defined in IRC section 414(i), that was maintained by the member's same employer in the pension fund shall apply as if the total annual additions under all such defined contribution plans in which the member has been a member were payable to one plan.

 

Section 4445.150  Basic 415(b) Limitation

 

Before January 1, 1995, a member may not receive an annual benefit that exceeds the limits specified in IRC section 415(b), subject to the applicable adjustments in that section.  On and after January 1, 1995, a member may not receive an annual benefit that exceeds the dollar amount specified in IRC section 415(b)(1)(A), subject to the applicable adjustments in IRC section 415(b), and subject to any additional limits that may be specified in this Section.  In no event shall a member's annual benefit payable in any limitation year from a pension fund be greater than the limit applicable at the pension benefit starting date, as increased in subsequent years pursuant to IRC section 415(d) and related Treasury Regulations (26 CFR 1.415(d)).

 

Section 4445.160  Definition of Annual Benefit

 

For purposes of IRC section 415(b), the "annual benefit" means a benefit payable annually in the form of a straight life annuity (with no ancillary benefits) without regard to the benefit attributable to after-tax employee contributions (except pursuant to IRC section 415(n)) and to rollover contributions (as defined in IRC section 415(b)(2)(A)).  The "benefit attributable" shall be determined in accordance with Treasury Regulations (26 CFR 1.415(b)(2)(A)).

 

Section 4445.170  Adjustments to Basic 415(b) Limitation for Form of Benefit

 

a)         If the benefit under the pension fund is other than the form specified in Section 4445.160, then the benefit shall be adjusted so that it is the equivalent of the annual benefit, using factors prescribed in Treasury Regulations (26 CFR 1.415(b)).

 

b)         If the form of benefit without regard to the automatic benefit increase feature is not a straight life annuity or a qualified joint and survivor annuity, then subsection (a) is applied by either reducing the IRC section 415(b) limit applicable at the pension benefit starting date or adjusting the form of benefit to an actuarially equivalent amount (determined using the assumptions specified in 26 CFR 1.415(b)-1(c)(2)(ii)) that takes into account the additional benefits under the form of benefit as follows:

 

1)         For a benefit paid in a form to which IRC section 417(e)(3) does not apply (a monthly benefit), the actuarially equivalent straight life annuity benefit that is the greater of (or the reduced 415(b) limit applicable at the annuity starting date that is the "lesser of", when adjusted in accordance with the following assumptions):

 

A)        The annual amount of the straight life annuity (if any) payable to the member under the plan commencing at the same annuity starting date as the form of benefit to the member; or

 

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 form of benefit payable to the member, computed using a 5% interest assumption (or the applicable statutory interest assumption) and the applicable mortality tables described in IRC section 417(e)(3)(B) (see Notice 2008-85, published by the Internal Revenue Service on September 29, 2008); or

 

2)         For a benefit paid in a form to which IRC section 417(e)(3) applies (a lump sum benefit), the actuarially equivalent straight life annuity benefit that is the greatest of (or the reduced 415(b) limit applicable at the annuity starting date that is the "least of", when adjusted in accordance with the following assumptions):

 

A)        The annual amount of the straight life annuity commencing at the pension benefit starting date that has the same actuarial present value as the particular form of benefit payable, computed using the interest rate and mortality table, or tabular factor, specified in the plan for actuarial experience;

 

B)        The annual amount of the straight life annuity commencing at the pension benefit starting date that has the same actuarial present value as the particular form of benefit payable, computed using a 5.5% interest assumption (or the applicable statutory interest assumption) and the applicable mortality table for the distribution under IRC section 417(e)(3)(B) (see IRS Notice 2008-85); or

 

C)        The annual amount of the straight life annuity commencing at the pension benefit starting date that has the same actuarial present value as the particular form of benefit payable (computed using the applicable interest rate for the distribution under 26 CFR 1.417(e)-1(d)(3) (the 30-year Treasury rate (prior to January 1, 2007, using the rate in effect for the month prior to retirement and, on and after January 1, 2007, using the rate then in effect for the first day of the plan year, with a one-year stabilization period)) and the applicable mortality rate for the distribution under IRC section 417(e)(3)(B) (see IRS Notice 2008-85), divided by 1.05. 

 

Section 4445.180  Benefits Not Taken into Account for 415(b) Limit

 

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

 

a)         Any ancillary benefit that is not directly related to retirement income benefits;

 

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

 

c)         Any other benefit not required under IRC section 415(b)(2) and related Treasury Regulations (26 CFR 1.415(b)) to be taken into account for purposes of the limitation of IRC section 415(b)(1).

 

Section 4445.190  Other Adjustments in 415(b) Limitation

 

a)         In the event the member's retirement benefits become payable before age 62, the limit prescribed by this Subpart shall be reduced in accordance with regulations issued by the Secretary of the Treasury pursuant to the provisions of IRC section 415(b), so that the limit (as so reduced) equals an annual straight life benefit (when the retirement income benefit begins) equivalent to a $160,000 (as adjusted) annual benefit beginning at age 62.

 

b)         In the event the member's benefit is based on at least 15 years of service as a full-time employee of any fire department or on 15 years of military service, the adjustments provided for in subsection (a) shall not apply.

 

c)         The reductions provided for in subsection (a) shall not be applicable to pre-retirement disability benefits or pre-retirement death benefits.

 

Section 4445.200  Less than 10 Years of Service Adjustment for 415(b) Limitations

 

The maximum retirement benefits payable to any member who has completed less than 10 years of service shall be the amount determined under Section 4445.150 multiplied by a fraction, the numerator of which is the number of the member's years of service and the denominator of which is 10.  The reduction provided by this Section cannot reduce the maximum benefit below 10%.  The reduction provided by this Section shall not be applicable to pre-retirement disability benefits or pre-retirement death benefits.

 

Section 4440.210  $10,000 Limit

 

Notwithstanding the foregoing, the retirement benefit payable with respect to a member shall be deemed not to exceed the IRC section 415 limit if the benefits payable, with respect to the member under the plan and under all other qualified defined benefit pension plans to which the member's employer contributes, do not exceed $10,000 for the applicable limitation year and for any prior limitation year, and the employer has not at any time maintained a qualified defined contribution plan in which the member participated.

 

Section 4445.220  Effect of COLA without a Lump Sum Component on 415(b) Testing

 

Effective on and after January 1, 2003, for purposes of applying the IRC section 415(b) limit to a member with no lump sum benefit, the following will apply:

 

a)         a member's applicable 415(b) limit will be applied to the member's annual benefit in the member's first limitation year without regard to any automatic cost of living adjustments;

 

b)         to the extent that the member's annual benefit equals or exceeds the limit, the member will no longer be eligible for cost of living increases until the benefit plus the accumulated increases are less than the 415(b) limit;

 

c)         in any subsequent limitation year, a member's annual benefit, including any automatic cost of living increases, shall be tested under the then applicable 415(b) limit including any adjustment to the IRC section 415(b)(1)(A) dollar limit under IRC section 415(d), and the related Treasury Regulations (26 CFR 1.415(b)).

 

Section 4445.230  Effect of COLA with a Lump Sum Component on 415(b) Testing

 

On and after January 1, 2009, with respect to a member who receives a portion of the member's annual benefit in a lump sum, a member's applicable limit will be applied taking into consideration cost of living increases as required by IRC section 415(b) and applicable Treasury Regulations (26 CFR 1.415(b)).

 

Section 4445.240  415(c) Limit

 

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

 

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

 

b)         For purposes of applying the 415(c) limits only and for no other purpose, the definition of compensation, where applicable, will be compensation actually paid or made available during a limitation year, except as noted in subsection (c) and as permitted by 26 CFR 1.415(c)-2; however, member contributions picked up under IRC section 414(h) shall not be treated as compensation.

 

c)         Unless another definition of compensation that is permitted by 26 CFR 1.415(c)-2 is specified by the plan, compensation will be defined as wages within the meaning of IRC section 3401(a) and all other payments of compensation to an employee by an employer for which the employer is required to furnish the employee a written statement under IRC sections 6041(d), 6051(a)(3) and 6052 and will be determined without regard to any rules under IRC section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in IRC section 3401(a)(2)). 

 

1)         However, for limitation years beginning on and after January 1, 1998, compensation will also include amounts that would otherwise be included in compensation but for an election under IRC section 125(a), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b).  For limitation years beginning on and after January 1, 2001, compensation will also include any elective amounts that are not includible in the gross income of the employee by reason of IRC section 132(f)(4).

 

2)         For limitation years beginning on and after January 1, 2009, compensation for the limitation year will also include compensation paid by the later of 2½ months after an employee's severance from employment or the end of the limitation year that includes the date of the employee's severance from employment if:

 

A)        the payment is regular compensation for services during the employee's regular working hours, or compensation for services outside the employee's regular working hours (such as overtime or shift differential), commissions, bonuses or other similar payments, and, absent a severance from employment, the payments would have been paid to the employee while the employee continued in employment with the employer;

 

B)        the payment is for unused accrued bona fide sick, vacation or other leave that the employee would have been able to use if employment had continued; or

 

C)        payments pursuant to a nonqualified unfunded deferred compensation plan, but only if the payments would have been paid to the member at the same time if the member had continued employment with the employer and only to the extent that the payment is includible in the member's gross income.

 

3)         Any payments not described in subsection (c)(2) are not considered compensation if paid after severance from employment, even if they are paid within 2½ months following severance from employment, except for payments to the individual who does not currently perform services for the employer by reason of qualified military service (within the meaning of IRC section 414(u)(1)) to the extent these payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the employer rather than entering qualified military service.

 

4)         An employee who is in qualified military service (within the meaning of IRC section 414(u)(1)) shall be treated as receiving compensation from the employer during that period of qualified military service equal to:

 

A)        the compensation the employee would have received during that period if the employee were not in qualified military service, determined based on the rate of pay the employee would have received from the employer but for the absence during the period of qualified military service; or

 

B)        if the compensation the employee would have received during that period was not reasonably certain, the employee's average compensation from the employer during the 12 month period immediately preceding the qualified military service (or, if shorter, the period of employment immediately preceding the qualified military service).

 

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

 

6)         Back pay, within the meaning of 26 CFR 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 subsection (c).

 

(Source:  Amended at 38 Ill. Reg. 9514, effective April 16, 2014)

 

Section 4445.250  Service Purchases under IRC Section 415(n)

 

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

 

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

 

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

 

b)         For purposes of applying this Section, a pension fund will not fail to meet the reduced limit under IRC section 415(b)(2)(C) solely by reason of this Section and will not fail to meet the percentage limitation under IRC section 415(c)(1)(B) solely by reason of this Section. 

 

c)         Permissive Service Credit

 

1)         For purposes of this Section, the term "permissive service credit" means service credit:

 

A)        recognized by the plan for purposes of calculating a member's benefit under the plan;

 

B)        that the member has not received under the plan; and

 

C)        that the member may receive only by making a voluntary additional contribution, in an amount determined under the plan, that does not exceed the amount necessary to fund the benefit attributable to the service credit. 

 

2)         Effective for permissive service credit contributions made in limitation years beginning after December 31, 1997, the term may include service credit for periods for which there is no performance of service and, notwithstanding subsection (c)(1)(B), may include service credited in order to provide an increased benefit for service credit a member is receiving under the plan. 

 

d)         A pension fund will fail to meet the requirements of this Section if:

 

1)         more than 5 years of nonqualified service credit are taken into account for purposes of this Section; or

 

2)         any nonqualified service credit is taken into account under this Section before the member has at least five years of participation under the plan. 

 

e)         For purposes of subsection (d), effective for permissive service credit contributions made in limitation years beginning after December 31, 1997, the term "nonqualified service credit" means permissive service credit other than that allowed with respect to:

 

1)         service (including parental, medical, sabbatical and similar leave) as an employee of the Government of the United States, any state or political subdivision of the United States, or any agency or instrumentality of any of the foregoing (other than military service or service for credit that was obtained as a result of a repayment described in IRC section 415(k)(3));

 

2)         service (including parental, medical, sabbatical and similar leave) as an employee (other than as an employee described in subsection (e)(1)) of an education organization described in IRC section 170(b)(1)(A)(ii) that is a public, private or sectarian school that provides elementary or secondary education (through grade 12), or a comparable level of education, as determined under the applicable law of the jurisdiction in which the service was performed;

 

3)         service as an employee of an association of employees who are described in subsection (e)(1); or

 

4)         military service (other than qualified military service under IRC section 414(u)) recognized by the plan.

 

f)         In the case of service described in subsections (e)(1) through (3), the service will be nonqualified service if recognition of the service would cause a member to receive a retirement benefit for the same service under more than one plan. 

 

g)         In the case of a trustee-to-trustee transfer after December 31, 2001 to which IRC section 403(b)(13)(A) or 457(e)(17)(A) applies (without regard to whether the transfer is made between plans maintained by the same employer):

 

1)         the limitations of subsection (d) will not apply in determining whether the transfer is for the purchase of permissive service credit; and

 

2)         the distribution rules applicable under federal law to the plan will apply to the transferred amounts and any benefits attributable to those amounts.

 

h)         For an eligible participant, the limitation of IRC section 415(c)(1) shall not be applied to reduce the amount of permissive service credit that may be purchased to an amount less than the amount allowed to be purchased under the terms of the plan as in effect on August 5, 1997.  For purposes of this subsection (h), an eligible participant is an individual who first became a participant in the plan before January 1, 1998.

 

Section 4445.260  Modification of Contributions for 415(c) and 415(n) Purposes

 

Notwithstanding any other provision of law to the contrary, a pension fund may modify a request by a member to make a contribution under this Part if the amount of the contribution would exceed the limits provided in IRC section 415 by using the following methods:

 

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

 

b)         If payment pursuant to this Section will not avoid a contribution in excess of the limits imposed by IRC section 415(c) or 415(n), a pension fund may either reduce the member's contribution to an amount within the limits of those IRC sections or refuse the member's contribution.

 

Section 4445.270  Repayments of Cashouts

 

Any repayment of contributions (including interest) to a pension fund with respect to an amount previously refunded upon a forfeiture of service credit under a pension fund shall not be taken into account for purposes of IRC section 415, in accordance with applicable Treasury Regulations (26 CFR 1.415).

 

Section 4445.280  Reduction of Benefits Priority

 

a)         Reduction of benefits and/or contributions to all plans, when required, shall be accomplished by first reducing the member's defined benefit component under any defined benefit plans in which the member participated.

 

b)         Except as otherwise provided in subsection (c), the reduction shall be made:

 

1)         first, with respect to the plan in which the member most recently accrued benefits and thereafter in the priority determined by the plan and the plan administrator of the other plans; then

 

2)         by reducing the member's defined contribution component benefit under any defined benefit plans; then

 

3)         by reducing or allocating excess forfeitures for defined contribution plans in which the member participated, with the reduction to be made first with respect to the plan in which the member most recently accrued benefits and thereafter in the priority established by the plan and the plan administrator for the other plans.

 

c)         However, the necessary reductions may be made in a different manner and priority pursuant to the agreement of the plan and the plan administrator of all other plans covering the member.

 

Section 4445.290  Compliance with Internal Revenue Code

 

Each of the plans established under Article 4 of the Pension Code is intended to be a qualified defined benefit plan under IRC sections 401(a) and 414(d).

 

Section 4445.300  Plan Termination

 

Upon plan termination, a member's interest in a pension fund will be nonforfeitable.

 

Section 4445.310  Vesting and Forfeitures

 

                  a)                        A plan member shall be 100% vested in his or her accumulated contributions at all times.

 

                  b)                        In conformity with IRC section 401(a)(8), any forfeitures of benefits by members or former members of the plan will not be used to pay benefit increases.  However, forfeitures shall be used to reduce employer contributions.

 

Section 4445.320  HEART Act

 

The downstate firefighters' pension funds will operate in compliance with USERRA, as required by Section 1-118 of the Pension Code, and as amended and expanded by the HEART Act.

 

a)         Effective with respect to deaths occurring on or after January 1, 2007, while a member is performing qualified military service (as defined in USERRA), to the extent required by IRC section 401(a)(37), survivors of a member in a State or local retirement or pension system are entitled to any additional benefits that the system would provide if the member had resumed employment and then died, such as accelerated vesting or survivor benefits that are contingent on the member's death while employed.  In any event, a deceased member's period of qualified military service must be counted for vesting purposes.

 

b)         Beginning January 1, 2009, to the extent required by IRC sections 3401(h) and 414(u)(12), an individual receiving differential wage payments (while the individual is performing qualified military service (as defined in USERRA)) from an employer shall be treated as employed by that employer, and the differential wage payment shall be treated as compensation for purposes of applying the limits on annual additions under IRC section 415(c). This provision shall be applied to all similarly situated individuals in a reasonably equivalent manner.

 

c)         Effective with respect to deaths and disabilities occurring on or after January 1, 2007, while a member is performing qualified military service (as defined in USERRA), to the extent permitted by IRC section 414(u)(8), for benefit accrual purposes and, in the case of death, for vesting purposes, the member will be treated as having earned years of service for the period of qualified military service, having returned to employment on the day before the death and/or disability, and then having terminated on the date of death or disability.  This provision applies only if the employer and the employee have made contributions equal to those that would have been made had the employee been active during the period of coverage.  This provision shall be applied to all similarly situated individuals with respect to an employer in a reasonably equivalent manner.

 

(Source:  Added at 39 Ill. Reg. 4968, effective March 23, 2015)