OAR 459-005-0535: Annual Benefit Limitation

(1) Applicable Law. This administrative rule shall be construed consistently with the requirements of the Internal Revenue Code (IRC) Section 415(b) and the Treasury regulations and Internal Revenue Service rulings and other interpretation issued thereunder. (2) Annual Benefit Limitation. The benefits payable to any member for a calendar year, when expressed as an annual benefit, shall not exceed the applicable dollar limitation for that year. (3) Applicable Dollar Limitation. For purposes of this rule, the "applicable dollar limitation" for each calendar year is the limitation in effect under IRC Section 415(b)(1)(A), with the adjustment described as follows: (a) Cost-of-Living Adjustments. The limitation under IRC Section 415(b)(1)(A) shall be adjusted for cost of living in accordance with IRC Section 415(d) and Treasury Regulation Section 1.415(a)-1(d)(3)(v)(C). The adjustment applies to the applicable dollar limitation for years: (A) Between separation and retirement of a member; and (B) After the member’s effective retirement date. (b) Reduction for Retirement Before Age 62. Except as otherwise provided in the paragraphs (A), (B), and (C) of this subsection, if the member's benefit begins before the member reaches 62 years of age, the applicable dollar limitation shall be adjusted as provided for in IRC Section 415(b)(2)(C). (A) This reduction shall not apply to any member who has at least 15 years of creditable service as a full-time employee of a police department or fire department which is organized and operated by the state or a political subdivision of the state to provide police protection, firefighting services, or emergency medical services for any area within the jurisdiction of the state or political subdivision. (B) This reduction shall not apply to disability retirement allowances or death benefits. (C) This reduction shall not apply to any portion of a member's annual benefit that is derived from contributions to purchase service credit, as defined in OAR 459-005-0540, Permissive Service Credit. (c) Reduction for Less than 10 Years of Membership. Except as provided in paragraphs (A) and (B) of this subsection, if the member has less than 10 years of active membership in PERS, the applicable dollar limitation shall be reduced as provided for under IRC Section 415(b)(5)(A). (A) For the purposes of this section, a member with less than one year of active membership shall be treated as having one year of active membership. (B) The reduction under this section shall not apply to disability retirement allowances or death benefits. (d) Increase for Retirement After Age 65. If the member's benefit begins after the member reaches 65 years of age, the applicable dollar limitation shall be increased as provided for under IRC Section 415(b)(2)(D). (4) Annual Benefit. For purposes of this rule, the "annual benefit" is the benefit payable to a member under ORS Chapter 238 and the pension program under Chapter 238A for a calendar year, excluding any benefit payable under 238.485 through 238.492, and adjusted as described in this section. (a) Excludable Benefits. The annual benefit shall not include the portion of the member's benefit that is attributable to: (A) After-tax member contributions, other than member payments to purchase permissive service credit as defined in OAR 459-005-0540, Permissive Service Credit; (B) Rollover contributions, if such contributions are permitted; (C) A transfer of assets from another qualified retirement plan; and (D) Purchases of permissive service credit, as defined in OAR 459-005-0540, Permissive Service Credit, if all of the member's payments to purchase permissive service credit are treated as annual additions for purposes of 459-005-0545, Annual Addition Limitation, in the year purchased. (b) Adjustment to Straight Life Annuity. The member's benefit shall be adjusted to an actuarially equivalent straight life annuity beginning at the same age. For purposes of this adjustment, the following values are not taken into account: (A) The value of a qualified spouse joint and survivor annuity to the extent that the value exceeds the sum of the value of a straight life annuity beginning on the same day, and the value of any post-retirement death benefits that would be payable even if the annuity was not in the form of a joint survivor annuity. (B) The value of benefits that are not directly related to retirement benefits, such as pre-retirement disability benefits and post-retirement medical benefits. (C) The value of post-retirement cost of living increases, to the extent they do not exceed the increase provided under IRC Section 415(d) and Treasury Regulation Section 1.415(d)-1. (5) Interest Rates. The following interest rates shall apply for purposes of adjusting the applicable dollar limitation under section (3) of this rule and the annual benefit under section (4) of this rule. (a) For purposes of reducing the applicable dollar limitation for retirement before 62 years of age under subsection (3)(b) of this rule, the interest rate shall be the greater of five percent or PERS' assumed earnings rate. (b) For purposes of determining the portion of a member's benefits attributable to after-tax member contributions under paragraph (4)(a)(A) of this rule, the interest rate shall be the greater of 5 percent or the PERS' assumed earnings rate. (c) For purposes of adjusting the member's annual benefits under section (4) of this rule (other than the adjustment for after-tax member contributions), the interest rate shall be the greater of five percent or PERS' assumed earnings rate. (d) For purposes of increasing the applicable dollar limitation for retirement after 65 years of age under subsection (3)(d) of this rule, the interest rate shall be the lesser of five percent or PERS' assumed earnings rate. (6) Mortality Table. For purposes of adjusting the applicable dollar limitation and annual benefit under sections (3) and (4) of this rule, the mortality table used shall be the table prescribed pursuant to the Internal Revenue Code. (7) The provisions of this rule are effective on January 1, 2004.