| Topic: | Plan Administration |
| Subtopic: | Excess Benefit Plan; Plan Document |
| Date: | 11/19/2004 |
| Status: | Active |
WHEREAS, the Illinois Municipal Retirement Fund is a qualified retirement plan under § 401(a) of the Internal Revenue Code; and
WHEREAS, a qualified retirement plan must conform to the limitations of § 415 of the Internal Revenue Code; and
WHEREAS, § 415(b) of the Internal Revenue Code limits the amount of pension benefits a member may accrue in a qualified pension plan; and
WHEREAS, § 415(m)(3) of the Internal Revenue Code authorizes the establishment of a qualified governmental excess benefit arrangement to pay pension benefits, which exceed the § 415(b) limits, but which are owed to plan participants under the provisions of the Illinois Pension Code; and
WHEREAS, the Board of Trustees of the Illinois Municipal Retirement Fund intends to establish a qualified governmental excess benefit arrangement for certain pension benefits, which exceed the limits of § 415(b) of the Internal Revenue Code, but which are otherwise payable under the Illinois Pension Code.
NOW THEREFORE BE IT RESOLVED by the Board of Trustees of the Illinois Municipal Retirement Fund that the following excess Benefit Plan and Trust be hereby established.
ILLINOIS MUNICIPAL RETIREMENT FUND EXCESS BENEFIT PLAN AND TRUST
ARTICLE I.
ESTABLISHMENT OF PLAN AND TRUST
1.01. Establishment Of Plan and Trust. The "Illinois Municipal Retirement Fund Excess Benefit Plan and Trust" is hereby established effective as of November 1, 2004.
1.02. Purpose. The purpose of this Plan is solely to provide the part of a Participant's Retirement Benefit that would otherwise have been payable by IMRF except for the limitations of Code Section 415(b). This Plan is intended to be a "qualified governmental excess benefit arrangement" within the meaning of Code Section 415(m)(3) and shall be interpreted and construed consistently with such intent.
ARTICLE II.
DEFINITIONS AND CONSTRUCTIONS
2.01. Definitions. When the initial letter of a word or phrase is capitalized herein, it shall have the same meaning as defined below:
(a) "Administrator" means IMRF.
(b) "Annuitant" means a person who is receiving a Retirement Benefit from IMRF.
(c) "Beneficiary" means an individual receiving benefits from IMRF within the meaning of 40 ILCS 5/7-118.
(d) "Board" means the Board of Trustees of IMRF, within the meaning of 40 ILCS 5/7-120.
(e) "Code" means the Internal Revenue Code of 1986, as amended, as applicable to a governmental plan, or corresponding provisions of any subsequent federal income tax law.
(f) "Employer" means any Participating Municipality or Participating Instrumentality as defined in 40 ILCS 5/7-106 and 7-108.
(g) "Excess Benefit" means the benefit determined in accordance with Section 4.01 of this Plan.
(h) "IMRF" means the Illinois Municipal Retirement Fund.
(i) "Fund's Actuary" means the actuary selected by the Board from time to time.
(j) "Participant" means an Annuitant or Beneficiary who is entitled to benefits under this Plan.
(k) "Plan" means the "Illinois Municipal Retirement Fund Excess Benefit Plan" established herein.
(l) "Plan Year" means the calendar year for purposes of this Plan.
(m) "Retirement Benefit" means the amount of the Annuity payable to an Annuitant of IMRF, or the benefit payable to a Beneficiary, without regard to any limitations on such retirement income or benefit under Code Section 415(b).
(n) "State" means the State of Illinois.
(o) "Trust Fund" means the trust fund established by the Board pursuant to Article VI of this Plan that constitutes a valid trust under the laws of Illinois.
(p) "Trustees" mean the members of the Board.
2.02. Construction.
(a) Words used herein in the masculine gender shall be construed to include the feminine gender where appropriate, and the words used herein in the singular or plural shall be construed as being in the plural or singular where appropriate.
(b) Whenever any actuarial present value or actuarial equivalency is to be determined under the Plan to establish a benefit, it shall be based on such reasonable actuarial assumptions as may be approved in the sole discretion of the Board, and shall be determined in a uniform manner for all similarly situated Participants.
ARTICLE III.
PARTICIPATION
All Annuitants and Beneficiaries of IMRF are eligible to participate in the Plan if their Retirement Benefits from IMRF for a Plan Year are, or have been since January 1, 2005, limited by Code Section 415(b). The Board shall determine for each Plan Year which Annuitants and Beneficiaries are eligible to participate in the Plan. Participation in the Plan will commence on January 1 and continue through December 31 of each Plan Year in which it has been determined that an Annuitant or Beneficiary will have an Excess Benefit in that Plan Year; provided, however, that an Annuitant or Beneficiary who is not receiving a Retirement Benefit on January 1 of a calendar year but begins receiving a Retirement Benefit during the calendar year may commence participation on the date the Retirement Benefit begins provided the Annuitant or Beneficiary is otherwise eligible to participate in the Plan.
ARTICLE IV.
BENEFITS
4.01. Benefit Amount. A Participant in the Plan shall receive a benefit in an amount equal to the amount of retirement income that would have been payable to, or with respect to, a Participant by IMRF that could not be paid because of the application of the limitations on such retirement income under Code Section 415(b). This calculation shall not compensate for the effect of limitations under Code Section 401(a)(17).
4.02. Calculation of Benefit.
(a) The Excess Benefit payable under Section 4.01 above shall be calculated annually with respect to any Annuitant whose Annuity is incrementally adjusted on an annual basis. In addition, the Excess Benefit payable to all Annuitants in the Plan shall be recalculated in the event of any change in the limitations imposed by Code Section 415(b).
(b) The calculation of an Annuitant's Excess Benefit shall be made using the straight-life method. This method shall continue to be used when the Annuitant reaches an age which qualifies that Participant for social security benefits and any optional benefit received by the Annuitant under the Plan is reduced or eliminated as a result of such eligibility.
(c) With respect to an Annuitant or Beneficiary who is not receiving a Retirement Benefit on January 1 but begins receiving a Retirement Benefit during the calendar year, the limitations shall be applied based on the limitation for the entire calendar year.
(d) Any benefit attributable to pre-tax contributions made by an Annuitant to IMRF during his or her employment by an Employer shall be considered in the calculation of that individual's Excess Benefit. Any benefit attributable to post-tax contributions made by an Annuitant to IMRF during his or her employment by an Employer shall not be considered in the calculations of that individual's Excess Benefit.
(e) Any tax basis shall not be considered in the determination of the tax reporting of the Excess Benefit.
4.03. Time for Payment; Form of Benefit. The Excess Benefit to which a Participant is entitled under the Plan shall be paid in equal monthly installments at the same time and in the same manner as the Retirement Benefit payable under IMRF. No election is provided at any time to the Participant, directly or indirectly, to defer compensation under this Plan.
4.04. Survivor Benefit. In the event the Participant dies with a remaining benefit, an Excess Benefit will be calculated. That Excess Benefit will then be paid to the Beneficiary.
ARTICLE V.
CONTRIBUTIONS AND FUNDING
5.01. Funding. The Plan shall be, and remain, unfunded and the rights, if any, of any person to any benefits hereunder shall be those specified herein. The Plan constitutes a mere unsecured promise by Employers to make benefit payments in the future.
5.02. Contributions.
(a) The Trustees shall determine the amount necessary to pay the Excess Benefit under the Plan for each Plan Year. The required contribution for each Employer shall be the aggregate of the Excess Benefits payable to all Participants of the Employer for such Plan Year plus an amount determined by the Trustees to be a necessary and reasonable expense of administering the Plan. The amount determined from time to time to be necessary to pay the Excess Benefit of the Participant and administrative expenses of the Plan shall be paid by the Employer of the Participant, unless otherwise determined by the Board. In the event that a Participant is employed by more than one Employer at the time of the Participant’s retirement, the share of benefits to be paid to the Plan by each Employer, if any, shall be determined by the Administrator in a manner consistent with the manner in which such determinations are made for Retirement Benefits. Under no circumstances will Employer contributions to fund the Excess Benefits under the Plan be credited to the Employers' Retirement Reserve Accounts. Any contributions not used to pay the Excess Benefit for a current Plan Year, together with any income accruing to the Trust Fund, may be used to pay the administrative expenses, if any, of the Plan for the Plan Year. Any contributions not used to pay the Excess Benefit for the current Plan Year that remain after paying any administrative expenses of the Plan for the Plan Year shall be used to fund benefits of Participants in future Plan Years.
(b) The amounts determined to be necessary to provide the Excess Benefit under the Plan for each Participant shall be accounted for separately; provided, however, such separate accounting shall not be deemed to set aside such amounts for the benefit of a Participant. Benefits under this Plan shall be paid from the Trust Fund.
(c) The consultants, independent auditors, attorneys, and actuaries performing services for IMRF may also perform services for this Plan; provided, however, any fees attributable to services performed with respect to this Plan shall be payable solely from the Trust Fund.
ARTICLE VI.
TRUST FUND
6.01. Establishment of Trust Fund. An "Excess Benefit Trust Fund" (hereinafter called the "Trust Fund") is hereby established, which is separate from IMRF, to hold contributions of the Employers. Contributions to this Trust Fund shall be held separate and apart from the funds comprising IMRF and shall not be commingled with assets thereof, and must be accounted for separately.
6.02. Trust Fund Purpose. The Trust Fund is maintained solely for the purpose of providing benefits under a qualified governmental excess benefit arrangement within the meaning of Code Section 415(m).
6.03. Trust Fund Assets. All assets held by such Trust Fund to assist in meeting the Employers' obligations under the Plan, including all amounts of Employers' contributions made pursuant to the Plan, all property and rights acquired or purchased with such amounts and all income attributable to such amounts, shall be held separate and apart from other funds of the Employers and shall be used exclusively for the uses and purposes of Plan Participants and general creditors as set forth herein. Plan Participants and their Beneficiaries shall have no preferred claim on, or any beneficial interest in, any assets of the Trust Fund. Any rights created under the Plan and Trust agreement shall be mere unsecured contractual rights of Plan Participants and their Beneficiaries against Employers. Any assets held by the Trust Fund will be subject to the claims of the Employers' general creditors under federal and state law in the event of insolvency.
6.04. Grantor Trust. The Trust Fund is intended to be a grantor trust, of which the Employers are the grantors, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. This provision shall not be construed to create an irrevocable trust of any kind.
6.05. Trust Fund Income. Income accruing to the Trust Fund in respect of the Plan shall constitute income derived from the exercise of an essential governmental function upon which the Trust shall be exempt from tax under Code Section 115, as well as Code Section 415(m)(1).
ARTICLE VII.
ADMINISTRATION
7.01. Administrative Authority. The Trustees shall have the authority to control and manage the operation and administration of the Plan. The Trustees shall have the same rights, duties and responsibilities respecting the Plan as the Board has with respect to IMRF pursuant to 40 ILCS 5/7-178.
(a) The Trustees shall have such power and authority (including discretion with respect to the exercise of that power and authority) as may be necessary, advisable, desirable or convenient to enable the Trustees:
(1) to establish procedures with respect to administration of the Plan not inconsistent with the Plan and the Code, and to amend or rescind such procedures;
(2) to determine, consistent with the Plan, applicable law, rules or regulations, all questions of law or fact that may arise as to the eligibility for participation in the Plan and eligibility for distribution of benefits from the Plan, and the status of any person claiming benefits under the Plan;
(3) pursuant to Article IV of the Plan, to make payments from the Trust Fund to Participants;
(4) to contract with a third party to perform designated administrative services under this Plan; and
(5) subject to and consistent with the Code, to construe and interpret the Plan as to administrative issues and to correct any defect, supply any omission or reconcile any inconsistency in the Plan with respect to same.
(b) Any action by the Trustees which is not found to be an abuse of discretion shall be final, conclusive and binding on all individuals affected thereby. The Trustees may take any such action in such manner and to such extent as the Trustees in their sole discretion may deem expedient, and the Trustees shall be the sole and final judge of such expediency.
7.02. Advice. The Trustees may employ one (1) or more persons to render advice with regard to their responsibilities under the Plan.
7.03. Payment of Benefits. The Trustees, if in doubt concerning the correctness of their action in making a payment of a benefit, may suspend payment until satisfied as to the correctness of the payment or the person to receive the payment.
ARTICLE VIII.
PLAN AMENDMENTS
The Board from time to time may amend, suspend, or terminate any or all of the provisions of this Plan as may be necessary to comply with Code Section 415(m) and to maintain the Plan's or IMRF's qualified status under the Code.
ARTICLE IX.
NONASSIGNABILITY AND EXEMPTION FROM TAXATION AND EXECUTION
The interests of Participants under this Plan are hereby exempt from any state, county, municipal or local tax, and shall not be subject to execution, garnishment, attachment, or any other process of law whatsoever, and shall be unassignable, except as otherwise provided by 40 ILCS 5/7-217.
ARTICLE X.
MISCELLANEOUS
10.01. Federal and State Taxes. The Trustees, the Employers, and the Administrator, if any, do not guarantee that any particular Federal or State income, payroll, or other tax consequence will occur because of participation in this Plan.
10.02. Investment. The Trustees may hold such portion of the Plan uninvested as the Trustees deem advisable for making distributions under the Plan, or may invest assets of the Plan pending the Excess Benefit payments in short-term investment grade instruments as otherwise permitted pursuant to 40 ILCS 5/7-201.
10.03. Conflicts. In resolving any conflict between provisions of the Plan and in resolving any other uncertainty as to the meaning or intention of any provision of the Plan, the interpretation that (i) causes the Plan to constitute a qualified governmental excess benefit plan under the provisions of Code Section 415(m) and the Trust Fund to be exempt from tax under Code Sections 115 and 415(m), (ii) causes the Plan and IMRF to comply with all applicable requirements of the Code, and (iii) causes the Plan and IMRF to comply with all applicable Illinois statutes and rules, shall prevail over any different interpretation.
10.04. Limitation on Rights. Neither the establishment nor maintenance of the Plan, nor any amendment thereof nor any act or omission under the Plan (or resulting from the operation of the Plan), shall be construed:
(a) as conferring upon any Participant or any other person a right or claim against the Board, Trustees, Employers, or Administrator, if any, except to the extent that such right or claim shall be specifically expressed and provided in the Plan;
(b) as creating any responsibility or liability of the Employer for the validity or effect of the Plan;
(c) as a contract between the Employer and any Participant or other person;
(d) as being consideration for, or an inducement or condition of, employment of any Participant or other person, or as affecting or restricting in any manner or to any extent whatsoever the rights or obligations of the Employers or any Participant or other person to continue or terminate the employment relationship at any time; or
(e) as giving any Participant the right to be retained in the service of the Employer.
10.05. Erroneous Payments. Any benefit payment that according to the terms of the Plan and the benefits provided hereunder should not have been made may be recovered as to the extent permitted by 40 ILCS 5/7-217(c).
10.06. Release. Any payment to any Participant shall, to the extent thereof, be in full satisfaction of the claim of such Participant being paid thereby, and the Trustee(s) may condition payment thereof on the delivery by the Participant of the duly executed receipt and release in such form as may be determined by the Trustees.
10.07. Liability. The Board, Trustees, or Administrator, if any, shall not incur any liability in acting upon any notice, request, signed letter, telegram or other paper or document or electronic transmission believed by the Board, Trustees, or Administrator to be genuine or to be executed or sent by an authorized person.
The Plan shall hold harmless and indemnify the Board, the Trustees, and the Administrator, and the officers and employees thereof, from financial loss arising out of any claim, demand, suit or judgment by reason of alleged negligence or other act by such board member, trustee, officer or employee, provided that such board member, trustee, officer or employee at the time of such alleged negligence or act was acting in the discharge of his or her duties and within the scope of his or her employment and that such damages did not result from the willful and wrongful act of gross negligence of such board member, trustee, officer or employee and provided further that such board member, trustee, officer or employee shall, within five days of the time he or she is served with any summons, complaint, process, notice, demand or pleading, deliver the original or a copy thereof to the Administrator's legal advisor.
The Trustees may obtain insurance to provide coverage for any liabilities which may arise as described by this Section.
10.08. Governing Laws. The laws of the State of Illinois shall apply in determining the construction and validity of this Plan.
10.09. Necessary Parties to Disputes. Necessary parties to any accounting, litigation or other proceedings relating to the Plan shall include only the Administrator. The settlement or judgment in any such case in which the Administrator is duly served shall be binding upon all affected Participants in the Plan, their beneficiaries, estates and upon all persons claiming by, through or under them.
10.10. Severability. If any provision of the Plan shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions of the Plan shall continue to be fully effective.