A.  Unless otherwise provided in this Chapter, the accrued benefit of each “Section 401(a)(17) employee” as that term is defined below shall be the greater of the following:

(1)  The employee’s accrued benefit determined with respect to the benefit formula applicable for the plan year beginning on or after January 1, 1996, as applied to the employee’s total years of service taken into account for purposes of benefit accruals.

(2)  The sum of:

(a)  The employee’s accrued benefit as of the last day of the last plan year beginning before January 1, 1996, frozen in accordance with the provisions of Sections 1.401(a)(4)-1 through 1.401(a)(4)-13 of the Treasury regulations; and

(b)  The employee’s accrued benefit determined under the benefit formula applicable for the plan year beginning on or after January 1, 1996, as applied to the employee’s years of service credited to the employee for plan years beginning on or after January 1, 1996, for purposes of benefit accruals.

B.  A “Section 401(a)(17) employee” shall mean any employee whose current accrued benefit, as of a date on or after the first day of the first plan year beginning on or after January 1, 1996, is based on compensation for a year beginning prior to the first day of the first plan year beginning on or after January 1, 1996, that exceeded one hundred fifty thousand dollars.

C.  If an employee is not a “Section 401(a)(17) employee”, his accrued benefit in this system shall not be based upon compensation in excess of the annual limit of Section 401(a)(17) of the Internal Revenue Code, as amended and revised, subject to the following provisions:

(1)  Effective with respect to plan years beginning on and after July 1, 1996, and before July 1, 2002, the annual compensation of a plan member which exceeds one hundred fifty thousand dollars, as adjusted for cost-of-living increases under Section 401(a)(17)(B) of the Internal Revenue Code, shall be disregarded for purposes of computing employee and employer contributions to or benefits due from the retirement system.  Effective only for the 1996 plan year, in determining the compensation of an employee eligible for consideration under this Paragraph, the rules of Section 414(q)(6) of the Internal Revenue Code shall apply, except that in applying such rules, the term “family” shall include only the spouse of the member and any lineal descendants of the employee who have not attained age nineteen before the close of the year.

(2)  Effective with respect to plan years beginning on and after July 1, 2002, the annual compensation of a plan member which exceeds two hundred thousand dollars, as adjusted for cost-of-living increases in accordance with Section 401(a)(17)(B) of the Internal Revenue Code, may not be taken into account in determining benefits or contributions due for any plan year.  Annual compensation means compensation during the plan year or such other consecutive twelve month period, hereinafter the “determination period”, over which compensation is otherwise determined under the plan.  The cost-of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year.  If the determination period consists of fewer than twelve months, the annual compensation limit is an amount equal to the otherwise applicable annual compensation limit multiplied by a fraction, the numerator of which is the number of months in the short determination period, and the denominator of which is twelve.  If the compensation for any prior determination period is taken into account in determining a plan member’s contributions or benefits for the current plan year, the compensation for such prior determination period is subject to the applicable annual compensation limit in effect for that prior period.

Acts 1995, No. 586, §1, eff. July 1, 1995; Acts 2014, No. 727, §1, eff. July 1, 2014.