Md. Code Regs. 22.07.02.02

Current through Register Vol. 52, No. 1, January 10, 2025

Section 22.07.02.02 - Compliance with the Internal Revenue Code, 26 U.S.C. Section401(a)(17) for the Limitation on Compensation

A. 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 $150,000, as adjusted for cost-of-living increases under § 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 State system.

B. Plan Years Beginning On and After July 1, 2002.

(1) Effective with respect to plan years beginning on and after July 1, 2002, the annual compensation of a plan member which exceeds $200,000, as adjusted for cost-of-living increases in accordance with § 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.

(2) Annual compensation means compensation during the plan year or such other consecutive 12-month period over which compensation is otherwise determined under the plan (the determination period).

(3) 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.

(4) If the determination period consists of fewer than 12 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 12.

(5) 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.

C. Eligible Member.

(1) In this section, "eligible member" means, a person who first became a member of the State system prior to the plan year beginning after December 31, 1995.

(2) Pursuant to section 13212(d)(3)(A) of Omnibus Budget and Reconciliation Act of 1993, and the regulations issued under that section, eligible members are not subject to the limits of § 401(a)(17) of the Internal Revenue Code, and the maximum compensation used in computing employee and employer contributions to, or benefits due from, the State system for eligible members shall be the maximum amount allowed by the State system to be so used on July 1, 1993.

(3) The limits referenced in §§A and B of this regulation apply only to years beginning after December 31, 1995, and only to individuals who first become plan members in plan years beginning on and after July 1, 1996.

Md. Code Regs. 22.07.02.02