§ 28-6. Same—Amendment No. Five: Employee Contributions.

Pursuant to authority set forth in Article XI thereof, The City of Galveston Employee's Retirement Plan for City Employees (as restated effective October 1, 1983) is hereby amended in the following respects only and except as otherwise provided, shall be effective as of January 1, 1989:

(a)

First: Section 2.1(h), Compensation, of the plan is hereby amended to read as follows:

(h) Compensation: The total cash remuneration paid to an employee for a calendar year by the employer for personal services, including longevity pay, overtime, deferred compensation, workmen's compensation, 414(h)(2) pick-up contributions and unused vacation and sick leave. Compensation taken into account under the plan shall not exceed two hundred thousand ($200,000.00), adjusted for changes in the cost-of-living as provided in Section 415(d) of the Internal Revenue Code, for the purpose of calculating a member's accrued benefit for any plan year commencing after December 31, 1988. However, the accrued benefit determined in accordance with this provision shall not be less than the accrued benefit determined on the effective date of this amendment without regard to this provision.

(b)

Second: Section 4.2, Contributions by Members, is hereby amended by adding the following paragraphs to said section:

Effective January 1, 1990, the employer shall pick up under the provisions of Section 414(h)(2) of the Internal Revenue Code of 1986 and pay the contribution which the member is required by law to make to the fund for all compensation earned after December 31, 1989. Although the contributions so picked up are designated as member contributions, such contributions shall be treated as contributions being paid by the employer in lieu of contributions by the member in determining tax treatment under the Internal Revenue Code of 1986 and such picked-up contributions shall not be includable in the gross income of the member until such amounts are distributed or made available to the member or the beneficiary of the member. The member, by the terms of this plan, shall not have any option to choose to receive the contribution so picked up directly and the picked-up contributions must be paid by the employer to the fund.

Member contributions which are picked up shall be treated in the same manner and to the same extent as member contributions made prior to the date of which member contributions were picked up by the employer. Member contributions so picked up shall be included in gross salary for purposes of determining benefits and contributions under the plan.

The employer shall pay the member contributions from the same source of funds used in paying salary to the member, by effecting an equal cash reduction in gross salary of the member.

(c)

Third: Article VI, Amount of Retirement Benefits, is hereby amended to add the following Section 6.7 to read as follows:

6.7. Increase to retirees: Effective with benefit payments on and after October 1, 1988, the monthly pension payable to a retired member who retired prior to October 1, 1987, shall be increased by five (5) percent of the amount of his monthly pension, save and except the following retirees and beneficiaries:

(a)

Retirees who began receiving pension payments subsequent to October 1, 1987.

(b)

Beneficiaries of previous members who have received the appropriate allowable benefits subsequent to October 1, 1987.

(c)

Beneficiaries who as of October 1, 1988, are receiving one hundred dollars ($100.00) per month minimum benefit under section 16-47(c) of the prior plan.

(d)

Fourth: The plan is amended by the addition of a new Article XII to read as follows:

Article XII. Limitations Under Code Section 415

12.1. Maximum annual benefit under code section 415: Notwithstanding any other provision contained herein to the contrary, the benefits payable to an employee from this plan, shall be subject to the limitations of Code section 415 in accordance with (a) and (b) below:

(a)

Defined benefit plan(s) only: Any annual pension payable to an employee hereunder (including any annual pension paid to such employee from another defined benefit plan of the employer) shall not exceed the lesser of (1) and (2) below, subject to (3) through (7) below:

(1)

Ninety thousand dollars ($90,000.00), adjusted for increases in the cost of living, as prescribed by the secretary of the treasury or his delegate, effective January 1 of each calendar year and applicable to the limitation year ending with or within such calendar year; or

(2)

One hundred (100) percent of the employee's average earnings for the three (3) consecutive calendar years, while a participant in the plan, in which his earnings were the highest. For purposes of this subsection (2), earnings for any limitation year shall be the employee's earned income, wages, salaries, and fees for professional services, and other amounts received for personal services actually rendered in the course of employment with the employer (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses), provided such amounts are actually paid or includable in gross income during such year. Earnings shall exclude the following:

(i)

Employer contributions to a plan of deferred compensation which are not included in the employee's gross income for the taxable year in which contributed, employer pick-up contributions under section 414(h)(2) of the Code, or employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the employee, or any distributions from a funded plan of deferred compensation;

(ii)

Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture;

(iii)

Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and

(iv)

Other amounts which received special tax benefits, or contributions made by the employer (whether or not under a salary reduction agreement) towards the purchase of an annuity described in section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the employee).

(3)

Except as provided in (5) below, the foregoing limitations shall not be applicable with respect to any participant whose total annual pension under this plan and any other defined benefit plan maintained by the employer, is less than ten thousand dollars ($10,000.00) and who has not at any time participated in any defined contribution plan (within the meaning of section 415(k) of the Code) maintained by the employer.

(4)

In the event that a participant has less than ten (10) years of participation in this plan and predecessor plans hereto, the dollar limitation otherwise applicable under (1) above shall be reduced by multiplying such limitation by a fraction, the numerator of which is the number of such participant's years of plan participation (or part thereof), but never less than one (1), and the denominator of which is ten (10). This paragraph shall, to the extent required by the secretary of the treasury, be applied separately to each change in benefit structure hereunder.

(5)

In the event that a participant has been credited with less than ten (10) years of vesting service, the percentage-of-average-earnings limitation otherwise applicable under (2) above and the dollar amount otherwise applicable under (3) above shall be reduced by multiplying each by a fraction, the numerator of which is the number of such participant's years of vesting service (or part thereof), but never less than one (1), and the denominator of which is ten (10).

(6)

The limitations of this section apply to a straight life annuity with no ancillary benefits and to an annuity that constitutes a qualified joint and survivor annuity, provided payment begins between the participant's attainment of age sixty-two (62) and age sixty-five (65). If payment is in a different form, the amount thereof shall be adjusted to be the actuarial equivalent of a single life annuity and the limitation shall be applied to such adjusted amount. If payment begins before the participant's attainment of age sixty-two (62), the limitation in (1) above shall be reduced on an actuarially equivalent basis; provided however, if such payment begins after the participant's age fifty-five (55), the reduced limit shall not be less than seventy-five thousand dollars ($75,000.00) limit for age fifty-five (55); (provided, further, however, as to police or firefighters who are participants in this plan, in no event shall such amount be reduced below fifty thousand dollars ($50,000.00), adjusted for increases in the cost of living, as prescribed by the secretary of treasury, or his delegate). If payment begins after the participant's attainment of age sixty-five (65), the limitation in (1) above shall be the actuarial equivalent of such amount otherwise applicable at the participant's attainment of age sixty-five (65). The interest rate to be used in determining actuarial equivalence shall be the rate specified in section 2.1(b) hereof; however, the interest rate used in determining an actuarially equivalent single life amount or pre age sixty-two (62) amount shall not be less than five (5) percent and the interest rate used in determining an actuarially equivalent post age sixty-five (65) amount shall not be greater than five (5) percent.

(7)

In no event shall a participant's maximum annual pension allowable under this section be less than the annual amount of pension (including early pension and qualified joint and survivor annuity amounts) duly accrued by such participant (under Code section 415 limitations then in effect) as of the last day of the limitation year beginning in 1982, or as of the last day of the limitation year beginning in 1986, whichever is greater (disregarding any plan changes or cost-of-living adjustments occurring after July 1, 1982, as to the 1982 accrued amount, and May 5, 1986, as to the 1986 accrued amount).

(b)

Defined benefit and defined contribution plans: If a participant also participates, or has participated, in one or more defined contribution plans (within the meaning of section 415(k) of the Code) maintained by the employer (whether or not terminated), then the sum of the defined benefit plan fraction and defined contribution plan fraction (as defined in (1) and (2) below) shall not exceed one (1.0), as provided in (3) below.

(1)

The defined benefit fraction for any limitation year shall mean a fraction (a) the numerator of which is the projected annual benefit of the participant under the plan (determined as of the close of the limitation year), and (b) the denominator of which is the lessor of one hundred twenty-five (125) percent of the dollar limitation under Code section 425(b)(1)(A) or one hundred forty (140) percent of the percentage limitation under Code section 415(b)(1)(B) for the year of determination (taking into account the effect of Section 235(g)(4) of the Tax Equity and Fiscal Responsibility Act of 1982).

(2)

The defined contribution fraction for any limitation year shall mean a fraction (a) the numerator of which is the sum of the annual additions (as defined in section 415(c)(2) of the Code) to the participant's accounts under all defined contribution plans maintained by the employer as of the close of the limitation year (subject to reduction to the extent permitted under the transition rule in Section 235(g)(3) of the Tax Equity and Fiscal Responsibility Act of 1982), and (b) the denominator of which is the sum of the lesser of one hundred twenty-five (125) percent of the dollar limitation under Code section 415(c)(1)(A) or one hundred forty (140) percent of the percentage limitation under Code section 415(c)(1)(B), for such limitation year and for all prior limitation years during which the employee was employed by the employer (provided, however, at the election of the committee, the denominator shall be increased by using for limitation years ending prior to January 1, 1983, an amount equal to the denominator in effect for the limitation year ending in 1982, multiplied by the transition fraction provided in Code section 415(e)(6)(B).

(3)

If, in any limitation year, the sum of the defined benefit plan fraction and defined contribution plan fraction for a participant would exceed one (1.0) without adjustment of the amount of the maximum annual pension that can be paid to such participant under paragraph (a) of this section, then the amount of the maximum annual pension that can be paid to such participant under paragraph (a) of this section, shall be reduced to the extent necessary to reduce the sum of the defined benefit plan fraction and defined contribution plan fraction for such participant to one (1.0), or the committee may take such other action as will cause the sum to equal one (1.0) or less.

(Ord. No. 89-138, § 2, 12-21-89)