Section 104. (a) Notwithstanding any other provision of this chapter to the contrary, there shall be established with respect to the state employees’ retirement system and the teachers’ retirement system, and with respect to any other system that has established a funding schedule pursuant to the provisions of subdivision (6A) of section 22 or section 22D and that accepts the provisions of this paragraph by majority vote of the board of such system, a separate fund, which shall be entitled the section 401(a)(17) excess fund and shall be maintained by the board of such system to provide benefits to such member, or beneficiary of such member, who was in service prior to the effective date of this section and whose retirement allowance granted pursuant to sections 1 to 28, inclusive, had been calculated using, or for whom contributions or deductions in any year is or had been based on, regular compensation. Benefits provided to any such member or beneficiary pursuant to this paragraph shall be calculated by the applicable board based on the difference between (i) the amount of the retirement allowance that would have been payable to such affected member, or his beneficiary, pursuant to said sections 1 to 28, inclusive, if such benefit, deduction or contribution had been determined without regard to the limitations of 26 U.S.C. § 401(a)(17), and (ii) the amount of the retirement allowance actually payable to such member or beneficiary under this chapter, taking into account the limitations imposed by said 26 U.S.C. § 401(a)(17). Benefits shall be paid under this paragraph in the same manner, and subject to the same requirements and restrictions, as retirement allowances otherwise payable pursuant to said sections 1 to 28, inclusive, except to the extent necessary to comply with 26 U.S.C. § 401(a)(17). The benefits payable pursuant to the provisions of this paragraph combined with any amounts paid pursuant to the provisions of any other section of this chapter shall in no event exceed any limits on retirement allowances established by said sections 1 to 28, inclusive, except such limitations contained in the definition of regular compensation in section 1 with respect to 26 U.S.C. § 401(a)(17). Regular and additional deductions shall be collected from any such member in service prior to the effective date of this section as provided in subdivision (1) of section 22 without regard to the limitations contained in said definition of regular compensation with respect to said 26 U.S.C. § 401(a)(17), and any such deductions based on regular compensation in excess of said limitations shall be transferred to said separate fund rather than to the Annuity Savings Fund. The applicable board shall maintain records of such excess deductions, and the crediting of regular interest thereon, as if such deductions were accumulating in an individual member account in the Annuity Savings Fund, and it shall be an obligation of said separate fund to pay any amount in respect of such deductions and interest that any such member would have been entitled to withdraw had such deductions and interest accumulated in the Annuity Savings Fund, but such deductions and interest may be commingled with other moneys in that fund and used for the purposes of that fund. In the case of the state employees’ and teachers’ retirement systems, such separate fund shall be maintained as part of the PRIT Fund, and moneys shall be transferred to such separate fund from the commonwealth’s Pension Liability Fund in such amount as may be determined by the state board of retirement and teachers’ retirement board, respectively. In the case of all other systems, moneys shall be appropriated to such fund pursuant to subdivision (1) of section 22D.

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(b) Notwithstanding any other provision of this chapter to the contrary, there shall be established with respect to the state employees’ retirement system and the teachers’ retirement system, and with respect to any other system that has established a funding schedule under subdivision (6A) of section 22 or section 22D and that accepts the provisions of this paragraph by majority vote of the board of such system, a separate fund, which shall be a qualified governmental plan excess benefit arrangement, as described in 26 U.S.C. § 415(m), and which shall be entitled the Section 415 Excess Benefit Fund and maintained by the board of such system, solely for the purpose of paying benefits as described herein. Such benefits shall be paid from such separate fund to members, or beneficiaries in respect of members, who were in service prior to the effective date of this section, and the amounts in such fund shall be used for no other purpose. The amount of the benefit payable to such a member or beneficiary from such separate fund shall be the difference between (i) the amount of the retirement allowance that would have been payable pursuant to sections 1 to 28, inclusive, including, without limitation, the limitations of section 26 U.S.C. § 401(a)(17) contained in the definition of regular compensation in section 1, if the limitations of section 26 U.S.C. § 415, contained in paragraph (f) of subdivision (3) of section 5, did not exist, and (ii) the amount of the retirement allowance actually payable to the member or beneficiary under said sections 1 to 28, inclusive, taking into account the limitations contained in said paragraph (f) of subdivision (3) of section 5. No amounts may be deferred, either directly or indirectly, by any member from such member’s compensation to such qualified governmental plan excess benefit arrangement. Benefits shall be paid under this section in the same manner, and subject to the same requirements and restrictions, as retirement allowances otherwise payable under said sections 1 to 28, inclusive, except to the extent necessary to comply with 26 U.S.C. § 415. The benefits payable under this paragraph combined with any amounts paid under any other section of this chapter shall in no event exceed the limits on retirement allowances otherwise established by said sections 1 to 28, inclusive, other than the limits imposed by said paragraph (f) with respect to 26 U.S.C. § 415. In the case of the state employees’ and teachers’ retirement systems, such separate fund shall be maintained as part of the PRIT Fund, and moneys shall be transferred to such separate fund from the commonwealth’s Pension Liability Fund in such amount as may be determined by the state board of retirement and teachers’ retirement board, respectively. In the case of all other systems, moneys shall be appropriated to such fund pursuant to subdivision (1) of section 22D.