Can someone explain to me in laymans's terms what IRC Section 414(k)(2) means when there are employee contributions involved in the D/B plan.

I'm involved with a City that participates in a Municiple Retirement System that claim they have a hybrid D/B Plan, even though it looks like a matching D/C plan (EE picked-up contribution plus ER "match"). They want to establish a supplemental D/C plan, which is allowed by State law, but have been told this section may limit them to the D/C 415 limits even though the State statutes refer to D/B limits.