Grades are too high for the department - what should I do?
One really wants to say that the vice-chair is an idiot, but I will refrain. The policy is idiotic in any case. I've taught at places in which nearly every student excels on every measure I could devise. Why would I want to pit one student against another for the purpose of an artificial "average"? They weren't average. 

If you have the twenty best people (students or employees for example) in the world and you measure them in any single way, then half of them will be below average. Just how fine can you make the graduations so that someone can be "called" worse than someone else. 

On the other hand, if the average, as measured over several runnings of the class, is around 85 and if there are clear differences in behavior and outcome, then "rewarding" everyone equally is also idiotic. 

You set a standard. People met it. The standard was not that you must do "better" than someone else. If you change it now you have an ethical failing. 

I hope you have enough standing in the university and in the profession that you can stand up to such unfair and unethical suggestions. If your group of students was exceptional there is no reason not to mark them as exceptional. 

If you want to lower the average in future, with a different group of students, make the course more demanding. 

But if you change the grading structure after they have finished their work then you are doing evil, not teaching.