Los Angeles Municipal Code Art. 1 General Provisions

Section

• 4.1100 Purpose of Programs.

• 4.1101 Administration.

• 4.1102 Establishment of Health Care Coverage Account.

• 4.1102.1 Los Angeles City Employees' Retirement System Health Care Fund.

• 4.1103 Funding of Programs.

4.1104 Definitions of Service and Service Credit for Retiree Health and Welfare Programs Established in this Chapter; Prospective Application.

4.1105 Establishment of Programs.

4.1106 Discretionary Medical Plan and Dental Plan Benefit Changes.

It is the purpose of this Chapter to establish Los Angeles City Employees’ Retirement System (“LACERS”) health and welfare programs for former employees who are retired pursuant to the provisions of Division 4, Chapter 10 of this Code, their eligible dependents and their eligible survivors. These benefits may be modified and the conditions of entitlement changed, by ordinance, as authorized in Section 1168 of the City Charter.

SECTION HISTORY

Added by Ord. No. 182,629, Eff. 7-25-13.

The health and welfare programs established in this Chapter shall be administered by the Board of Administration of the Los Angeles City Employees’ Retirement System (Board). In furtherance thereof, the Board shall contract for suitable plans as authorized in Sections 4.1105 and 4.1106 of this Chapter, or with third- party administrators that contract for suitable plans (such as health care exchanges), to be made available to former employees retired, pursuant to the provisions of Division 4, Chapter 10 of this Code, and former employees retired, pursuant to the provisions of Volume II, Article XI, Part 3 of the Charter, governing the Los Angeles Fire and Police Pension plan (LAFPP), who were enrolled in plans administered by the Personnel Department on December 31, 1999. Effective December 31, 2017, any former employee retired from LAFPP shall be ineligible for enrollment in any program established in this Chapter unless such former employee was enrolled in a plan administered by the Personnel Department on December 31, 1999.

The Board shall have the power to adopt such rules as it deems necessary to administer the health and welfare programs.

SECTION HISTORY

Added by Ord. No. 182,629, Eff. 7-25-13.

Amended by: Ord. No. 184,853, Eff. 4-6-17.

(a) Effective July 1, 1987, there is established within the Los Angeles City Employees’ Retirement Fund a separate account for the purpose of paying benefits for sickness, accident, hospitalization and medical expenses, or any combination thereof provided under this Chapter (hereinafter, “Retired Employees Health and Welfare Programs”). The account is established pursuant to Section 401(h) of the Internal Revenue Code. The assets in this account shall be accounted for separately from the other accounts in the Los Angeles City Employees’ Retirement Fund. However, the assets of this account may be commingled for investment purposes only with the other accounts of the Los Angeles City Employees’ Retirement Fund. Investment earnings and expenses will be allocated on a reasonable basis. All assets in the 401(h) account shall be held in trust for the exclusive benefit of eligible retirees, their eligible dependents, and their qualified survivors.

(b) Effective October 3, 1989, contributions to the 401(h) account established by this section shall be made from appropriations and any other sources. Contributions to the 401(h) account are subordinate to the contributions to the Los Angeles City Employees’ Retirement Fund. At no time shall contributions to the 401(h) account, plus any life insurance protection costs, be in excess of twenty-five percent (25%) of the total aggregate actual contributions made to the Los Angeles City Employees’ Retirement Fund for the traditional pension plan benefits (not including contributions to fund past service credits) and the 401(h) account, plus any life insurance protection costs. Annually it will be determined whether the twenty-five percent (25%) limit has been exceeded.

(c) Forfeitures are not to be allocated to any individual accounts under the Retired Employees Health and Welfare Programs established under Division 4, Chapter 11 of the Los Angeles Administrative Code, but shall be used to provide the defined health care benefits under the Retired Employee Health and Welfare Programs.

(d) The assets of the 401(h) account shall only be used for the payment of health care coverage and medical benefits as provided in the Retired Employees Health and Welfare Programs for eligible retirees, their eligible dependents and their qualified survivors.

(e) At no time prior to the satisfaction of all liabilities under the Retired Employees Health and Welfare Programs shall any assets in the 401(h) account be used for, or diverted to, any purpose other than providing the benefits under subsection (d) of this section and the payment of administrative expenses. Assets in the 401(h) account may not be used for retirement, disability or survivor benefits, or for any other purpose under Division 4, Chapter 10 of the Los Angeles Administrative Code.

(f) Upon the satisfaction of all liabilities under the law to provide benefits pursuant to subsection (d) of this section, any assets in the 401(h) account, if any, that are not used as provided in Subsection (d) of this section shall be transferred to the City Fund, as required by Section 401(h)(5) of the Internal Revenue Code.

(g) It is the intent of the City of Los Angeles in adopting this section to comply in all respects with Sections 401(a) and 401(h) of the Internal Revenue Code, and regulations interpreting those sections. In applying this amendment, the City of Los Angeles will apply the interpretation that achieves compliance with those sections and preserves the qualified status of the Los Angeles City Employees’ Retirement System as a governmental plan under Sections 401(a) and 414(d) of the Internal Revenue Code.

SECTION HISTORY

Added by Ord. No. 182,629, Eff. 7-25-13.

(a) The Los Angeles City Employees’ Retirement System Health Care Fund (the “LACERS Health Care Fund”) is established for the sole purpose of funding the retiree health care benefits provided to eligible retirees, their eligible dependents, and their qualified survivors, of the Los Angeles City Employees’ Retirement System plan pursuant to the programs established by Chapter 11 of Division 4 of the Los Angeles Administrative Code, and is intended to qualify for exemption from federal income tax under Section 115 of the Internal Revenue Code. Except as provided in Subsection (d), funds in the LACERS Health Care Fund may not be used, directly or indirectly, to pay the cost of any other benefits provided by, or expenses or obligations incurred by, the Los Angeles City Employees’ Retirement System plan (the “Plan”).

(b) The LACERS Health Care Fund shall provide an alternative funding mechanism, in addition to or in lieu of the 401(h) account described in Section 4.1102, for funding benefits under the health and welfare programs described in this Chapter. Effective on or around July 15, 2019, on a prospective basis, the City shall provide for an annual contribution of funds from appropriations and other sources to the LACERS Health Care Fund, in the amount and on the date determined each year by the Board of Administration of the Los Angeles City Employees’ Retirement System (the “Board”) based upon the recommendation of the Plan’s actuary. Such contributions shall be in lieu of contributions to the 401(h) account described in Section 4.1102.

(c) The City and the Board shall enter into a written trust agreement for the LACERS Health Care Fund (the “Trust Agreement”) on or before July 15, 2019. The Trust Agreement shall provide that the Board shall serve as the trustee of the LACERS Health Care Fund. The Trust Agreement shall establish the respective roles and responsibilities of the Board and the City with respect to the administration and investment of the LACERS Health Care Fund, consistent with Charter Section 1106 and Section 17 of Article XVI of the California Constitution. The Trust Agreement may include, but is not limited to, funding, distribution, expenditure, actuarial, accounting, and reporting considerations. The Board shall have sole control over the investment activity of the LACERS Health Care Fund, as provided in Subsection (d).

(d) Consistent with Charter Section 1106 and Section 17 of Article XVI of the California Constitution, the Board shall have sole, exclusive, and plenary authority, and shall have fiduciary responsibility, over the funds in the LACERS Health Care Fund, including the investment of such funds. The Board may commingle and/or co-invest all or any portion of the funds in the LACERS Health Care Fund with those in the Retirement Fund of the Los Angeles City Employees’ Retirement System plan, to the extent allowed by federal tax laws, including through a group trust under Revenue Rulings 81-100 and 2011-1. The investment earnings and investment expenses attributable to the investment activity of the LACERS Health Care Fund shall be accounted for separately from the investment earnings and expenses of the Retirement Fund. The funds in and investment earnings of the LACERS Health Care Fund shall be used to pay the reasonable costs related to investment expenses and administration of the LACERS Health Care Fund and the health and welfare programs described in this Chapter to the extent allowed by federal tax laws. Those expenses shall not be deemed to be an investment or administrative expense of the Los Angeles City Employees’ Retirement System plan or the Retirement Fund.

(e) In accordance with the procedures established in the written Trust Agreement described in Subsection (c), the Board or the City may elect to terminate the LACERS Health Care Fund. If the Board or the City so elects, the Board shall disburse the funds in the LACERS Health Care Fund in the following order and manner:

(1) The Board shall retain an amount sufficient to fund and pay for, as applicable, all retiree health care benefits owed to eligible retired members and beneficiaries under the programs established by Chapter 11 of Division 4 of the Los Angeles Administrative Code.

(2) The Board shall retain an amount sufficient to pay reasonable administrative and investment costs described in this Section 4.1102.1.

(3) After the amounts in paragraphs (1) and (2) have been retained or disbursed, the Board shall transfer any remaining funds to the general fund.

(f) The Board may establish rules and procedures governing the investments and administration of the LACERS Health Care Fund.

(g) The Board is authorized to take any and all actions necessary to establish, administer, and maintain the LACERS Health Care Fund in compliance with applicable federal tax laws or other legal requirements, including but not limited to Section 115 of the Internal Revenue Code.

(h) The Board shall have the authority to adopt any rules it deems necessary to carry out its role as trustee of the LACERS Health Care Fund.

(i) The Trust Agreement entered into between the City and the Board, as described in Subsection (c), shall not change the obligations of the City or the Board created under other contracts, laws, ordinances, regulations, or similar actions to provide benefits for employees or retired employees of the City, or their eligible beneficiaries.

SECTION HISTORY

Added by Ord. No. 185,829, Eff. 11-9-18.

The health and welfare programs established in this Chapter, including all administrative costs, shall be funded from the Health Care Coverage Account established in Section 4.1102 of this Chapter and/or the Health Care Fund established in Section 4.1102.1 of this Chapter. Notwithstanding all of the foregoing, the health and welfare programs established in this Chapter, including all administrative costs, shall be paid first from the Health Care Coverage Account, until it is depleted. Upon depletion of the Health Care Coverage Account, the Health Care Fund shall fund the health and welfare programs established in this Chapter, including all administrative costs. The Board shall establish the policies and/or procedures necessary to implement this section.

SECTION HISTORY

Added by Ord. No. 182,629, Eff. 7-25-13.

Amended by: Ord. No. 185,829, Eff. 11-9-18.

The definitions of Service and Service Credit now set forth in Section 4.1110 for Tier 1 and Section 4.1125 for Tier 3 shall apply prospectively to Members and former Members who retire on or after February 21, 2016. Effective February 21, 2016, a part-time employee Member shall be eligible for a benefit under this Chapter when the Member is age 55 with a minimum of ten years of Service, provided that the Member is receiving a service retirement benefit or disability retirement benefit from LACERS under Chapter 10. After calculating the first ten years of Service, a part-time Member’s health subsidy shall be calculated using Service Credit, which shall be prorated based upon the number of hours the Member worked per pay period. However, employees who became Members of LACERS prior to April 23, 1990, whose health subsidy is based on periods of part-time and less than full-time employment, shall receive a health subsidy based on Service, and not pro-rated Service Credit.

Any retired Member who retired before February 21, 2016, who would have been eligible for a benefit under this chapter had the retired Member retired on or after February 21, 2016, shall be entitled to apply to LACERS, under rules and procedures to be developed by LACERS, to enroll or participate in the retiree health program established by this Chapter. Such retirees shall receive, upon enrollment in a health plan administered by LACERS or the first date of participation in LACERS’ Medical Premium Reimbursement Program, the monthly retiree medical subsidy amount to which they are entitled based upon their prorated Service Credit, effective as of the first date of such enrollment or participation.

SECTION HISTORY

Added by Ord. No. 182,629, Eff. 7-25-13.

Amended by: Ord. No. 184,134, Eff. 1-22-16; In Entirety, Ord. No. 188,756, Eff. 11-16-25.

The following health and welfare programs are established herein:

(a) A Medical Plan Program which the Board is to administer in accordance with the provisions of Sections 4.1101, 4.1111, 4.1121 and 4.1126 of this Chapter.

(b) A Medical Premium Reimbursement Program which the Board is to administer in accordance with the provisions of Sections 4.1101, 4.1112, 4.1122 and 4.1127 of this Chapter.

(c) A Medicare Part B Basic Premium Reimbursement Program which the Board is to administer in accordance with the provisions of Sections 4.1101, 4.1113, 4.1123 and 4.1128 of this Chapter.

(d) A Dental Plan Program which the Board is to administer in accordance with the provisions of Section 4.1101, 4.1114, 4.1124 and 4.1129 of this Chapter.

(e) A Survivor Medical Plan Premium Subsidy Program which the Board is to administer in accordance with the provisions of Sections 4.1101, 4.1115 and 4.1129.1 of this Chapter.

(f) A Health Insurance Reciprocal Subsidy Credit Program which the Board is to administer in accordance with the provisions of Section 4.1101 and Article 5 of this Chapter.

SECTION HISTORY

Added by Ord. No. 182,629, Eff. 7-25-13.

Amended by: Ord. No. 184,134, Eff. 1-22-16.

The Board may make discretionary Medical Plan and Dental Plan benefit changes as long as these involve cost increases of no more than one-half of one percent in total annual premium cost. The Board may make changes greater than the above level as long as the changes are submitted to the City Council for review. Any increases that are not acted upon by the Council within 30 days after receipt by the City Clerk of the report to Council for consideration of the increase are deemed approved. Should the Council reject the increase approved by the Board, the Council shall determine the amount, if any, by which the total annual premium cost shall be increased and shall adopt such change by resolution.

SECTION HISTORY

Added by Ord. No. 182,629, Eff. 7-25-13.