Los Angeles Municipal Code § 4.1102 Establishment of Health Care Coverage Account

(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.