Los Angeles Municipal Code § 4.1150 Health Care Coverage Account

(a) Effective March 21, 1975, there is established within the respective General Pension Fund under each membership Tier (“Fund”) a separate account for the purpose of paying benefits for health, medical, hospital, or other medical plans as authorized under the programs established in this Chapter (“Health Care Plan”). 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 Fund. However, the assets of this account may be commingled for investment purposes only with the other accounts of the 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 and their spouses and dependents.

(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 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 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. The plan actuary shall annually determine whether the twenty-five percent (25%) limit has been

exceeded.

(c) Forfeitures are not to be allocated to any individual accounts under the Health Care Plan, but shall be used to provide the defined health care benefits under the Health Care Plan.

(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 Health Care Plan for eligible retirees, their eligible dependents, and their qualified survivors.

(e) At no time prior to the satisfaction of all liabilities under the Health Care Plan 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 the Fire and Police Pension Plan.

(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 amendment 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 Board will apply the interpretation that achieves compliance with those sections and preserves the qualified status of the Fire and Police Pension Plan as a governmental plan under Sections 401(a) and 414(d) of the Internal Revenue Code.

SECTION HISTORY

Added by Ord. No. 147,014, Eff. 3-21-75. Renumbered and Relocated by Ord. No. 154,536, Eff. 11-30-80. Amended by: Ord. No. 172,040, Eff. 7-3-98; Ord. No. 173,272, Eff. 6-25-00, Oper. 7-1-00. Deleted by Ord. No. 179,538, Eff. 3-2-08. Added by Ord. No. 182,628, Eff. 7-16-13.

(a) The Los Angeles Fire and Police Pensions Retiree Health Care Fund (the “LAFPP 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 Fire and Police Pension plan pursuant to the programs established by Chapter 11.5 of Division 4 of the Los Angeles Administrative Code, and is intended to qualify for exemption from federal income tax under Section 115(1) of the Internal Revenue Code. Except as provided in Subsection (d), funds in the LAFPP 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 Fire and Police Pension plan (the “Plan”).

(b) The LAFPP Health Care Fund shall provide an alternative funding mechanism, in addition to or in lieu of the 401(h) account described in Section 4.1150, for funding benefits under the Health Care Plan described in that section. Effective July 1, 2022, on a prospective basis, the City shall provide for an annual contribution of funds from appropriations and other sources to the LAFPP Health Care Fund, in the amount determined each year by the Board of Fire and Police Pension Commissioners (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 4.1150 .

(c) The City and the Board shall enter into a written trust agreement for the LAFPP Health Care Fund (the “ Trust Agreement”) on or before July 1, 2022. The Trust Agreement shall provide that the Board shall serve as the trustee of the LAFPP 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 LAFPP 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 LAFPP 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 LAFPP 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 LAFPP Health Care Fund with those in the Service Pension Funds and General Pension Funds of the Los Angeles Fire and Police Pension plan (the “Pension Funds”), 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 LAFPP Health Care Fund shall be accounted for separately from the investment earnings and expenses of the Pension Funds. The funds in and investment earnings of the LAFPP Health Care Fund shall be used to pay the reasonable costs related to investment expenses and administration of the LAFPP Health Care Fund and the Health Care Plan 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 Fire and Police Pension plan or the Pension Funds.

(e) Any amendment to the Trust Agreement shall require approval by a majority vote of all members of the Board and two of the affirmative votes must be cast by elected employee members of the Board.

(f) In accordance with the procedures established in the written Trust Agreement described in Subsection (c), the Board may elect to terminate the LAFPP Health Care Fund. If the Board so elects, the Board shall disburse the funds in the LAFPP 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 11.5 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 4.1150.1.

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

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

(h) The Board is authorized to take any and all actions necessary to establish, administer, and maintain the LAFPP 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.

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

(j) 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. 187,351, Eff. 2-21-22.