Sacramento Municipal Code § 2.124.010 Legislative intent

This chapter is enacted to implement the provisions of Article XVII of the Sacramento City Charter. The benefits payable under this chapter exclusive of Article IX of this chapter shall not be greater or less than those provided under such Article XVII of the Sacramento City Charter. Any section or part of any section of this chapter exclusive of Article IX of this chapter, insofar as it should conflict with the sections of such Article XVII of the Sacramento City Charter or with any part thereof, shall be superseded by the contents of such Article XVII of the Sacramento City Charter. (Ord. 2000-017 § 4(a)(4); prior code § 34.01.100)

The following words and phrases as used in this chapter, unless a different meaning is plainly required by the context or by a definition provided in a specific article shall have the following meaning:

"Accumulated normal contributions" or "accumulated contributions" means the contributions made by a member, standing to the credit of his or her individual account, together with interest thereon, credited as determined by the board. Accumulated contributions shall not include additional contributions.

"Actuarial equivalent" means the present value of any benefit provided under this system, measured as of any specified date to determine the equivalence in value between two or more methods of payment. The factors used to determine the actuarial value are based on an interest rate and the mortality table as described in Section 2.124.120 of this chapter.

"Additional contributions" means contributions voluntarily made by a member as provided for in Section 2.124.1900 of this chapter.

"Allowance" means any benefit payable in periodic payments, consisting of an annuity and a pension.

"Annuity" means payments for life or years derived from a member's accumulated contributions.

"Beneficiary" means any person in receipt of a benefit from the retirement system.

"Benefit" means and includes "allowance," "retirement allowance," "disability retirement allowance" and "death benefit."

"Board" means the administration, investment and fiscal management board as referred to and created in Section 381 of the Charter.

"Charter" means the Charter of the city of Sacramento.

"Commission" means the retirement hearing commission as referred to and created in Section 388 of the Charter.

"Compensation," as distinguished from benefits under Division 4 of the Labor Code of the state of California, means the remuneration payable in cash by the city plus the monetary value, as determined by the retirement system manager, for board, lodging, fuel, laundry and other advantages allowed as remuneration by the city, but excluding remuneration paid for overtime. For the purpose of members under Articles III, IV, V and VI of this chapter, overtime is the aggregate service performed in all categories of employment in excess of the hours of work considered normal for employees on a full-time basis and for which monetary compensation is paid, and also for the purpose of the retirement system, compensation paid to such members under Charter Section 107 in lieu of vacation, or compensation so paid under Charter Section 108 as longevity pay, or compensation so paid in lieu of accumulated sick leave, shall be considered as remuneration paid for overtime.

"Compensation earnable" means the compensation as determined by the retirement system manager, which would have been earned by the member had he or she worked, throughout the period under consideration, the average number of days ordinarily worked by persons in the same grade or class of positions as the positions held by him or her during such period and at the rate of pay attached to such positions. The computation for any absence of a member shall be based on the compensation earnable by him or her at the beginning of the absence and that for time prior to entering the service of the city shall be based on the compensation earnable by him or her in the position first held by him or her in such service.

"Continuous service" means uninterrupted city service, except that discontinuance of city service by a member from any cause whatever followed by reentrance into city service within three years from the date of such discontinuance shall not be considered as a break in the continuity of service, and except that any absence from city service by reason of service in the military service shall not be considered as a break in the continuity of service. Notwithstanding any other provisions of this chapter, city service rendered before January 1, 1921 shall for all purposes be considered "continuous service" regardless of the length of absence from city service prior to such date.

"Council" or "city council" means the council of the city of Sacramento.

"Current service" means city service rendered as a member of the retirement system after April 1, 1935.

"Effective date of this chapter" means January 1, 1977.

"Employee" means any person in the employ, either as an officer or employee, of the city whose compensation is paid out of funds directly controlled by the city.

"Final compensation" means the highest average annual compensation earnable by a member during any period of three consecutive years during his or her membership in the system, or if his or her membership is of a lesser period, it shall mean the average annual compensation earnable by the member during such period. For the purposes of this chapter, periods of service separated by breaks in service may be aggregated to constitute a period of three consecutive years, if the periods of service are consecutive except for such breaks. If a break in service did not exceed six months in duration, time included in the break and compensation earnable during such time shall be included in computation of final compensation. If a break in service exceeded six months in duration, the first six months thereof and the compensation earnable during those six months shall be included in computation of final compensation, but time, included in the break which is in excess of six months and the compensation earnable during such excess time, shall be excluded in computation of final compensation.

"Former Charter section" means a section of the Charter as such section read on the date immediately preceding the date on which said section was repealed. The use of the term "(1970)," "(1976)," "(1979)," or "(1989)" in conjunction with these words indicates the year of repeal.

"Interest" means interest compounded annually at the rate adopted by the board.

"Manager" means the retirement system manager appointed pursuant to Charter Section 391.

"Member" means any person included in the membership of the retirement system as provided in Section 2.124.030 of this chapter.

"Military service" means absence from city service by any member who, while so absent, is engaged in any activity or activities which would legally entitle such member to be reinstated in city service after having been so engaged, as provided by Section 395.1 of the Military and Veterans Code of the state of California as that section is currently enacted or as it may hereafter be amended.

"Miscellaneous member" or "miscellaneous officer" or "miscellaneous employee" means any officer or employee who is a member of the retirement system and is not a safety member as defined in this section.

"Normal contributions" means member contributions at the rates provided for in Articles II, III, IV, V and VI of this chapter and Article XVII of the City Charter.

Part-Time Basis and Part-Time City Service. A member is serving on a "part-time basis" and is rendering "part-time city service" when he or she engages in his or her duties for less time than is required of members serving on a full-time basis, even though he or she is subject to call at any time.

"Pension" means payments for life or years derived from contributions made by the city.

"Prior service," as applied to members of the retirement system, means city service rendered before April 1, 1935.

"Retirement" means cessation of employment with the city with a retirement allowance granted under the provisions of the charter and this chapter.

"Retirement allowance" or "allowance" means any benefit payable in periodic payments consisting of a pension and an annuity.

"Retirement system" or "system" means the Sacramento city employees' retirement system referred to in former (1989) Charter Sections 372 and 374, and Charter Sections 372 and 374.

"Safety member" means a member whose employment is, or was, as an officer or employee of the police or the fire departments of the city, whose principal duties consist of either active law enforcement or full-time fire fighting and fire prevention, respectively. Safety member does not include those persons employed in duties of a clerical, communication, identification, repair, or other nature even though such persons may be subject to occasional call, or are occasionally called upon to perform duties within the scope of active law enforcement or full-time fire fighting and fire prevention.

"Surviving spouse" means the widow of a male member or the widower of a female member.

"Widow" and "surviving wife" each mean the surviving lawful wife of a male member or the surviving lawful husband of a female member.

Words used in the masculine gender shall include the feminine and neuter genders and singular numbers shall include the plural and the plural the singular. (Prior code § 34.01.101)

With the exception of those employees who are excluded from membership as provided in Section 2.124.040 of this chapter, all employees shall become members of the retirement system as follows:

A. Every employee at the effective date of this chapter who is a member of the retirement system shall continue to be such a member.

B. Every employee who shall enter city service after the effective date hereof shall become a member of the retirement system upon such entry. (Prior code § 34.01.102)

A. The following persons shall not be members of the retirement system:

1. Elective officers and appointive members of boards and commissions.

2. Employees, not then already members, certified from civil service lists for temporary employment.

3. Inmates of city institutions who are allowed compensation for such service as they are able to perform.

4. Persons in city institutions principally for the purpose of training but who receive compensation.

5. Persons employed under contract for a definite period and for the performance of specific duties.

6. Employees, not already members, serving in a part-time, seasonal, or limited term basis or as substitutes.

7. Employees who are members of the Public Employees Retirement System of the state of California (PERS) by reason of a contract between the city and the Board of Administration of PERS executed pursuant to former (1989) Charter Section 372, and Charter Section 372.

B. Any employee so excluded from membership by subsections (A)(2) or (A)(6) this section may make contributions to the system when and if he or she subsequently becomes a member, in an amount determined by the application of his or her current contribution rate, based on his or her then attained age, to his or her compensation, before deduction for any reason other than absence from duty, for the city service rendered in such temporary, part-time, seasonal, limited term, or substitute employment, and the city shall contribute as if such services were rendered as a member. (Prior code § 34.01.103)

Each member and beneficiary shall be subject to all the provisions of this chapter and any rules and regulations lawfully adopted, and shall furnish to the retirement system manager such information affecting the member's status as a member or beneficiary of the system as the retirement system manager may reasonably require. (Prior code § 34.01.105)

Notwithstanding any provision in this chapter to the contrary, whenever a benefit payable to the surviving spouse under this chapter terminates or is reallocated because of the remarriage of the spouse, the termination or reallocation of the benefit shall be only for the period of remarriage, and in the event that the surviving spouse resumes the status of an unmarried person, the benefit shall be fully reinstated or reallocated, as the case may be, to the surviving spouse for said unmarried periods. (Prior code § 34.01.106)

Allowances existing in favor of or on account of employees of the city at the time of the adoption of this chapter shall be continued in force subject to change under the provisions of Article XVII of the Sacramento City Charter. (Prior code § 34.01.107)

Any allowance granted under the provisions of this chapter shall be payable in equal monthly installments or in smaller prorata amounts when the pension, annuity, retirement allowance or death benefit allowance begins after the first day of the month or ends before the last day of the month. (Prior code § 34.01.108)

The citizen members of the board and commission shall each receive as compensation the sum of thirty (30) dollars for each board or commission meeting attended; provided, that the total compensation paid to any such member shall not exceed one hundred fifty dollars ($150.00) in any one month. In addition, each such member shall receive necessary travel and subsistence expenses incurred in the discharge of his or her duties. (Prior code § 34.01.109)

The purpose of this section is to limit benefits in accordance with Section 415(b)(10) of the Internal Revenue Code for members who first become participants in this system after December 31, 1989.

Benefits payable to members who were participants in this system before January 1, 1990 shall not be less than the benefits which would have been paid under the terms of the system on October 14, 1987 before applying the limitations of Section 415 of the Internal Revenue Code.

For purposes of this section and Internal Revenue Code Section 415, the plan year will be the limitation year.

A. Basic Limitation.

1. Subject to the adjustments set forth hereafter, the maximum annual amount of retirement allowance payable to a member under this system in the normal form under this chapter will not exceed the lesser of:

a. The defined benefit dollar limitation or its actuarial equivalent payable in a different form; or

b. One hundred (100) percent of the member's highest average annual compensation during any three consecutive calendar years of membership. For purposes of this section, annual compensation shall not include amounts over two hundred thousand dollars ($200,000.00) in any calendar year.

2. For purposes of applying the defined benefit dollar limitation of subsection (A)(1) of this section, the limitation applicable before age sixty-two (62) will be adjusted to the lesser of:

a. The limitation that is the actuarial equivalent of the limitation at age sixty-two (62), except that the greater of a five percent interest rate assumption or the rate specified in Section 2.124.020 of this chapter for determining actuarial equivalence shall apply; or

b. The dollar limitation after adjustments for an early retirement reduction as provided by the system.

3. For purposes of applying the defined benefit dollar limitation of subsection (A)(1) of this section, the limitation applicable after age sixty-two (62) and through Social Security retirement age shall be the defined benefit dollar limitation at Social Security retirement age decreased by 5/9 of one percent for each of the first thirty-six (36) months and by 5/12 of one percent for each of the additional months by which benefits begin before Social Security retirement age.

4. For purposes of applying the defined benefit dollar limitation of subsection (A)(1) of this section, the limitation applicable after Social Security retirement age shall be the defined benefit dollar limitation at Social Security retirement age increased to provide the actuarial equivalent of such retirement allowance payable at Social Security retirement age in accordance with Internal Revenue Code Section 415(b)(2)(D). For purposes of this increase, the interest rate assumption shall be the lesser of five percent or the rate specified in Section 2.124.020 of this chapter for determining actuarial equivalence, and mortality decrements shall be ignored to the extent a forfeiture does not occur at the date of death.

5. For purposes of applying the above limitation, benefits payable in any form other than the normal form under this chapter with no ancillary benefits will be adjusted, as provided by Treasury Department regulations, so that such benefits are the equivalent of a benefit payable under the normal form. For purposes of this section, any ancillary benefit not directly related to retirement income benefits will not be taken into account.

6. "Defined benefit dollar limitation" for any plan year means the dollar limitation set forth in Internal Revenue Code Section 415(b)(1) (ninety-eight thousand sixty-four dollars ($98,064.00) for the limitation year ending in 1989) as adjusted by the Secretary of the Treasury under Internal Revenue Code Section 415(d) to reflect increases in the cost of living, in such manner as the Secretary of the Treasury shall prescribe.

7. "Social Security retirement age" for any plan year means the age used as the retirement age for the member under Section 216(1) of the Social Security Act except that such section shall be applied without regard to the age increase factor, and as if the early retirement age under Section 216(1)(2) of such Act were sixty-two (62).

B. Participation in Other Defined Benefit Plans. The limitation of this subsection with respect to any member who has at any time been a participant in any other qualified defined benefit plan (as defined in ERISA Section 3(35) and Internal Revenue Code Section 414(j)) maintained by the city will apply as if the total benefits payable under all such defined benefit plans in which he or she has been a member were payable from one plan.

C. Benefits Not in Excess of Ten Thousand Dollars. Subsections A and B of this section will not apply to any member who has not at any time participated in any defined contribution plan (as defined in ERISA Section 3(34) and Internal Revenue Code Section 414(i)) maintained by the city if his or her total annual retirement benefit under all defined benefit plans of the city does not exceed ten thousand dollars ($10,000.00) for any year.

D. Fewer Than Ten Years of Service or Participation.

1. The maximum retirement benefits payable under this section to any member who has completed fewer than ten (10) years of service in this plan will be the amount determined under subsection A or subsection C of this section, as applicable, multiplied by a fraction, the numerator of which is the number of the member's years of service and the denominator of which is ten (10).

2. If a member has completed fewer than ten (10) years of participation in this plan, the defined benefit dollar limitation under subsection (A)(6) of this section shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of the member's years of participation (or part thereof) and the denominator of which is ten (10).

3. In no event shall subsection (D)(1) or (2) of this section reduce the dollar or compensation limitations of subsection (A)(1)(b) of this section, or the limitation of subsection C of this section to an amount less than 1/10 of such limitation (determined without regard to this subsection D).

4. To the extent provided by the Secretary of the Treasury, this subsection D shall be applied separately with respect to each change in benefit structure under the system.

E. Membership in this System and Defined Contribution Plan. If a member has at any time been a participant in a qualified defined contribution plan (as defined in ERISA Section 3(34) and Internal Revenue Code Section 414(i)) maintained by the city, the sum of the member's defined benefit plan fraction and defined contribution plan fraction for any plan year will not exceed 1.0.

For purposes of this subsection E only, the following words and phrases will have the meaning specified below:

1. "Defined benefit plan fraction" for any plan year means a fraction in which the numerator is the member's projected annual benefit under the system, as defined below, as of the end of the year and the denominator is the lesser of 1.25 multiplied by the dollar limitation in effect under Internal Revenue Code Section 415(b)(1)(A) for such plan year or 1.4 multiplied by one hundred (100) percent of the member's highest average annual compensation during any three consecutive plan years of membership.

2. "Defined contribution plan fraction" for any plan year means a fraction, not to exceed 1.0, in which the numerator is the sum of all annual additions made on behalf of such member to his participant accounts in such plan year and for all prior plan years and the denominator of which is the lesser of subsections (E)(2)(a) or (b) of this section determined for such plan year and for all prior plan years during which such member was employed by the city.

a. 1.25 multiplied by the dollar limitation in effect under Internal Revenue Code Section 415(c)(1)(A) for such plan year.

b. 1.4 multiplied by twenty-five (25) percent of the member's compensation in such plan year.

The numerator of the defined contribution plan fraction shall be adjusted pursuant to Internal Revenue Service Regulation 1.415-7(d)(1) and Internal Revenue Service Notice 83-10.

3. "Member's projected annual benefit" means the sum of the following:

a. The annual benefit to which the member would be entitled under this system, assuming that the member continues employment until his or her normal retirement age, that the member's compensation continues until his or her normal retirement age at the rate in effect during the current plan year, and that all other factors relevant for determining benefits under the system remain constant at the level in effect during the current plan year; and

b. The annual benefit to which the member would be entitled, in accordance with the assumptions described above, under any other defined benefit plan of the city.

If the member's defined benefit plan fraction and defined contribution plan fraction for any plan year exceeds one, adjustments will be made first by reducing the amount in the numerator of the defined benefit plan fraction, to the extent possible, and second by reducing the amount in the numerator of the defined contribution plan fraction.

F. Preservation of December 31, 1986 Accrued Benefit. If the member's current accrued benefit as of December 31, 1986 exceeds the benefit limitations of this section, then for purposes of Internal Revenue Code Sections 415(b) and (e) the defined benefit dollar limitation will be equal to the member's current accrued benefit on December 31, 1986. For purposes of this subsection, "current accrued benefit" means the member's annual benefit under the system, determined as if the member had terminated employment as of December 31, 1987, expressed as an annual benefit within the meaning of Internal Revenue Code Section 415(b)(2). The amount of the member's current accrued benefit will be determined without regard to any:

1. Change in the terms and conditions of the system after May 5, 1986; or

2. Cost-of-living adjustment occurring after May 5, 1986.

G. Restrictions on Payment of Benefits. Despite any other system provisions, the benefits provided under this system for employees (including retirees) who are among the twenty-five (25) most highly compensated employees of the city as of the original date of establishment of the system by the city, or as of any date after such applicable original date of establishment as of which any amendment changed the system so as to increase the benefits for such highly compensated employees (each date is hereafter referred to as a "restricted date") and whose anticipated annual benefits from the system exceed one thousand five hundred dollars ($1,500.00) (such employees are hereafter referred to as "limited employees") will be subject to the following restrictions:

1. If, on any date before ten (10) years after the applicable restricted date, the system is terminated, the benefits under the system payable to any limited employee will not exceed the benefits that can be provided from the greater of the following:

a. The city contributions (or funds attributable thereto) that would have been applied to provide benefits for the employee under the system as it was in effect on the day before such applicable restricted date, had it continued in effect unchanged to the date the system is terminated; or

b. Twenty thousand dollars ($20,000.00); or

c. The sum of:

i. Such city's contributions (or funds attributable thereto) that would have been applied to provide benefits for the member under the system as in effect on the day before such applicable restricted date if it had been terminated on such day, and

ii. An amount computed by multiplying (1) the lesser of (A) twenty (20) percent of his or her average annual compensation paid by the city over the last five years of his or her employment or (B) ten thousand dollars ($10,000.00) by (2) the number of years elapsed between such applicable restricted date and the date the system is terminated, or

d. The dollar amount equal to the present value of the benefit guaranteed to the limited employee under Section 4022 of ERISA.

2. If, at the end of any plan year before ten (10) years after the applicable restricted date, the city's contributions made pursuant to the system have been insufficient to meet the full current costs of the plan, then no benefits for any limited employee will exceed those that would be provided if the system were terminated at that time until such time as the city's contributions have been sufficient to meet such full current costs of the retirement system. If the Internal Revenue Service determined by the statute or ruling that the provisions of this section are no longer necessary to satisfy the requirements of Internal Revenue Code Section 401(a), this section will be void and of no further effect without the need to amend the retirement system. (Prior code § 34.01.110)

Upon partial or complete termination of the retirement system or any plan within the system, or, upon complete discontinuance of contributions to a plan within the system, the accrued benefits of each affected member shall, to the extend funded, be nonforfeitable as of the date of such termination or discontinuance. (Prior code § 34.01.111)

A. Interest Rate. The interest rate used for determining actuarial equivalence (except for the purpose of Section 2.124.1830 of this chapter) shall change each year effective July 1st. The effective rate shall be the average of the three immediately preceding annual rates of return on investable assets of the system, rounded down to the nearest quarter percent, but may not be less than seven percent. The interest rate used to calculate the actuarial equivalent of the reduction in allowances payable under Section 2.124.1830 of this chapter shall be seven percent.

B. Mortality Table. The mortality rates for determining actuarial equivalence shall be the following:

Post Retirement Mortality

(Prior code § 34.01.112)