Chapter 3.50

• 3.50.130 Method of payment of benefits upon occurrence of severance event.

• 3.50.131 Postponement of payment of benefits.

• 3.50.140 Date of payments of benefits.

• 3.50.150 Payment of benefits after death.

• 3.50.155 De minimus accounts.

• 3.50.170 Reserved.

• 3.50.180 Amendment or termination of plan.

• 3.50.190 Administrative costs.

• 3.50.200 Conforming domestic relations orders.

• 3.50.210 Repeal.

The name of this plan is the City of San José, California, PTC Deferred Compensation Plan (hereinafter referred to as the Plan). Detailed rules and provisions related to the Plan can be found in the Basic Plan Document.

(Ords. 24061, 26541, 30536.)

PTC PLAN

Sections:

• 3.50.010 Name.

• 3.50.020 Purpose.

• 3.50.025 Establishment of trust.

• 3.50.030 Definitions.

• 3.50.040 Deferral of compensation.

• 3.50.050 Participation in the plan.

• 3.50.060 Administration of the plan.

• 3.50.070 PTC fund.

• 3.50.080 Reserved.

• 3.50.090 Status of participants.

The purpose of the PTC Plan is to provide part-time, temporary and contract employees, and Council Assistants (who are not members of a City retirement plan other than an eligible deferred compensation plan) with a retirement program by requiring them to enter into agreement with the City of San José which will provide for deferral of payment of a portion of their current compensation until death, disability, retirement, termination of employment or other event as provided herein, in accordance with the applicable provisions of the Internal Revenue Code.

(Ords. 24061, 25245, 26541, 30536, 30625.)

• 3.50.100 Reserved.

• 3.50.110 Governing law. 3.50.115 Inter-plan transfer. 3.50.116 Eligible rollover distributions. 3.50.120 Distribution of benefits; election. 3.50.121 Loans.

• A. There is hereby established the City of San José PTC Deferred Compensation Plan Trust.

• B. Notwithstanding any contrary provision of the Plan, in accordance with Section 457(g) of the Internal Revenue Code, all amounts of

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§ 3.50.030

compensation deferred pursuant to the Plan, all property and rights purchased with such amounts, and all income attributable to such amounts, property, or rights shall be held by the City in trust for the exclusive benefit of participants and beneficiaries under the Plan.

• C. The trustee shall ensure that all investments, amounts, property and rights held under the trust are held for the exclusive benefit of participants and their beneficiaries.

• D. All amounts of compensation deferred under the Plan shall be transferred to the trust within a period that is not longer than is reasonable for the proper administration of the accounts of participants and beneficiaries.

• E. Prior to the satisfaction of all liabilities with respect to Plan participants and their beneficiaries, no part of the assets or income of the trust shall be used for, or diverted to, purposes other than for the exclusive benefits of the Plan participants and their beneficiaries and defraying reasonable expenses of the administration of the Plan.

• (Ords. 25707, 26541, 30536.)

For the purposes of this plan, certain words or phrases used herein will have the following meanings:

• A. "Account" shall mean a sub-account maintained for a participant to hold and account for the contributions which are the proceeds of deferral of compensation from the City, including any adjustment for earnings and expenses.

• B. "Alternative normal retirement age" shall mean any age irrevocably designated in writing by the participant which is:

  1. Not earlier than the earliest age at which the participant has the right to retire under a retirement plan of the City and receive immediate retirement benefits without actuarial or similar reduction for early retirement; and

  2. No later than age seventy and onehalf (70-1/2).

• C. "Alternate payee" shall mean any person who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under the Plan with respect to a participant within the meaning of Internal Revenue Code Section 414(p).

• D. "Basic Plan Document" shall mean the written basic plan document, as amended and restated from time to time, for the City of San José, PTC Deferred Compensation Plan.

• E. "Beneficiary" shall mean a beneficiary designated by the participant to receive payment of benefits under the Plan, or if no beneficiary is so designated, the participant's estate.

• F. "City" shall mean the City of San José, California.

• G. "City Manager" shall mean the City Manager or the City Manager's designee.

• H. "Committee" or "Advisory Committee" shall mean the Deferred Compensation Advisory Committee.

• I. "Compensation" prior to April 9, 2021, shall mean includible compensation. Effective April 9, 2021, "compensation" shall mean the following:

  1. Regular Salary;

  2. Executive Leave;

  3. Personal Leave;

  4. Vacation;

  5. Holiday;

  6. Sick Leave;

  7. Administrative Leave;

  8. Funeral Leave;

  9. Paid Time Off;

  10. Witness Leave;

  11. Cancer Screening Release Time;

  12. Military Leave;

  13. Retroactive Salary Payments;

  14. POST Pay;

  15. Anti-Terrorism Pay; and

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§ 3.50.030

16. Any compensation that would be considered a non-pensionable compensation increase under Chapters 3.28.030.05(E) and/or 3.36.020.3(A) of Title 3 of the San José Municipal Code.

Notwithstanding anything to the contrary, compensation does not include payment for any purpose not included above, including, but not limited to, the following:

1. Bilingual pay; 2. Auto allowances; 3. Taxable cellular phone and data stipends;

2. Medical and dental in lieu payments;

3. Higher class pay;

4. Retention payments;

5. Management Performance Bonus Program;

6. Premium-related payments;

7. Severance pay;

8. Vacation balance payoffs;

9. Compensatory time off payoffs; 12. Sick leave payoffs; 13. Reimbursements;

10. Allowances for equipment;

11. Safety purchases;

12. Moving expenses;

13. Professional development;

14. Education reimbursement; and

15. Overtime.

J. "Eligible Deferred Compensation Plan" means a plan which meets the requirements of Internal Revenue Code section 457(b).

K. "Includible compensation" shall mean:

1. Prior to January 1, 2002, "includible compensation" shall mean the compensation for services performed for the City which (taking into account the provisions of Sections 457 and 403(b) of the Internal Revenue Code) is currently includible in gross income. Amounts of

compensation shall be determined without regard to any community property laws.

2. After December 31, 2001, "includible compensation" shall have the meaning given to the term "participant's compensation" by Section 415(c)(3) of the Internal Revenue Code. Amounts of compensation shall be determined without regard to any community property laws.

3. Effective January 1, 2009, "includible compensation" includes differential wage payments while the participant is performing qualified military service (as defined in Chapter 43 of Title 38, United States Code) to the extent required by the provisions of Internal Revenue Code Sections 3401(h) and 414(u)(12), the Treasury regulations thereunder and any subsequent guidance issued under Internal Revenue Code Section 414(u)(12). A participant receiving differential wage payment from the City shall be treated as employed by the City and the differential wage payment shall be treated as compensation for purposes of applying the maximum amount which may be deferred under Code Sections 457(b)(2) and 457(b)(3). Furthermore, effective January 1, 2008, "includible compensation" includes amounts paid after the employee's severance event if paid by the later of two and one-half (2 ½) months after the employee's severance event, or the end of the calendar year that includes the date of the employee's severance event subject to the following requirements:

• a. The payment is regular compensation for services during the employee's regular work-

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§ 3.50.030

ing hours, or compensation for services outside the employee's regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments and the payment would have been made to the employee prior to a severance event if the employee had continued in employment with the City.

  - b. Includible compensation shall include all payments to an individual who does not currently perform services for the City by reason of qualified military service (within the meaning of Internal Revenue Code Section 414(u)(1)) to the extent these payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the City rather than entering qualified military service.

include all payments to an individual who does not currently perform services for the City by reason of qualified military service (within the meaning of Internal Revenue Code Section 414(u)(1)) to the extent these payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the City rather than entering qualified military service.

4. Effective April 9, 2021, "includible compensation" shall mean a participant's actual wages for services performed for the employer the year reported in box 1 of Form W-2, increased by any compensation reduction election under Internal Revenue Code Sections 125, 132(f), 401(k), 403(b) or 457(b) (including an election to defer compensation under this plan). Includible compensation is determined without regard to any community property laws.

• L. Participant" shall mean any eligible PTC employee who fulfills the requirements of enrollment into the Plan, and who is or has enrolled in the plan and who retains the rights to benefits under the Plan.

On or after October 3, 2021, City councilmembers are no longer PTC employees (and are no longer active Participants), but will continue to be Participants under the Plan as long as the councilmember maintains an Account.

• M. "Participation Agreement" shall mean the agreement executed and filed by a PTC employee with the City or Plan Administrator, pursuant to the Basic Plan Document, in which a PTC employee becomes a participant in the Plan.

• N. "Payroll period" shall mean a biweekly compensation period.

• O. "Percentage limitation" shall mean:

  1. Prior to January 1, 2002, thirtythree and one-third percent (33 1/3%) of the participant's includible compensation for the taxable year.

  2. After December 31, 2001, one hundred percent (100%) of the participant's includible compensation for the taxable year.

• P. "Plan administrator" shall mean the City Manager or the entity designated by the City Manager to carry out certain nondiscretionary administrative functions of the Plan.

• Q. "Plan year" shall mean a calendar year.

• R. "PTC employee" shall mean any parttime, temporary, or contract employee of the City of San José, California, and shall include any council assistant until such time as the council assistant becomes a member of a city retirement plan other than an eligible deferred compensation plan. Prior to October 3, 2021, a PTC employee includes any City councilmember of the City of San José, California, but on or after October 3, 2021, City councilmembers shall no longer be included as a PTC employee under this Plan.

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§ 3.50.030

• S. "Severance event" shall mean:

  1. Prior to January 1, 2002, severance of the participant's employment with the City that constitutes a "separation from service" the meaning of Internal Revenue Code Section 402(e)(4)(D)(iii).

  2. After December 31, 2001, a severance of the participant's employment with the City within the meaning of Internal Revenue Code Section 457(d)(1)(A)(ii).

• T. "Trustee" shall mean the City of San José and Advisory Committee based on the duties set forth in Chapter 3.50.060 of Title 3 of the San José Municipal Code. shall be determined without regard to any community property laws.

• (Ords. 24061, 25245, 26541, 26666, 29137, 30536, 30625.)

• A. During each payroll period in which a PTC employee is a participant in the Plan:

  1. 3.75% of the participant's compensation shall be deferred and paid to the Plan (mandatory deferrals); and

  2. For PTC employees, the City shall contribute 3.75% of the participant's compensation to the plan. Prior to October 3, 2021, for City councilmembers, the City shall contribute 6.55% of the participant's compensation to the Plan ("City contributions").

• B. Notwithstanding any provision of the Plan to the contrary, contributions to the Plan and additions to accounts of participants shall be limited to the percentage limitation and as provided in Internal Revenue Code Section 457 and any other relevant Internal Revenue Code Sections, as detailed in the Basic Plan Document.

• (Ords. 24061, 25245, 26541, 27523, 30536, 30625.)

• A. Each PTC employee shall automatically become a participant of the Plan and make man-

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datory deferrals of part of their compensation, in the amount set forth in section 3.50.040, effective the first pay period.

• B. Each period served by a person in the uniformed services shall, upon reemployment under the Uniformed Service Employment and Reemployment Act of 1994, as it may be amended from time to time (USERRA), be deemed to constitute service with the employer maintaining the Plan for the purpose of determining the accrual of benefits under the Plan, all to the extent required by and as provided under USERRA. Notwithstanding any provision in the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Internal Revenue Code Section 414(u) for additional elective deferrals a participant can make upon return from qualified military service.

• (Ords. 24061, 26541, 29137, 30536.)

• A. The Plan and the Trust established by this Chapter shall be administered by the City Manager which shall be the sole authority to enforce the Plan and the Trust. To the extent reasonably necessary to effectively administer the plan in accordance with the requirements of the Internal Revenue Code and any other applicable laws, regulations, or pronouncements, the City Manager may adopt amendments to the Basic Plan Document, provided such amendments do not conflict with any provisions of the San José Municipal Code.

• B. The City Manager shall be responsible for the operation of the Plan in accordance with its terms and shall determine all the questions arising out of the administration, interpretation and application of the Plan and the Trust. All such determinations shall be conclusive and binding on all persons.

• C. The City Manager shall have the authority to enter into agreements on behalf of the City for the administration of the Plan, for custodial

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§ 3.50.110

agreements for funds, and for investments selected by the Advisory Committee under the plan where the fees to be paid under such an agreement are to be paid by the participants of the Plan or where there is no amount to be paid by the City under the agreement.

• D. The Advisory Committee shall have the authority to make decisions on behalf of the City as to the investment policy, the choice and nature of investments to be available under the Plan, and enter agreements on behalf of the City for investment advice under the Plan where the fees under such an agreement are to be paid by the participants of the Plan or where there is no amount to be paid by the City under the agreement. The Advisory Committee shall have the authority to review and advise the City Manager on annual budgets and proposed changes to the Plan.

• E. The method of selection and the term of office of the members of the Advisory Committee shall be established by resolution of the City Council.

(Ords. 24061, 25707, 26541, 30536.)

• A. The City shall establish a PTC deferred compensation fund to which all deferred compensation shall be credited at such times as the compensation would have been payable to individual employees if not a participant in the Plan.

• B. Separate accounts will be established for each employee participating which will include all amounts of deferred compensation, investments made, shares acquired and earnings and gains on investments. Each account will be valued at least semiannually.

• C. The City may invest amounts of deferred compensation in the types of investments set forth in Sections 53601 and 53602 of the Government Code of the State of California. Nothing in this Section shall be construed to permit any type of investment prohibited by the Constitution of the State of California. Any action

by the Advisory Committee in selecting investment funds shall not be considered to be either an endorsement or guarantee of any investments, nor shall it be considered to attest to the financial soundness or the suitability of any investment for the purpose of meeting future obligations. Neither the City nor the Advisory Committee shall be liable to any participant, or to any participant's beneficiaries or heirs, or to any other person for any losses resulting from investments under the Plan.

(Ords. 24061, 25707, 26541, 30536.)

Editor’s note— Ord. 30536, § 9, adopted March 9, 2021, repealed § 3.50.080, which pertained to city participation and derived from Ords. 24061 and 26541.

Neither the establishment of the Plan nor any modification thereof, nor the establishment of any account, nor the payment of any benefits, shall be construed as giving to any PTC employee or participant or other person any legal or equitable right against the City, except as herein provided; and in no event shall the terms of employment of any PTC employee or participant be modified or in any way affected hereby.

(Ords. 24061, 26541, 30536.)

Editor’s note— Ord. 30536, § 11, adopted March 9, 2021, repealed § 3.50.100, which pertained to the condition of the plan and derived from Ords. 24061 and 26541.

This plan shall be construed, administered and enforced according to the laws of the State of California and Internal Revenue Code of 1986, as amended.

(Ords. 24061, 26541.)

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§ 3.50.115

• A. Outgoing inter-plan transfers shall be permitted pursuant to the Basic Plan Document.

• B. Incoming inter-plan transfers are not permitted.

The payment of benefits following the death of a participant shall be made in accordance with the provisions in the Basic Plan Document. (Ords. 24061, 26541, 29137, 30536.)

(Ords. 26541, 28996, 30536.)

• A. Outgoing rollovers shall be permitted pursuant to the Basic Plan Document.

• B. Incoming rollovers are not permitted. (Ords. 26541, 28996, 30536.)

The provisions relating to mandatory liquidation of account balances are described in the Basic Plan Document.

(Ords. 26541, 30536.)

The distribution of benefits shall be made in accordance with the provisions pursuant to the Basic Plan Document.

Editor’s note— Ord. 30536, § 20, adopted March 9, 2021, repealed § 3.50.170, which pertained to nonassignability and derived from Ords. 24061 and 26541.

(Ords. 24061, 25245, 26541, 29137, 30536.)

Loans shall be allowed under the Plan as provided in the Basic Plan Document. (Ord. 31114.)

The method of payment of benefits upon the occurrence of termination of employment, or other severance event, shall be made in accordance with the provisions pursuant to the Basic Plan Document.

(Ords. 24061, 26193, 26541, 30536.)

The postponement of payment of benefits shall be allowed as permitted under the requirements of Internal Revenue Code Sections 401(a)(9) and 457(d)(2), as detailed in the Basic Plan Document. (Ords. 24709, 25991, 26541, 30536.)

The date of payment of benefits shall be made in accordance with the provisions of the Basic Plan Document. (Ords. 24061, 26541, 30536.)

• A. The City may, at any time, terminate this Plan for all participants. Upon such termination, each participant in the Plan will be deemed to have terminated his or her service as of the date of such termination, and the value of each participant's account, less any taxes required to be withheld, shall be distributed to the participants or their beneficiaries no later than sixty (60) days after the termination of the Plan.

• B. The City may also amend the provisions of this Plan at any time; provided, however, that no amendment shall affect the rights of the participants or their beneficiaries to the receipt of payment of benefits, to the extent of any compensation deferred at the time of the amendment as adjusted for income attributable to such deferred compensation prior to and subsequent to the amendment. No amendment shall divest any participant of any rights to deferrals prior to the date of any amendment or amend the Plan so that it is no longer in compliance with the requirements of Internal Revenue Code Section 457.

• C. This Plan is intended to qualify as an eligible deferred compensation plan maintained by a

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§ 3.50.190

governmental employer under Section 457 of the Internal Revenue Code and shall be interpreted and administered in a manner consistent with such qualification.

• D. The City reserves the right to amend the Plan to the extent that may be necessary to conform the Plan to the requirements of Internal Revenue Code Section 457 and any other applicable law, regulation or ruling, including amendments that are retroactive to the effective date of the Plan.

• E. In the event that the Plan is deemed by the Internal Revenue Service to be administered in a manner inconsistent with Internal Revenue Code Section 457, the City shall correct such administration within the period provided in Section 457(b). The City reserves the right to take such action and do such things as are required to make the Plan, as administered, consistent with Section 457.

• (Ords. 24061, 26541, 30536.)

• A. The City Manager may determine fair and equitable cost to the City in withholding de-

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ferred compensation pursuant to this Plan or in making investments or otherwise administering or implementing the Plan.

• B. The City Manager may withhold or collect or have withheld or collected such costs in such manner as it deems equitable either:

  1. From the compensation deferred pursuant to the Plan, the income produced from any investment with respect thereto, or from principal return from any investment, whether or not augmented; or

  2. From the organization receiving such investments, where required by law to collect therefrom, or if not so required, where mutually satisfactory to such organization and the committee; or