Chapter 3.57

POLICE AND FIRE DEPARTMENTS VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATION

Parts:

• 1 Definitions

• 2 VEBA - Establishment, Purpose and Funding

• 3 Catastrophic Disability Healthcare Program

Part 1

If the trustees or the administrator makes any payment that, according to the terms of the trust, and the benefits provided hereunder, should not have been made, the trustees or administrator may recover that incorrect payment, by whatever means necessary as allowed by state law, whether or not it was made due to the error of the trustees or administrator, from the person to whom it was made or from any other appropriate party, including but not limited to, deduction of the amount of the incorrect payment when making any future payments to or on behalf of the recipient of the incorrect payment.

(Ord. 29065.)

DEFINITIONS

Sections:

• 3.57.010 Definitions - Rules of construction.

• 3.57.020.02 "Governmental accounting standards board" or "GASB."

• 3.57.020.03 "Health and Welfare Benefit."

• 3.57.020.04 "IRC."

• 3.57.020.05 "Member."

• 3.57.020.06 "New employee."

• 3.57.020.07 "Retiree."

• 3.57.020.08 "Tier 2 member."

Any payment to an insurance company, or its designee, shall, to the extent thereof, be in full satisfaction of the claim of such entity being paid thereby and the trustees or administrator may condition payment thereof on the delivery by the insurance company, or its designee, of a duly executed receipt and release in such form as may be determined by the trustees. (Ord. 29065.)

• 3.57.020.09 "VEBA."

• 3.57.020.10 "Retired."

• 3.57.030 Rules of construction.

Unless the context otherwise requires, the definitions and general provisions set forth in this Part 1 govern the construction of Chapter 3.57. (Ord. 29879.)

"Dependent" means a surviving spouse, surviving domestic partner, or surviving child of a

T3:560

PERSONNEL

§ 3.57.020.09

member or a tier 2 member eligible for benefits under the terms of the VEBA established pursuant to this Chapter 3.57.

(Ord. 29879.)

"Governmental accounting standards board" or "GASB" means the organization funded and monitored by the financial accounting foundation (FAF), or successor organization, whose main purpose is to improve and create accounting reporting standards or generally accepted accounting principles (GAAP), which makes it easier for users to understand and use the financial records of both state and local governments. (Ord. 29879.)

"Health and Welfare Benefit" means a medical, prescription drug, or dental benefit, including a premium subsidy for the same for retirees and dependents, which is considered a post-retirement benefit other than pension under the applicable GASB requirements or statements. Such a benefit is limited to medical care expenses, including premium subsidies as defined in Section 213(d), which may be provided under the VEBA for eligible retirees and dependents. To the extent a VEBA member is eligible to purchase a City provided retiree healthcare plan, the following restrictions apply:

• A. VEBA Member with less than five (5) years of service with the City of San José will not be eligible to purchase into the City's retiree healthcare insurance plans; and

• B. The rate at which retiree healthcare insurance plans will be made available to VEBA Members shall at a retiree only rate, and shall not be based on a blended rate with active employees.

(Ords. 29879, 30007.)

"IRC" means the Internal Revenue Code of 1986, as amended. (Ord. 29879.)

"Member" means a new employee as defined under Section 3.57.020.08 or a tier 2 member as defined under Section 3.57.020.10. "Member" also means a member defined under Section 3.36.020.6 of Title 3 of the San José Municipal Code who is not a tier 2 member but has made an irrevocable election pursuant to the procedures established under this Chapter 3.57 to be covered under the terms of this VEBA and is no longer eligible for insurance coverage under Parts 14 and 15 of Chapter 3.36 of Title 3 of the San José Municipal Code. (Ord. 29879.)

"New employee" means any employee initially hired to the police department on or after August 4, 2013, or initially hired to the fire department on or after January 2, 2015.

(Ord. 29879.)

"Retiree" means a former employee of the city who was employed in the police department or the fire department of the City of San José and who is retired and is entitled to health and welfare benefits under the terms of the VEBA established under this Chapter 3.57.

(Ord. 29879.)

"Tier 2 member" means a tier 2 member as defined under Section 3.36.020.15 of Title 3 of the San José Municipal Code who is eligible for benefits to be provided under this Chapter 3.57 through the VEBA.

(Ord. 29879.)

"VEBA" means a voluntary employees' beneficiary association meeting the requirements of In-

T3:561

SAN JOSÉ CODE

§ 3.57.020.09

ternal Revenue Code Section 501(c)(9), as approved by the Internal Revenue Service, which shall be established by the city, the San José Police Officers' Association and the San José Fire Fighters, IAFF Local 230, to provide post-retirement healthcare benefits to tier 2 members and, upon approval of the Internal Revenue Service, to those members of the plan other than tier 2 members who make a one-time irrevocable election to be covered under this Chapter 3.57 rather than continuing to be covered under Parts 14 and 15 of Chapter 3.36 of Title 3 of the San José Municipal Code. (Ord. 29879.)

"Retired" means any VEBA members who retire from the city under the provisions of Chapter 3.36 of Title 3 of San José Municipal Code and VEBA Members who have a separation from service with the City and are retirement eligible under the provisions of Chapter 3.36 of Title 3 of San José Municipal Code. (Ord. 30007.)

Words used herein in the masculine gender shall be construed to include the feminine gender where appropriate, and words used herein in the singular or plural shall be construed as being in the plural or singular where appropriate. Accounting terms and principles used herein or applicable hereto shall be as defined and described from time to time by pronouncements and other guidance of the governmental accounting standards board ("GASB"), or any successor organization. (Ord. 29879.)

Part 2

VEBA - ESTABLISHMENT, PURPOSE AND FUNDING

Sections:

Effective March 31, 2017, pursuant to applicable agreements between the city, the San José Police Officers' Association, and the San José Fire Fighters, IAFF Local 230, a VEBA meeting the requirements of IRC Section 501(c)(9), as approved by the Internal Revenue Service, shall be established to provide post-retirement healthcare benefits to new employees and, upon approval of the Internal Revenue Service, to those members other than tier 2 members who make a one-time irrevocable election to be covered under this Chapter 3.57 rather than continuing to be covered under Parts 14 and 15 of Chapter 3.36 of Title 3 of San José Municipal Code. Such irrevocable election shall be executed as provided under the procedures established under this Chapter 3.57. (Ord. 29879.)

The VEBA established under this Chapter 3.57 shall have the following sources of funding:

• A. Effective March 25, 2018, tier 2 members and new employees shall make mandatory contributions equal to four percent (4.0%) of base salary. To the extent a Tier 2 member made member contributions to the benefit programs provided under Part 14 and Part 15 of Chapter 3.36 of the San José Municipal Code prior to the effective date of this Subsection, an amount determined to be equal to the member's prior retiree healthcare contributions under the terms of Parts 14 and 15 of Chapter 3.36 of Title 3 of the San José Municipal Code, without any interest on such amounts, shall be contributed by the city to the Tier 2 member's account under the VEBA.

• B. Effective March 25, 2018, members other than members described in Section

T3:562

PERSONNEL

§ 3.57.300

• 3.57.200.A., shall make mandatory contributions equal to five percent (4.0%) of base pay.

• C. There are no required contributions by the City to the VEBA.

• D. Effective upon IRS approval of one-time irrevocable election process for Tier 1 members and upon IRS approval of the ability to transfer funds in such manner, including ability to transfer funds from the Police & Fire Plan and the applicable 115 trust to the VEBA and upon completing the irrevocable election process to become covered under the VEBA, an amount determined to equal the member's prior retiree healthcare contributions under the terms of Parts 14 and 15 of Chapter 3.36 of Title 3 of the San José Municipal Code, without any interest on such amounts, shall be contributed by the City to the member's account under the VEBA.

(Ords. 29879, 30044, 30007.)

• A. The Plan and the Trust established by this Chapter shall be administered by the VEBA advisory committee which shall be the sole authority to enforce the Plan and the Trust.

• B. The advisory committee 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, including making decisions on behalf of the City as to the choice and nature of investments to be available under the Plan. All such determinations shall be conclusive and binding on all persons.

• C. The advisory committee shall have the authority to enter into agreements on behalf of the City for the administration of the Plan, for custodial agreements for funds, and for investments under the Plan where the fees to be paid

under such an agreement are to be paid by the participants or where there is no amount to be paid by the City under the agreement.

• D. The advisory committee shall be selected by Plan members. The number of members on the committee, qualifications, selection process and term of office shall be established by a negotiated agreement among between the City and all labor groups participating in the Plan, including unrepresented members. Once agreement is reached, the matter shall be referred to and adopted by resolution of the City Council in the form of a resolution.

• (Ords. 29879, 30007.)

Part 3

CATASTROPHIC DISABILITY HEALTHCARE PROGRAM

Sections:

• 3.57.300 Eligibility for catastrophic disability healthcare benefits under VEBA.

• 3.57.310 Catastrophic disability healthcare benefit under VEBA.

• 3.57.320 Limitations on payment of catastrophic healthcare benefit from defined benefit plan.

Subject to the provisions of this chapter, effective March 31, 2017 and upon IRS approval of the VEBA, a member who is covered by the VEBA shall be entitled to receive a benefit as described under Section 3.57.310 if the requirements of Subsections A., B., and C. of this Section 3.57.300 are satisfied.

• A. The member is receiving a service-connected disability retirement benefit under the terms of Chapter 3.36; and

• B. The member is not eligible for an unreduced service retirement under Chapter 3.36; and

T3:563

SAN JOSÉ CODE

§ 3.57.300

• C. The member must have exhausted all funds credited to his or her VEBA account.

• (Ord. 29879.)

ability for the member to again qualify under this Part 3 if the member subsequently loses such employment-provided healthcare coverage.

• (Ord. 29879.)

Subject to the provisions of this chapter, effective March 31, 2017 and upon IRS approval of the VEBA, a member who meets the requirements of Section 3.57.300 may be entitled to receive a benefit similar to those established under Parts 14 and 15 of Chapter 3.36. These provisions entitle a member to a benefit equal to the amount of the premium for single coverage under the lowest cost medical insurance coverage available under the city's retiree medical program. Such benefit shall cease at the time that such member is eligible for coverage under Medicare. This catastrophic disability healthcare benefit shall be paid from the police department healthcare trust fund or the fire department healthcare trust fund, as applicable. (Ord. 29879.)

Subject to the provisions of this chapter, effective March 31, 2017 and upon IRS approval of the VEBA, a member who is receiving a catastrophic healthcare benefit from the plan under Section 3.57.310, shall be subject to the following limitations with respect to eligibility to receive such benefit:

• A. The member must submit, on an annual basis, an affidavit in the form prescribed by the administrator of the VEBA verifying that the member has no other employment which provides healthcare coverage; and

• B. If it is determined that the member has other employment which provides healthcare coverage, the member's eligibility for benefits under this Part 3 of Chapter 3.57 shall automatically cease, subject to the