Chapter 3.58

FEDERATED EMPLOYEES VOLUNTARY EMPLOYEES' BENEFICIARY ASSOCIATION

Parts:

• 1 Definitions

• 2 VEBA - Establishment, Purpose and Funding

• 3 Catastrophic Disability Healthcare Program

Part 1

DEFINITIONS

Sections:

• 3.58.010 Definitions - Rules of Construction.

• 3.58.020.01 "Dependent."

• 3.58.020.02 "Governmental Accounting Standards Board" or "GASB."

• 3.58.020.05 "Health and Welfare Benefit."

• 3.58.020.06 "IRC."

• 3.58.020.07 "Member."

• 3.58.020.08 "New Employee."

• 3.58.020.09 "Retiree."

• 3.58.020.10 "VEBA."

• 3.58.030 "Rules of Construction."

Unless the context otherwise requires, the definitions and general provisions set forth in this Part 1 govern the construction of Chapter 3.58. (Ord. 29904.)

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"Dependent" means a surviving spouse, surviving domestic partner, or surviving child of a member eligible for benefits under the terms of the VEBA established pursuant to this Chapter 3.58. (Ords. 29904, 30017.)

"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. 29904.)

"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 applicable GASB standards and reports. 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's health and welfare benefit includes eligible to purchase coverage under a City provided retiree healthcare plan, the following restrictions apply:

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

• B. 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.

• (Ords. 29904, 30017.)

"IRC" means the Internal Revenue Code of 1986, as amended. (Ord. 29904.)

"Member" means any person who meets the definition of member under Section 3.28.030.15 of Title 3 of the San José Municipal Code who is not entitled to retiree healthcare benefits under Part 16 and 17 of Chapter 3.28 of Title 3 of the San José Municipal Code. "Member" also means a person who meets the definition of member under Section 3.28.030.15 of Title 3 of the San José Municipal Code and is entitled to benefits under Part 16 and 17 but made is eligible to make and makes an irrevocable election pursuant to the procedures established under this Chapter 3.58 to be covered under the terms of the VEBA established under this Chapter 3.58 and to no longer be eligible for or entitled to benefits provided under Parts 16 and 17 of Chapter 3.28 of Title 3 of the San José Municipal Code.

(Ords. 29904, 30017.)

"New Employee" means any employee hired or rehired by the City on or after September 27, 2013.

(Ords. 29904, 30017.)

"Retiree" means a former employee of the City who was employed in 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 3.58. (Ord. 29904.)

"VEBA" means a voluntary employees' beneficiary association meeting the requirements of Internal Revenue Code Section 501(c)(9), as approved by the Internal Revenue Service, which shall be established by the City and employees to provide

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post-retirement healthcare benefits members and, upon approval of the Internal Revenue Service, to those members of the Plan who would be required to make a one-time irrevocable election to be covered under this Chapter 3.57 rather than continuing to be covered under Parts 16 and 17 of Chapter 3.28 of Title 3 of the San José Municipal Code. (Ord. 29904.)

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. 29904.)

Part 2

VEBA - ESTABLISHMENT, PURPOSE AND FUNDING

Sections:

Effective June 16, 2017, pursuant to applicable agreements between the City and City employees, 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 for all persons, hereinafter in this chapter specified, who may become members thereof pursuant to the provisions of this Chapter 3.58.

(Ords. 29904, 30017.)

The VEBA established under this Chapter 3.58 shall have the following sources of funding:

• A. Except for new employees represented by the Operating Engineers, Local 3 and the Association of Building, Mechanical, and Electrical Inspectors that were hired before September 27, 2013, effective on the date established by the City, new employees shall make mandatory contributions equal to two percent (2.0%) of base salary.

• B. Effective on the date established by the City, members other than those described in Section 3.58.200.A, shall make mandatory contributions equal to four and one-half percent (4.5%) of base pay.

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

• D. Effective upon IRS approval of the ability to transfer funds from the Federated Plan and any applicable 115 trust to the VEBA, and upon completing the irrevocable election process to become covered under this Chapter 3.58, an amount determined to equal the member's prior retiree healthcare contributions under the terms of Parts 16 and 17 of Chapter 3.28 of Title 3 of the San José Municipal Code, without any interest on such amounts, shall be from the Federated Plan and applicable 115 trust to the member's account under the VEBA.

• E. New employees in Unit 99, Unit 81 and Unit 82 are not eligible members of Chapter 3.58 and may not participate in the benefits under Chapter 3.58. Further, in the event an unrepresented member in Unit 99, Unit 81 and Unit 82 who is eligible to make, and makes, an irrevocable election under Part 16 and/or Part 17 of Chapter 3.28, such member shall not make contributions to this Chapter 3.58 and benefits to such members shall be limited to an amount determined to equal

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the member's prior retiree healthcare contributions under the terms of Parts 16 and 17 of Chapter 3.28 of Title 3 of the San José Municipal Code, if any. (Ords. 29904, 30017, 30044.)

• 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. 29904, 30017.)

Part 3

CATASTROPHIC DISABILITY HEALTHCARE PROGRAM

Sections:

• 3.58.320 Limitations on payment of catastrophic healthcare benefit from VEBA.

Subject to the provisions of this Chapter, effective June 16, 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 3.58.310 if the requirements of subsections A, B, and C of this Section 3.58.300 are satisfied.

• A. The member is receiving a service-connected disability retirement benefit under the terms of Chapter 3.28; and

• B. The member is not eligible for an unreduced service retirement under Chapter 3.28; and

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

• (Ord. 29904.)

Subject to the provisions of this Chapter, effective June 16, 2017 and upon IRS approval of the VEBA, a member who meets the requirements of Section 3.58.300 may be entitled to receive a benefit similar to those established under Parts 16 and 17 of Chapter 3.28 of Title 3 of the San José Municipal Code. 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

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such member is eligible for coverage under Medicare. This catastrophic disability healthcare benefit shall be paid from the Federated Retiree Health Care Trust Fund, as applicable. (Ord. 29904.)

Subject to the provisions of this Chapter, effective June 16, 2017 and upon IRS approval of the VEBA, a member who is receiving a catastrophic healthcare benefit from the plan under Section 3.58.310, 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 3.58 shall automatically cease, subject to the ability for the member to again qualify under this Part 3 if the member subsequently loses such employment-provided healthcare coverage.

(Ord. 29904.)

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