San Jose Municipal Code Part 2 Administration

The retirement system established by the provisions of this Chapter 3.28, and the retirement fund provided for in this chapter, shall be managed, administered and controlled by that certain board of administration entitled "board of administration for federated city employees retirement system" which has been established by and pursuant to the provisions of Sections 2.08.1000 through 2.08.1090, inclusive, of the San José Municipal Code.

(Prior code § 2904.1050.)

The retirement board shall have all the powers and duties given it by the provisions of this Chapter 3.28, including but not limited to, the powers and duties specified in this Part 2. Notwithstanding anything in this part to the contrary, the retirement board shall not engage in a transaction prohibited by Section 503(b) of the Internal Revenue Code.

(Prior code § 2904.1051; Ord. 28885.)

The city manager shall seek the advice and consent of the retirement board on the appointment, evaluation, discipline or termination of the director of retirement services, and the hiring, evaluation, discipline or termination of the assistant director of retirement services, or their equivalent positions. Notwithstanding the foregoing, the city manager may appoint, hire, evaluate, discipline or terminate the director of retirement services or the assistant director of retirement services with or without the advice or consent of the retirement board. Nothing in this chapter shall limit any authority of the city manager under the San José City Charter, San José Municipal Code, and any applicable city policies.

(Ord. 29139.)

A. The retirement board shall keep or cause to be kept any and all records and accounts reasonably necessary for the management, administration or control of this retirement system, including but not limited to records of all contributions made by any and all members of the system or made by the city, and records of all moneys in the retirement fund and of the investment and distribution of such moneys.

B. In particular, the board shall keep such records and accounts as may be necessary to show:

1. The total accumulated normal contributions of members;

2. The total accumulated prior service contributions of members;

3. The accumulated contributions of the city held for the benefit of members on account of current service;

4. All other accumulated contributions of the city, which shall include the amounts available to meet the obligation of the city on account of prior service of members.

5. The names of all persons receiving benefits under the retirement system, the nature of such benefits and the amounts paid to each person therefor.

(Prior code § 2904.1060; Ord. 25993.)

A board member or employee of the board shall not, directly or indirectly:

A. Have any interest in the making of any investment, or in the gains or profits accruing therefrom;

B. For himself, or as an agent or partner of others, borrow any funds or deposits of this system, nor use such funds or deposits in any manner except to make such current and necessary payments as are authorized by the board;

C. Become an endorser, surety or obligor on investments by the board.

(Prior code § 2904.1065.)

Subject to the provisions of this chapter and to all applicable provisions of the Charter of the City of San José, the board may make and enforce reasonable rules and regulations for the administration, management and control of the provisions of this chapter and of the retirement system and fund provided for herein; and each member of this system, each person retired hereunder and each person or estate entitled to or receiving any benefits under the provisions of this chapter is and shall be subject to the provisions of this chapter and to said rules and regulations.

(Prior code § 2904.1052.)

A. The Board may enter into contractual arrangements for such medical service and advice, and may secure and pay reasonable compensation for such independent medical examiners, as the Board deems necessary to effectuate the terms of this Chapter. Such contracts for medical services shall be entered into in the name of the Board of Administration for the Federated City Employees Retirement System. The cost of obtaining such medical services and advice, and any cost for appeals therefrom to an administrative law judge shall be administrative expenses of the Plan.

B. Effective as of June 16, 2017 with respect to applications for disability benefits under the Plan, the Board shall appoint an independent medical panel of three (3) medical experts to evaluate and approve or deny, by a majority vote, all disability applications. The Board shall establish processes and procedures by which the independent medical panel shall carry out and document its responsibilities. Once the independent medical panel is formed, responsibility for reviewing disability applications and making disability determinations will be the sole responsibility of the independent medical panel, or, if the decision of the independent medical panel is appealed, an administrative law judge. The independent medical panel may, upon its own initiative or upon request, reassess the status of a disability retirement recipient to confirm whether the recipient's disability continues. The individuals who may be appointed to such panel by the Board shall be determined as follows:

1. Individuals shall be recruited to serve on the independent medical panel by the Board using the City's established request for proposal process.

2. Each individual selected to serve on the independent medical panel shall be approved by a vote of no less than five (5) of the seven (7) members of the Board and shall serve for a four (4)-year term.

3. Individuals serving on the independent medical panel shall have experience in varying fields of medicine and shall meet the following minimum qualifications:

a. Ten (10) years of practice after completion of residency; and

b. Practicing or retired Board Certified physician; and

c. Except for prior service on the independent medical panel established under this Section 3.28.150, is not providing or has not provided medical services to the City or retirement boards; and

d. No prior experience as a Qualified Medical Evaluator.

(Prior code § 2904.1054; Ords. 25092, 29904, 30017.)

A. In addition to the authority to enter into contractual arrangements for medical services as provided in Section 3.28.150 and the authority to enter into contractual arrangements for investment related services as provided in Part 3 of this chapter, the board is authorized to select, enter into contractual arrangements with, and pay reasonable compensation to persons to perform the following services for the board:

1. Actuarial services.

2. Auditing services.

3. Investment manager search services.

4. Investment performance evaluation services.

5. Proxy voting services.

6. Other consultant services which the board deems necessary to carry out its duties and responsibilities under this retirement plan.

B. The contracts described in subsection A. shall be entered into in the name of the board of administration for the federated city employees retirement system.

(Ords. 24696, 25092.)

The board shall keep in convenient form such data as is necessary for the actuarial evaluation of this system. The board shall cause an actuarial investigation to be made from time to time and as often as it may deem such to be reasonably necessary to keep the plan actuarially sound, but not less frequently than once each five years, commencing from and after July 1, 1975. The actuarial investigation shall consist of a report as to the mortality, service and compensation experience of members and persons receiving benefits, an actuarial valuation of the assets and liabilities of this system, and such other actuarial investigations as may be relevant to and for the benefit of the system. From time to time the board shall determine the rate of interest being earned on the retirement fund.

(Prior code § 2904.1055.)

The board shall cause to be issued, as of the date of the investigation and valuation made pursuant to Section 3.28.160, a financial statement showing an actuarial valuation of the assets and liabilities of this system. A statement as to the accumulated cash and securities in the retirement fund as certified by the auditor shall also be submitted at the same time.

(Prior code § 2904.1061.)

The Board, subject to the provisions of this Chapter, shall determine who are employees of the City eligible for membership in this Retirement System. Except as provided in Section 3.28.150 regarding decisions of the independent medical panel or, where the independent medical panel's determination is appealed to an administrative law judge, the Board is the sole judge of the conditions under which persons may be admitted to and received or continue to receive benefits under this system, and shall determine, modify or terminate benefits for service or disability or death or any other benefits provided for in this Chapter.

(Prior code § 2904.1053; Ord. 29904.)

The director of human resources shall give to the board such notice as it may require of the change of status of any member, resulting from transfer, promotion, leave of absence, resignation, reinstatement, dismissal or death, and other pertinent information.

(Prior code § 2904.1063; Ord. 29120.)

A. Upon the basis of any or all of such investigations, valuations and determinations, the Board shall adopt such mortality, service and other tables, actuarially assumed annual rate of return, and other actuarial assumptions as it may deem reasonably necessary, and, subject to such limitations as are set forth elsewhere in this Chapter, it shall fix and from time to time make such revisions or changes in the rates of contribution required of members and of the City as it may determine reasonably necessary to provide the benefits provided for by this Retirement Plan and make this System at all times actuarially sound in a manner consistent with Article XVI, Section 17 of the California Constitution (the "1992 California Pension Protection Act"); provided that, as may be otherwise provided elsewhere in this Chapter, the share of the normal cost portion of contributions made to the Plan on behalf of the City and members who are not Tier 2 members shall at all times be shared in the ratio of three to eight (3:8), except as provided for in Section 3.28.200 A.1. and Section 3.28.200 A.2. with the City bearing the total cost of any associated actuarially accrued unfunded liability for such members. For Tier 2 members, except as provided in Section 3.28.200 B., the proportionate share of contributions on behalf of the City and Tier 2 members shall at all times be in the ratio of one for the City to one for the Tier 2 members (1:1) (sharing equally), including any unfunded actuarially accrued liability.

1. Notwithstanding the foregoing, the following shall apply to the manner of determining and making additional contributions attributable to the cost associated with reclassifying prior members of this Plan, who became Tier 2 members between September 30, 2012 and June 18, 2017, and thereafter remain in the Plan but are no longer considered Tier 2 members as defined under Section 3.28.030.28 ("Reclassified Tier 1 Member"). The additional contributions described in this Section 3.28.200 A.1. are attributable to the entire cost associated with treating Tier 2 service earned by a Reclassified Tier 1 Member as Tier 1 service, including any increase in the unfunded actuarial accrued liability of the benefits. The entire cost associated with treating such Tier 2 service as Tier 1 service, including the increased UAL cost will be referred to as the "Total UAL Increase." The Total UAL Increase shall be determined for each affected member individually by the Board's actuary based upon that member's age, years of service, salary, length of Tier 2 service and other relevant actuarial factors As a result, the amortization schedule for each Reclassified Tier 1 Member's Total UAL Increase may vary. Notwithstanding the cost sharing ratio for Tier 1 members described in the first paragraph of this Section 3.28.200 A. above, the Total UAL Increase attributable to Reclassified Tier 1 Members shall be shared in a ratio of one for the City and one for the Reclassified Tier 1 Member (1:1) and will be reflected as soon as practicable as an increase in the contribution rates of the Reclassified Tier 1 Members. As a condition of receiving his or her full Tier 1 benefit, a Reclassified Tier 1 Member must:

i. pay his or her Total UAL Increase plus accrued interest on the Reclassified Tier 1 Member's Total UAL Increase at the Plan's assumed rate of return from the date the Total UAL Increase is calculated until September 3, 2020 (the "Reclassified Tier 1 Member Obligation"). Effective the first full pay period following the effective date of Ordinance No. [xxxxx] amending Chapter 3.28.200 A(1)(i) of the 1975 Federated Employees Retirement Plan in the San José Municipal Code, the City will pay a one-time amount equivalent to the expected future interest accrual on the Tier 1 Reclassified Member Obligation calculated as to the anticipated date to be repaid. In no event shall the City's payment cover interest accrued on the Reclassified Tier 1 Member Obligation prior to the first full pay period following the effective date of the ordinance amendment adding this provision and all interest accrued on the Reclassified Tier 1 Member Obligation prior to such date remains the obligation of the Reclassified Tier 1 Member whether or not previously paid by the Reclassified Tier 1 Member; and

ii. in addition to making the required Tier 1 member contributions, be individually responsible for his or her Reclassified Tier 1 Member Obligation and commence paying his or her Reclassified Tier 1 Member Obligation as soon as practicable after the board determines the amount of such obligation; and

iii. execute a legally binding agreement with the City setting forth the terms and conditions of his or her Reclassified Tier 1 Member status under the Plan and payment of his or her Reclassified Tier 1 Member Obligation; and

iv. fully satisfy any outstanding balance of his or her Reclassified Tier 1 Member Obligation on or before the later of sixty (60) calendar days following the date of the Reclassified Tier 1 Member's separation from City service or receipt of the final remaining balance calculation of such member's Reclassified Tier 1 Member Obligation from the Board. If the entire balance of the Reclassified Tier 1 Member Obligation is not satisfied by such date, benefits for such Reclassified Tier 1 Member shall be determined in accordance with Section 3.28.820 E.

2. The City shall pay its share of the Total UAL Increase through the Plan's amortization of the Plan's UAL as determined by the Board upon the recommendation of its actuary. The City's obligation includes any actuarial gains and losses associated with the Total UAL Increase, including interest from time to time at the Plan's assumed rate or return.

3. Notwithstanding the foregoing, subdivisions 1 and 2 of this Section 3.28.200 A., the following shall apply to the manner of determining contributions on behalf of the City and members who accept employment on or after September 30, 2012 who is otherwise eligible for this Plan and who was an active member in another California public retirement system, with which this Plan has reciprocity under Part 21, and who has a break in service of less than six (6) months from that covered employment and employment with the City, other than those who meet the definition of new members as defined by Government Code Section 7522.04(f) as may be amended, but on and after June 16, 2017 remain in the Plan but are no longer considered Tier 2 members under the definition of Tier 2 member under Section 3.28.030.28. Any and all costs, including but not limited to any unfunded actuarial accrued liability, directly or indirectly associated with benefit changes adopted on June 16, 2017 for such members and any and all amounts associated with moving such members from Tier 2 status to non-Tier 2 status, will be amortized as a separate liability over twenty (20) years or such other period determined by the Board. Further, notwithstanding the cost sharing ratio for non-Tier 2 members described in the first paragraph of Section 3.28.200 A. above, any and all costs described in this subsection 3.28.200 A.3. shall at all times be shared in the ratio of one for the City and one for the non-Tier 2 members who became a member as a result of Part 21 of Chapter 3.28 of the San José Municipal Code and is not a Tier 2 Member as defined under Section 3.28.030.28 (1:1) and will be reflected as soon as practicable in the contribution rates for such members.

B. Notwithstanding Section 3.28.200 A., the following shall apply to the manner of determining contributions on behalf of the City and members who are Tier 2 members on or after June 16, 2017:

1. The costs, including any unfunded actuarial accrued liability, associated with the Tier 2 benefit changes adopted on June 16, 2017 for members who were Tier 2 members prior to June 16, 2017, will be amortized as a separate liability over twenty (20) years or other period determined by the Board and will be reflected as soon as practicable in contribution rates to be shared equally among the City and all Tier 2 members and such increased rates shall not be subject to the incremental increases in amounts associated with unfunded actuarial accrued liability described in Section 3.28.200 B.2.

2. Other than provided in Section 3.28.200 A., in determining member contribution rates, to the extent an unfunded actuarial accrued liability is determined to exist with respect to the Plan, Tier 2 members will contribute toward the amount of such amortized unfunded actuarial accrued liability by increasing the Tier 2 member contribution rate by one-third of one percent (0.33%) of compensation each year until such time as the cost of the unfunded actuarial accrued liability is being shared equally by the Tier 2 members and the City. Until such time as the Tier 2 members and the City are sharing such cost equally, the City will include in its contribution rate the amount of the amortized unfunded actuarial accrued liability that would otherwise have been paid by the Tier 2 members in such year.

(Prior code § 2904.1056; Ords. 27436, 29904, 30017, 30145, 30183, 30441.)

A. Whenever it is impractical for the retirement board to determine from the records of the city and from other evidence before it the length of service, the compensation or the age of any member in this retirement system, it may estimate for the purposes hereof such length of service, compensation or age. Each employee shall file with the board such information respecting his age, length of service or compensation or any other information which may affect his status as the board may require.

B. If there is a disagreement between any member and the board with respect to the length of service, compensation or age of any member, or if any member refuses or fails to give the board a statement of his city service, compensation or age or other information requested by the board, the board shall hold a hearing and upon the basis of available testimony and available records determine such length of service, compensation or age.

(Prior code § 2904.1058.)

If more or less than the correct amount of contribution required of members or the city is paid, proper adjustment shall be made in connection with subsequent payments, or such adjustments may be made by direct cash payments between the member or the city and the board. Adjustments to correct any other errors in payments to or by the board may be made in the same manner.

(Prior code § 2904.1064.)

A. The Board in its discretion may hold hearings for the purpose of determining any question presented to it involving any right, benefit or obligation of any person under this Chapter. Any applicant for any benefits may file an application for rehearing of his or her application for benefits within thirty (30) days after written notice of the determination of the Retirement Board has been sent by mail to the applicant or his or her attorney of record, upon any of the following grounds:

1. That the Retirement Board acted without and in excess of its powers;

2. That the order, decision or award was procured by fraud;

3. That the evidence does not justify the determination of the Retirement Board;

4. That the applicant has discovered new evidence material to him or her which he or she could not with reasonable diligence have discovered or procured at the hearing.

B. The determination of the Retirement Board on any said application for rehearing shall be made within sixty (60) days from and after the date of filing of said application.

C. Notwithstanding the foregoing, any decisions regarding a determination related to a member's disability shall be subject to review only in accordance with the process described in Sections 3.28.1250, 3.28.1370.C, 3.28.1410, 3.28.1445 and/or 3.28.1449, as may be applicable.

(Prior code § 2904.1059; Ord. 29904.)

The retirement board shall have the power to administer or require oaths and affirmations, to issue subpoenas to compel the attendance of witnesses or the production of books, papers and documents, and to take and hear testimony concerning any matter pending before the board. If any person so subpoenaed neglects or refuses to appear or produce any book, paper or document as required by said subpoena, or shall refuse to testify before the board or answer any questions which a majority of the board decides to be proper and pertinent, the board shall have the power to initiate proceedings in the proper court to have such person declared guilty of contempt. The chief of police shall, on request of the board, have such subpoenas served by a police officer or officers.

(Prior code § 2904.1066.)

Within ninety days after the end of each fiscal year, or if later, within thirty days after the submission to the city council of an audited annual fiscal report of the retirement system's funds required by ordinance, the board shall submit to the city council and city manager an annual report for such preceding fiscal year. The report shall contain a statement of the board's work for such period, and shall show all receipts and disbursements and the balance remaining in the retirement fund after such payments. The report may contain recommendations for or against changes in the retirement system.

(Prior code § 2904.1062; Ord. 18767 § 4, 1977, 25993.)

A. If, under the provisions of this chapter, a person becomes entitled to a distribution which is an eligible rollover distribution, the person may elect to have the distribution or any portion thereof paid directly to an eligible retirement plan specified by the person.

B. The election made pursuant to this section shall be in accordance with the terms and conditions established by the board.

C. Upon the exercise of the election by a person pursuant to this section, the distribution from the retirement fund of the amount designated by the person, once distributable under the provisions of this chapter, shall be made in the form of a direct transfer to the eligible retirement plan so specified.

D. For the purposes of this section, "eligible rollover distribution" means a distribution from the retirement fund which constitutes an eligible rollover distribution within the meaning of Section 401(a)(31)(C) of the Internal Revenue Code, consisting of any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or the life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Internal Revenue Code; the portion of any distribution that is not includible in gross income; and any other distribution which the internal revenue service does not consider eligible for rollover treatment, such as certain corrective distributions necessary to comply with the provisions of Section 415 of the Internal Revenue Code or any distribution that is reasonably expected to total less than two hundred dollars during the year. Effective January 1, 2002, a portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions that are not includible in gross income. However, such portion may be transferred only: (i) to an individual retirement account or annuity described in Section 408(a) or (b) of the Internal Revenue Code or to a qualified defined contribution plan described in Section 401(a) of the Internal Revenue Code; (ii) on or after January 1, 2007, to a qualified defined benefit plan described in Section 401(a) of the Internal Revenue Code or to an annuity contract described in Section 403(b) of the Internal Revenue Code, that agrees to separately account for amounts so transferred (and earnings thereon), including separately accounting for the portion of the distribution that is includible in gross income and the portion of the distribution that is not so includible; or (iii) on or after January 1, 2008, to a Roth IRA described in Section 408A of the Internal Revenue Code. Effective January 1, 2002, the definition of eligible rollover distribution also includes a distribution to a surviving spouse or to a spouse or former spouse who is an alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Internal Revenue Code. For purposes of this Section 3.36.480, "spouse" has the meaning set forth in federal law.

E. For purposes of this section, "eligible retirement plan" means a plan which constitutes an eligible retirement plan within the meaning of Section 401(a)(31)(D) of the Internal Revenue Code, consisting of one or more of the following:

1. An individual retirement account described in Section 408(a) of the Internal Revenue Code;

2. An individual retirement annuity described in Section 408(b) of the Internal Revenue Code;

3. An annuity plan described in Section 403(a) of the Internal Revenue Code;

4. A qualified trust described in Section 401(a) of the Internal Revenue Code;

5. Effective January 1, 2002, an annuity contract described in Section 403(b) of the Internal Revenue Code;

6. Effective January 1, 2002, a plan eligible under Section 457(b) of the Internal Revenue Code that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or a political subdivision of a state that agrees to separately account for amounts transferred into that plan from the retirement plan; or

7. Effective January 1, 2008, a Roth IRA described in Section 408A of the Internal Revenue Code.

F. For purposes of this section, "distributee" means an employee or former employee. It also includes the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Internal Revenue Code. Effective July 1, 2010, a distributee further includes a nonspouse beneficiary who is a designated beneficiary as defined by Section 401(a)(9)(E) of the Internal Revenue Code. However, a nonspouse beneficiary may only make a direct rollover to an individual retirement account or individual retirement annuity established for the purpose of receiving the distribution, and the account or annuity shall be treated as an "inherited" individual retirement account or annuity.

G. If on or after March 28, 2005, the member is to receive a distribution of an eligible rollover distribution, with a present value greater than one thousand dollars, and if a member does not elect to have such distribution paid directly to an eligible retirement plan specified by member in a direct rollover or to receive the distribution directly, then the system shall pay the distribution in a direct rollover to an individual retirement plan designated by the board in accordance with Section 401(a)(31)(B) of the Internal Revenue Code and IRS Notice 2005-5.

(Ords. 24814, 28885.)

A. Except as provided in subsection B., prior to the adoption of any ordinance amending the Federated City Employees Retirement System, a copy of the proposed ordinance shall be provided to the board for the board's review and recommendation.

1. The board may, but is not required to, submit a report or recommendation on the proposed amendment to the city council.

2. If the board declines or fails to submit a report or recommendation on a proposed amendment within sixty days of receipt of the proposed ordinance by the secretary to the board, the city council may proceed to adopt or not adopt the ordinance without first receiving a report or recommendation from the board.

3. Nothing in paragraph 2. shall be deemed to preclude the board from thereafter submitting a report or recommendation to the city council.

B. In any case where the city council finds that there is a need to adopt an ordinance amending the system within a time period which would not allow for a sixty-day review period, the council may act on the ordinance without first submitting it to the board, and the following procedures shall apply:

1. At the time the council passes the ordinance for publication of title or, in the case of an urgency ordinance, at the time the council adopts the ordinance, the council shall refer the ordinance to the board for study and consideration.

2. Following its study, the board may submit to the council a recommendation that the council take one or more of the following actions:

a. Repeal the ordinance.

b. Readopt the provisions of the ordinance with such amendments, additions or changes, if any, as the board may wish to recommend.

c. Make such other changes or provisions as the board may recommend.

3. Upon receipt of the board's recommendation, the council may implement or disapprove the recommendation.

(Ords. 24921, 24979.)

A. If a member of this plan becomes eligible to purchase permissive service credit in this plan and elects to make such purchase through a lump sum deposit, the plan will accept a direct trustee-to-trustee transfer of funds from an eligible deferred compensation plan as defined in Section 457(b) of the Internal Revenue Code if such transfer is:

1. For the purchase of permissive service credit as defined in Section 415(n)(3)(A) of the Internal Revenue Code; or

2. A redeposit of withdrawn contributions pursuant to Section 3.28.790.

B. If required by the provisions of the Internal Revenue Code or the regulations promulgated under the Internal Revenue Code, the plan will account separately for funds received through a direct trustee-to-trustee transfer from an eligible deferred compensation plan.

(Ord. 26830.)