San Jose Municipal Code Part 10 Contributions

Any and all members of this retirement system, and any and all other persons authorized or required by the provisions of this chapter to contribute to this system, and the City of San José, shall contribute to this retirement system, and to the retirement fund, all moneys or sums required of them in this chapter in the manner and at the times provided in this chapter.

(Prior code § 2903.275.)

A. Service purchases under Section 415(n). Effective for permissive service credit contributions made in limitation years beginning after December 31, 1997, if a member makes one or more contributions to purchase permissive service credit under the retirement plan, then the requirements of Section 415(n) of the Internal Revenue Code shall be treated as met only if:

1. The requirements of Section 415(b) of the Internal Revenue Code are met, determined by treating the accrued benefit derived from all such contributions as an annual benefit for purposes of Section 415(b) of the Internal Revenue Code; or

2. The requirements of Section 415(c) of the Internal Revenue Code are met, determined by treating all such contributions as annual additions for purposes of Section 415(c) of the Internal Revenue Code.

3. For purposes of applying this section, the retirement plan shall not fail to meet the reduced limit under Section 415(b)(2)(C) of the Internal Revenue Code solely by reason of this paragraph and shall not fail to meet the percentage limitation under Section 415(c)(1)(B) of the Internal Revenue Code solely by reason of this section.

4. For purposes of this section the term "permissive service credit" means service credit:

a. Recognized by the retirement plan for purposes of calculating a member's benefit under the retirement plan;

b. Which such member has not received under the retirement plan; and

c. Which such member may receive only by making a voluntary additional contribution, in an amount determined under the retirement plan, which does not exceed the amount necessary to fund the benefit attributable to such service credit.

Effective for permissive service credit contributions made in limitation years beginning after December 31, 1997, such term may include service credit for periods for which there is no performance of service, and, notwithstanding subparagraph b., may include service credited in order to provide an increased benefit for service credit which a member is receiving under the retirement plan.

5. The retirement plan shall fail to meet the requirements of this section if:

a. More than five years of nonqualified service credit are taken into account for purposes of this Subsection A.; or

b. Any nonqualified service credit is taken into account under this Subsection A. before the member has at least five years of participation under the retirement plan.

6. For purposes of paragraph 5., effective for permissive service credit contributions made in limitation years beginning after December 31, 1997, the term "nonqualified service credit" means permissive service credit other than that allowed with respect to:

a. Service (including parental, medical, sabbatical, and similar leave) as an employee of the government of the United States, any state or political subdivision thereof, or any agency or instrumentality of any of the foregoing (other than military service or service for credit which was obtained as a result of a repayment described in Section 415(k)(3) of the Internal Revenue Code);

b. Service (including parental, medical, sabbatical, and similar leave) as an employee (other than as an employee described in subparagraph a. of an education organization described in Section 170(b)(1)(A)(ii) of the Internal Revenue Code which is a public, private, or sectarian school which provides elementary or secondary education (through grade twelve), or a comparable level of education, as determined under the applicable law of the jurisdiction in which the service was performed;

c. Service as an employee of an association of employees who are described in subparagraph a.; or

d. Military service (other than qualified military service under Section 414(u) of the Internal Revenue Code) recognized by the retirement plan.

In the case of service described in subparagraph a., b., or c., such service shall be nonqualified service if recognition of such service would cause a member to receive a retirement benefit for the same service under more than one plan.

7. In the case of a trustee-to-trustee transfer after December 31, 2001, to which Section 403(b)(13)(A) of the Internal Revenue Code or Section 457(e)(17)(A) of the Internal Revenue Code applies (without regard to whether the transfer is made between plans maintained by the same employer):

a. The limitations of paragraph 5. shall not apply in determining whether the transfer is for the purchase of permissive service credit; and

b. The distribution rules applicable under federal law to the retirement plan shall apply to such amounts and any benefits attributable to such amounts.

8. For an eligible member, the limitation of Section 415(c)(1) of the Internal Revenue Code shall not be applied to reduce the amount of permissive service credit which may be purchased to an amount less than the amount which was allowed to be purchased under the retirement plan as in effect on August 5, 1997. For purposes of this paragraph, an eligible member is an individual who first became a member in the retirement plan before January 1, 1998.

9. Tier 2 members shall be permitted to purchase service credit, except with respect to the purchase of credit associated with disciplinary suspension time.

B. Modification of contributions for 415(c) and 415(n) purposes. Notwithstanding any other provision of law to the contrary, the retirement plan may modify a request by a member to make a contribution to the retirement plan if the amount of the contribution would exceed the limits provided in Section 415 of the Internal Revenue Code by using the following methods:

1. If the law requires a lump sum payment for the purchase of service credit, the retirement plan may establish a periodic payment plan for the member to avoid a contribution in excess of the limits under Section 415(c) or 415(n) of the Internal Revenue Code.

2. If payment pursuant to paragraph 1. shall not avoid a contribution in excess of the limits imposed by Section 415(c) or 415(n) of the Internal Revenue Code, the retirement plan may either reduce the member's contribution to an amount within the limits of those sections or refuse the member's contribution.

C. Repayments of cashouts. Any repayment of contributions (including interest thereon) to the retirement plan with respect to an amount previously refunded upon a forfeiture of service credit under the retirement plan or another governmental plan maintained by the city shall not be taken into account for purposes of Section 415 of the Internal Revenue Code, in accordance with applicable treasury regulations.

D. Participation in other qualified plans; aggregation of limits.

1. The 415(b) limit with respect to any member who at any time has been a member in any other defined benefit plan as defined in Section 414(j) of the Internal Revenue Code maintained by the city shall apply as if the total benefits payable under all such defined benefit plans in which the member has been a member were payable from one plan.

2. The 415(c) limit with respect to any member who at any time has been a member in any other defined contribution plan as defined in Section 414(i) of the Internal Revenue Code maintained by the city shall apply as if the total annual additions under all such defined contribution plans in which the member has been a member were payable from one plan.

(Ords. 28886, 29266, 29879.)

The retirement board shall furnish to the director of finance the rates of contributions for, and the amounts of any other contributions payable by each member or other person. The director of finance shall apply such rates of contribution to the compensation of each member, and deduct from such compensation the contributions so determined and payable by each member. All other contributions authorized to be made or required of members or other persons shall be paid by such members or persons to the director of finance. The director of finance shall furnish to the board, upon request therefor, a statement of such contributions so deducted or credited with respect to each member or other person, together with such other information as the board may require. All contributions shall be placed in the retirement fund.

(Prior code § 2903.276; Ord. 27768.)

A. The retirement board shall determine and fix, and from time to time it may change, the amount of monthly or biweekly contributions for current service which must be required of the City of San José and of members of this plan to make and keep this plan and the retirement system at all times actuarially sound as provided under Section 3.36.540B. For the purpose of this section, "contributions for current service" for members employed in the fire department shall mean the sum of the normal costs for each actively employed member in the fire department as determined under the entry age normal actuarial cost method, divided by the aggregate current compensation of such members, and "contributions for current service" for members employed in the police department shall mean the sum of the normal costs for each actively employed member in the police department as determined under the entry age normal actuarial cost method, divided by the aggregate current compensation of such members. Rates for current service shall not include any amount required to make up any deficit resulting from the fact that previous rates of contribution made by the city and members were inadequate to fund benefits attributable to service rendered by such members prior to the date of any change of rates, and shall not include any amount required for payment of medical or dental insurance benefits. Notwithstanding the foregoing, members subject to this Subsection A. shall be responsible for any additional contributions described in Section 3.36.410, to the extent applicable to such member.

B. For the purposes of this section, the "entry age normal actuarial cost method" means the actuarial calculation which divides the actuarial present value of a member's future benefits, determined as of the date of the member's employment by the actuarial present value of the member's future salaries, determined as of the date of the member's employment in order to determine the member's normal cost rate. The "current year normal cost" for a member is the member's normal cost rate multiplied by the member's current compensation.

C. The City of San José and the members of this plan shall make and pay all such monthly or biweekly contributions as are found necessary and as are fixed by the retirement board. Except as provided under Section 3.36.410, for members other than tier 2 members, the monthly or biweekly contributions required of members, as compared to the monthly or biweekly contributions required of the city, shall at all times be in the ratio of three to eight (3:8). Except as provided under Section 3.36.410, for tier 2 members, the monthly or biweekly contributions required of tier 2 members and the city shall at all times be in the ratio of one for the city to one for the members (1:1) (sharing equally).

D. With respect to monthly or biweekly contributions required of members, the retirement board shall determine and fix, and from time to time change, the rate of contribution as a percentage of a member's monthly or biweekly compensation. The rate of contribution may be different for members employed in the fire department and members employed in the police department, depending on the benefits provided to such members, but it shall be the same percentage for all members in the fire department and shall be the same percentage for all members in the police department, except as otherwise provided under Section 3.36.410 or another provision of this Chapter 3.36. For tier 2 members, the rate of contribution may be different than for other non-tier 2 members, but it shall be the same percentage for all tier 2 members in any department, except as otherwise provided under Section 3.36.410 or another provision of this Chapter 3.36. The retirement board shall furnish such information to the director of finance so that payroll deductions may be made as provided in Section 3.36.1510.

E. There shall be no offset to normal cost contribution rates in the event plan funding exceeds one hundred percent. Both the city and employees shall always make the full annual required plan contributions as calculated by the retirement board actuaries which will be in compliance with applicable laws and will ensure the qualified status under the Internal Revenue Code.

(Prior code § 2903.280; Ords. 19690, 23432, 27721, 29266, 29879, 30007.)

The city and tier 2 members shall share in all costs of tier 2 of the retirement plan, including but not limited to administrative expenses, normal cost, and unfunded actuarial liability in the manner described in Section 3.36.410. The employee contributions for tier 2 members for each month (or for each two weeks, if compensation is paid biweekly by the city) shall represent the member's portion of the shared cost for such period.

(Ords. 28753, 29266, 29879.)

The city shall be credited with any and all contributions made by it to the retirement system or fund pursuant to this chapter.

(Prior code § 2903.278.)

Each member's or other person's contribution deducted or otherwise paid to the director of finance shall be credited by the director of finance to an individual account of the member or other person for whom the contribution was made. Payment of salaries or wages less such contributions is in full discharge of all claims and demands whatsoever for the service rendered by the members during the period covered by such payment, except the benefits afforded by this chapter.

(Prior code § 2903.277; Ord. 25084.)

A. If any person who is a member of or a recipient of or entitled to any benefits under the police and fire department retirement plan established by Chapter 3.32, or who has made any contributions thereto, elects, pursuant to and as may be authorized by the provisions of this chapter, to become a member of this system or to receive any benefits provided by this system, in lieu of being a member of or receiving any benefits pursuant to the provisions of the police and fire department retirement plan established by Chapter 3.32, any and all contributions theretofore made by said member or person to the police and fire department plan established by Chapter 3.32 and therein credited to him or her shall be paid or transferred to this system and credited to such member or person as a contribution made by him or her to this system for or on account of all service rendered by said member or person prior to the time he or she becomes a member of or elects to receive any benefits under this system for which service such member or person is given credit under this system, and for payment of benefits required by this system to be paid because of service rendered by such member or person prior to the time he or she becomes a member of or elects to receive any benefits under this system. Anything elsewhere in this chapter to the contrary notwithstanding, no person who has been or is a member of, or is entitled to receive or is receiving any benefits under the police and fire department retirement plan established by Chapter 3.32 may become a member of this system or be entitled to any benefits hereunder unless he or she agrees to the above, and such transfers or contributions are made or paid as above provided. Any such member or person shall be deemed to have agreed to the above upon electing to become a member of this system or upon electing to receive any benefits thereunder.

B. In addition, all contributions heretofore or hereafter made by the City of San José to the police and fire department retirement plan established by Chapter 3.32 for or on account of service rendered by any of the above-mentioned members or persons prior to the time they became members of this system or elected to receive any benefits hereunder for which service such members or persons are given credit under this system, shall be transferred to this system and credited to the City of San José as part of its contributions to this system for or on account of said prior service rendered by said members or persons prior to the time they became members of or elected to receive any benefits under this system and for the payment of benefits required to be paid by this system because of such prior service of said members or persons.

C. In addition, the City of San José shall contribute to the retirement fund, monthly, all such amounts as the retirement board shall find must be contributed to the fund, on account of service rendered by members or other persons prior to the effective date of this chapter and on account of benefits payable because of such prior service to make this plan actuarially sound as provided under Section 3.36.540B., to the extent that such amounts are not provided by such members' or persons' accumulated prior service contributions and said city's prior contributions for such prior service.

D. In addition, except as provided in Subsection E. below and Section 3.36.1555, the City of San José shall contribute to the retirement fund, monthly, all such amounts as the retirement board shall find must be contributed to the fund, to make this plan actuarially sound as provided under Section 3.36.540B., to the extent that such amounts are not provided by member and city's current service contributions as provided for in Section 3.36.1520.

E. To the extent this Section 3.36.1550 implicates the benefits of a tier 2 member or a member who, prior to August 4, 2013 for police and prior to January 1, 2015 for fire were non-tier 2 members of this plan and then became tier 2 members prior to March 31, 2017 but on and after March 31, 2017 remain in the plan but are no longer considered tier 2 members under the definition of tier 2 member under Section 3.36.020.15, the rates of contribution for such members and the city shall be determined in accordance with Section 3.36.410, including any amount designed to recover the difference between the amount of normal contributions theretofore actually required to be paid by members and the city and any greater amount which, because of amendments hereafter made to this system or as a result of experience under this system, said members or the city should have theretofore been required to pay in order to make the abovementioned pensions, allowances and other benefits which are or will become payable to such members.

(Prior code § 2903.279; Ords. 19690, 25614, 29266, 29879.)

A. The members of this plan shall contribute to the retirement fund that portion of the contributions for prior service which is attributable to the contributions that would have been made as contributions for current service by members of this plan because of the increased benefits provided by Section 3.36.805 and Section 3.36.1020.B.3 had the members made such contributions from February 4, 1996, to the effective date of the contribution rates adjustments to implement such benefits. The rate of contribution for such prior service, expressed as a percentage of payroll, shall be the same percentage for all members.

B. The members of this plan who are employed in the police department shall contribute to the retirement fund that portion of the contributions for prior service which is attributable to the contributions that would have been made as contributions for current service by such members because of the increased benefits provided by Ordinance No. 27721 had the members made such contributions from July 1, 2006, to the effective date of the contribution rates adjustments to implement such benefits. The rate of contribution for such prior service, expressed as a percentage of payroll, shall be the same percentage for all members who are employed in the police department.

C. The prior service costs payable by members of this plan pursuant to subsections A. and B. shall be amortized over the same period of time as the city's contributions for prior service costs for the benefits referenced in subsections A. and B., respectively, are amortized.

(Ord. 25614, 27992.)

If any other contributions are required of a person or persons under provisions of other parts of this chapter, either as a condition to becoming a member of this system; or as a condition to receiving any benefit hereunder, or for any other reason the same shall be paid by such person or persons as provided by said other provisions.

(Prior code § 2903.281.)

Except as provided in Section 3.36.190, if the membership of a member of this system terminates for any reason other than death or retirement, or in the case of a tier 2 member with ten years of service, and his accumulated contributions are returned to him or withdrawn by him, the city shall not receive a refund of its contributions made for such member nor receive a credit for such contributions against other contributions required to be made by the city.

(Ords. 20276, 29266.)

From and after July 12, 1987, all administrative expenses of this retirement plan, as determined and approved by the board, including staff salaries and indirect labor costs, shall be paid from the retirement fund. The payment of said expenses shall be subject to such limitations on said expenses as may be agreed upon by the city and the employee organizations representing members of this plan and set forth in the appropriate memoranda of agreement. Expenses in excess of said limitations, if any, shall be paid by the city.

All administrative costs related to providing benefits for tier 2 members of the system, as determined and approved by the board, shall be reflected in contribution rates so that such costs are shared equally by the tier 2 members and the city in accordance with Section 3.36.410.

All administrative costs related to tier transition of members who prior to August 4, 2013 for Police and prior to January 1, 2015 for Fire were non-Tier 2 members of this Plan and then became Tier 2 members prior to March 31, 2017 but on and after March 31, 2017 remain in the Plan but are no longer considered Tier 2 members as defined under Section 3.36.020.15, shall be reflected in contribution rates so that such costs are shared equally by the impacted Tier 1 members and the city in accordance with Section 3.36.410.

(Prior code § 2903.282; Ords. 20065, 20849, 21164, 21243, 22678, 22704, 29266, 29879, 30007.)

A. For the purposes of this section, contributions "picked up" by the city means contributions to this plan which are designated as employee contributions but are treated as employer contributions for income tax purposes as authorized by Section 414(h)(2) of the Internal Revenue Code (26 U.S.C.A. 414(h)(2)).

B. Notwithstanding any other provisions of law, the city may pick up, for the sole and limited purpose of deferring taxes as authorized by Section 414(h)(2) of the Internal Revenue Code (26 U.S.C.A. 414 (h)(2)) and Section 17501 of the California Revenue and Taxation Code, all or a portion of the contributions required to be paid by a member of this plan.

C. Nothing herein shall be construed to mean that any contributions so picked up by the city are to be treated as city contributions for any purpose other than the sole and limited purpose specified herein. Any contributions so picked up by the city shall be paid into the retirement fund and shall be treated in the retirement fund in the same manner as such contributions would be treated if they had not been picked up by the city. The member shall have no right to receive such picked up contributions directly but instead they must be paid to the retirement fund.

D. Subject to applicable laws relating to meet and confer requirements, the city shall retain the authority periodically to increase, reduce or eliminate the pickup by the city of all or a portion of the contributions required to be paid by a member of this plan.

(Ords. 22458, 26005, 28030, 28886.)

A. Such monthly or biweekly contributions as are required of the city by the provisions of this Part 10 shall be paid by the city within ten (10) days from and after the end of the month or two-week period for which they are made.

B. In lieu of making the monthly or biweekly contributions specified in this Part 10 for the pay periods commencing with the third pay period in fiscal year 2008-09, the city shall have the option to make, on or before August 1, 2008, an advance lump sum payment of the city's contributions to the medical benefits account and the retirement fund. The amount of such advance lump sum payment for fiscal year 2008-09 shall be as determined by the board to be actuarially equivalent to the monthly or biweekly payments that would otherwise have been the city's required contributions to the medical benefits account and the retirement fund for the pay periods commencing with the third pay period in fiscal year 2008-09.

C. Commencing with fiscal year 2009-10, the city shall have an annual option to select the advance periodic basis on which city contributions to the medical benefits account and to the retirement fund for that fiscal year will be paid; provided that such payment schedule shall be no less frequent than quarterly. Except as may otherwise be agreed to by the board, the notice of intent to exercise the option, including the advance periodic basis selected and the payment date(s) (the "notice of intent"), shall be provided by the city manager to the board on or before April 30th of the fiscal year prior to the fiscal year in which city may wish to exercise the option. The amount of the advance periodic payment(s) contained in city's notice of intent shall be as determined by the board to be actuarially equivalent to the monthly or biweekly payment that would otherwise have been required.

D. In the event that written notice of intent to exercise the option to select an alternative periodic payment schedule, has not been given by the city manager to the board on or before April 30th, or such other date as may be approved by the board, of each fiscal year, or if subsequent to the giving of such notice and prior to the commencement of the fiscal year, city elects not to exercise the option to select an alternative periodic payment schedule, city's payment of the city's contributions to the medical benefits account and to the retirement fund shall be made monthly or biweekly as otherwise specified in this Part 10.

E. Such alternative periodic payments as are made by the city pursuant to the provisions of this Part 10 shall be paid by the city within ten (10) days of the payment date(s) specified in city's notice of intent.

F. No later than the end of the second pay period in the fiscal year immediately following a fiscal year in which city has made a lump sum payment as specified in paragraph B. and C., city shall provide to the board a statement showing the actual amount of the city's payroll for members of the plan for the prior fiscal year. The board shall then determine whether the lump sum advance payment(s) and the payment(s) that would otherwise have been required in the absence of the lump sum advance payment(s) are actuarially equivalent. The city shall pay any underpayment by the earlier of ten (10) days following receipt of the board's notice of determination or city's next contribution due date. The city shall receive credit for any overpayment in the form of an offset against the next payment(s) due by the city.

G. In the event that a city elected lump sum payment is made later than the payment date specified in the city's notice of intent, city's contribution to the medical benefits account and to the retirement fund will be recalculated by the board's actuary, at the city's expense, to reflect the timing difference. The city will pay the difference within ten (10) days of the date that the board's notice of the amount due is received.

H. Any late payment to be made later than ten (10) days after the payment date specified in the city's notice of intent is subject to approval by the board.

(Ord. 28332.)