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(a) Council Authority. The Council may by ordinance adopted in accordance with the provisions of this section establish a program whereby a deferred retirement option plan (DROP) is created and offered to sworn members of the Fire and Police Departments on a voluntary basis as an alternative method of benefit accrual in the Fire and Police Pension Plans. The authority granted in this section shall include the authority to make necessary modifications to requirements of other Charter provisions of the various Fire and Police Pension Plans for the specific and limited purpose of implementing a DROP.
(b) Limitations of DROP. The authority given to the Council to establish a DROP is specifically limited as follows:
(1) DROP Shall Be Cost Neutral to the City. Members who elect to participate in the program will have access to a lump sum benefit in addition to their normal monthly retirement allowance at their actual retirement. With regard to plan funding, DROP shall be cost neutral to the City of Los Angeles as defined by the Plan’s actuary. DROP shall be designed to ensure that the implementation of the program will not adversely affect the tax-qualified status of the Fire and Police Pension Plans.
(2) Five Year Window Period for Enrollment. There shall be a five-year window period for enrollment, after which the City may review and evaluate DROP and at its sole discretion determine to continue DROP by ordinance.
(3) Operability of this Section. This section shall become inoperative in the event that a demand is made by a bargaining unit representing employees affected by this section that an impasse over a proposed ordinance authorized by this section be resolved by binding arbitration if such arbitration is authorized by law. In such event, pension benefits shall again be determined by Charter provisions in effect at the time this section was adopted. Courts of law shall have the exclusive authority to resolve disputes over whether an ordinance authorized by this section meets the cost neutrality requirement established by this section or satisfies any other legal requirement.
(c) Mode of Adoption. Ordinances adopted pursuant to this section shall be adopted in the same manner as provided in section 1618(b), but the City Council shall be advised in writing by an enrolled actuary as to the cost of the proposed program.
SECTION HISTORY
Added by Charter Amendment 2 § 1, approved April 10, 2001, effective May 5, 2001.
Editor’s Note: Refer to Los Angeles Administrative Code Division 4, Chapter 21 (§§ 4.2100 et seq.) for provisions regarding the Deferred Retirement Option Plan.
Notwithstanding any provision of this Part 3 to the contrary, effective July 1, 2001:
(a) The separate Tiers of the Plan shall be merged together and shall thereafter be the single Fire and Police Pension Plan;
(b) The assets of the separate Service Pension Funds, General Pension Funds and other funds described in this Part 3 shall become the assets of the single Plan, but the funds may be accounted for separately by the Board for record keeping, actuarial and other administrative purposes. If the total of the items calculated under Section 1210(b) with respect to a single Tier is a negative number, the assets allocated to that Tier shall be reduced by the amount of such negative number that is applied as an offset to a positive total of items for another Tier. In addition, such offset shall be treated as an increase of assets allocated to such other Tier; and
(c) All of the assets in the Plan, regardless of the fund to which they may be assigned for record keeping, actuarial or other administrative purposes, shall be available to pay any of the benefits provided for under the Plan, except as otherwise provided by Section 401(h) of the Internal Revenue Code.
(d) Notwithstanding the preceding subsections of this section, Member Contributions shall be paid into the applicable Service Pension Fund, and the moneys in the Service Pension Fund(s) shall continue to be applied solely to the payment of service pensions and, if applicable, refunds to Members.
(e) The Council is hereby authorized to provide by ordinance conforming and technical changes to this Part to implement the intention of this Section that the Tiers function as different benefit structures within the single Plan. Ordinances adopted pursuant to this section shall be adopted in the same manner as provided in Section 1618(b) of this Charter.
SECTION HISTORY
Added by Charter Amendment A § 5, approved June 5, 2001, effective July 10, 2001.
(a) Council Authority. The Council shall by ordinance adopted in accordance with the provisions of this section establish a new tier to be known as Tier 5 to the Fire and Police Pension Plan. Such ordinance shall be adopted by the Council no later than December 31, 2001.
(b) Provisions of Tier 5. The new tier to the Fire and Police Pension Plan shall include the following provisions:
(1) Eligibility for Membership: Each person who shall be appointed as a Department Member on or after January 1, 2002, shall become a Tier 5 member. In addition, any Plan Member currently in Tiers 2, 3, or 4, as of January 1, 2002, hired prior to that date who makes an irrevocable election in writing during a six to twelve month time period to be specified by the Board of Fire and Police Pension Commissioners after adoption of this section shall become a Tier 5 member.
(2) Service Pension Formula. Normal Retirement shall be with a minimum of 20 years of service and a minimum age of 50 years. The minimum service pension payable shall be equal to 50% of Final Average Salary at age 50 with 20 years of service. For each year of service after 20 years, an amount of 3% of Final Average Salary shall be provided per year of service, with the exception of the 30th year, in which 4% shall be provided. The maximum percentage of Final Average Salary payable, regardless of length of service, shall be 90% of Final Average Salary. The definition of Final Average Salary shall be the same definition as contained in Tier 3. Notwithstanding the above, a Tier 5 member may elect a deferred retirement with at least 20 years of service, however, the retirement formula will be identical to that contained in Tier 3.
(3) Member Contributions. Each Tier 5 Member shall contribute by salary deduction at a rate of 9% of the amount of his or her salary, except that further contributions shall not be required from a Tier 5 Member who has served as a Plan Member more than 33 years. The City shall pay 1% of this contribution contingent on the Fire and Police Pension Plan remaining at least 100% actuarially funded for pension benefits. In the event Section 1220 of the Charter becomes inoperative, employee contributions shall increase by one-half the increase in the Normal Cost of Tier 5 over the Normal Cost of Tier 3, immediately prior to the inception of Tier 5, as defined by the Plan’s actuary.
(4) Refund of Contributions. Tier 5 Members shall upon termination of employment be entitled to a refund of contributions.
(5) Cost-of-Living Adjustments. The annual cost of living adjustment shall be the equivalent to the provisions of Tier 3, except that there shall also be included a provision providing for the banking of amounts above the maximum annual increase and a provision crediting such banked amounts to members’ pensions during years when the applicable Consumer Price Index is less than the maximum permitted.
(6) Recall to Active Duty. The recall to active duty provisions shall be substantially identical to those currently provided for in Tier 2, Charter Section 1410(b).
(7) Compliance with Certain Internal Revenue Code Provisions. Tier 5 shall contain substantially identical provisions regarding compliance with Internal Revenue Code provisions as those set forth in Section 1520 of this Charter.
(8) Other Provisions and Definitions. All other provisions and definitions of Tier 5 not otherwise described herein shall be substantially identical to those of Tier 3. Notwithstanding the above, Tier 2 Members who elect to transfer into Tier 5, shall retain the existing Tier 2 Survivorship pension benefits contained in Section 1414 of this Charter, subject to the cost of living adjustment described in subsection (5), except that the active duty death survivor benefits shall be calculated at the higher rate currently contained in Tier 3.
(c) Technical Corrections. The Council is hereby authorized to provide conforming and technical changes to Tier 5 that do not result in any additional costs to the Fire and Police Pension Plan.
(d) Operability of the Section. This section shall become inoperative in the event that a demand is made by a bargaining unit representing employees affected by this section that an impasse over a proposed ordinance authorized by this section be resolved by binding arbitration if such arbitration is authorized by law. In such event, pension benefits shall again be determined by Charter provisions in effect at the time this section was adopted. Courts of law shall have the exclusive authority to resolve disputes over whether an ordinance authorized by this section satisfies any legal requirement.
(e) Mode of Adoption. Ordinances adopted pursuant to this section shall be adopted in the same manner as provided in Section 1618(b) of this Charter, but the City Council shall be advised in writing by an enrolled actuary as to the cost of the proposed program.
SECTION HISTORY
Added by Charter Amendment A § 6, approved June 5, 2001, effective July 10, 2001.
Editor’s Note: Refer to Los Angeles Administrative Code Division 4, Chapter 20 (§§ 4.2000 et seq.) for provisions regarding Fire and Police Pension Plan Tier 5.
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