(a) Definitions. For the purpose of this section, the following words and phrases shall have the meaning ascribed to them in this subsection unless a different meaning is clearly indicated by the context:
Buy Back shall mean purchase by a member of retirement credit for periods of eligible service with other governmental entities or purchase by a member of retirement credit for uncompensated maternity leave.
Full-time Service shall mean a minimum of six (6) months of uninterrupted service with an eligible governmental entity, excluding part-time service.
Governmental Entity shall mean the United States Government, including its territories, any agency of the United States Government, the United States Postal Service and any branch of the United States military service, any state or political subdivision thereof, any local government or special district within any state in the United States; and shall exclude non-governmental agencies supported by government contracts or grants and any prior service with the City of Los Angeles.
Government Service Buy Back Program or GSB shall mean the method for the buy back of retirement credit set forth in this section.
Prior Plan shall mean a retirement plan of a governmental entity in which the member was a participant during full-time service.
Uncompensated Maternity Leave shall mean a leave of absence from City Service taken for maternity reasons without pay, provided that such leave shall be a minimum of one (1) month and a maximum of twelve (12) months with respect to any one pregnancy.
(b) Eligibility. A member is eligible to buy back credit for periods of full-time service with other governmental entities and to buy back credit for periods of uncompensated maternity leave. Notwithstanding the foregoing:
(1) Members may not buy back credit for periods of service for which they are currently eligible or will become eligible to receive a retirement benefit from a prior plan. For purposes of the previous sentence, a member shall be treated as eligible for such benefit from a prior plan even if the member will not receive such benefit solely due to the member’s withdrawal of member contributions and interest from the prior plan, unless such withdrawal occurred prior to the member’s date of hire by the City or unless the member deposits the amount of such withdrawal within ninety (90) days of such withdrawal as a portion of the purchase cost. In addition, a member shall be treated as eligible for such benefit from a prior plan if the member received, at any time, a distribution from the prior plan in excess of member contributions and interest with respect to such period of service. The Board may extend the 90-day period if required for compliance with Section 415 of the Internal Revenue Code. In the event that, prior to the attainment of the minimum age and service for a service retirement under LACERS, the member becomes eligible to receive currently or in the future a retirement benefit from the prior plan with respect to such period of service, the corresponding buy back credit shall be canceled, and the member shall receive a refund of the payments made to purchase such buy back credit, with interest, payable upon the earlier of death, termination of employment, or retirement from City Service.
(2) Members are not allowed to buy back credit for periods of service from a governmental entity which provides reciprocal benefits with LACERS and for which that member would be entitled to those reciprocal benefits. For purposes of the previous sentence, a member shall be treated as entitled to reciprocal benefits even if the member will not receive such benefits solely due to the member’s withdrawal of member contributions and interest from the prior plan, unless such withdrawal occurred prior to the member’s date of hire by the City.
(3) Only a member performing City service as defined in Section 4.1051 shall be eligible to execute a buy back agreement.
(4) For purposes of this section, the date of a withdrawal shall be deemed to be the date of receipt of the proceeds of the withdrawal by the member or other designated recipient.
(5) Uncompensated Maternity Leave. Only a member who was on an active employment status immediately before and after taking a leave of absence for maternity reasons without pay shall be eligible to buy back credit for such leave of absence.
(c) Application of Buy Back Credit. Purchased service credit shall only count for purposes of calculating the member’s service retirement allowance. Purchased service credit shall not count toward establishing the minimum ten (10) years of continuous service required to qualify for retirement under Subsection 4.1055(a), the minimum five (5) years of continuous service required to qualify for retirement under Subsection 4.1056(a), or the minimum ten years of continuous service required to qualify for disability retirement under Subsection 4.1058(a). Further, purchased service credit shall not count as service or service credit for purpose of qualifying for any benefits provided in Chapter 11 of Division 4 of this Code.
(d) Minimum and Maximum Periods of Purchase. A member electing to buy back credit for previous service with other governmental entities or for periods of uncompensated maternity leave shall file with the Board of Administration a written application identifying the time periods and agencies for which credit is to be purchased, and shall submit proof acceptable to the Board of Administration establishing the fact of such other service with another governmental entity or such uncompensated maternity leave. Buy back credit for one or more periods of full-time service with another governmental entity prior to entrance or re-entrance into the Retirement System may be purchased, except, however, such purchase shall be limited to not less than six (6) months of uninterrupted service from a single entity. The six (6)-month minimum requirement does not apply to the uncompensated maternity leave. The period(s) of service purchased shall be limited to a total of four (4) years.
(e) Written Agreement and Cost of Purchase. A member electing to buy back credit described herein shall enter into a written agreement with the Retirement System. Such agreement shall specify the amount to be paid for the purchase of this service credit. The cost to purchase service credit shall be determined as follows:
The member’s contribution rate shall be combined with the “City Contribution Rate” (as defined below) to establish the total percent of the member’s compensation, at the time of purchase, that is to be paid for the total length of the period of service credit (not to exceed four years) that the member agrees to purchase. Compensation as used in this subsection shall refer to the member’s compensation earnable, as defined in Subsection 4.1051(a), at the time of purchase.
As an example, assuming the member’s compensation at the time of purchase is $100,000.00 per year, the member’s contribution rate is ten percent (10%), the City Contribution Rate is twenty percent (20%), and the period of service credit to be purchased is two (2) years, the cost would be determined as follows:
The ten percent (10%) member contribution rate plus the twenty percent (20%) City Contribution Rate results in a total contribution rate of thirty percent (30%). Thus, to purchase two (2) years of service credit would cost the member a total of $60,000.00 (thirty percent (30%) of the member’s $100,000.00 compensation for each year of service purchased).
The “City Contribution Rate” shall be the average annual percent of payroll contributed by the City to the Retirement Fund (excluding contributions allocated to fund the 401(h) account) for Tier 2 based upon the City’s payments for the seven years prior to the time of purchase. For the first seven (7) years commencing January 1, 2013, this rate shall be computed upon the City’s average annual percentage of payroll contributions to Tier 2, with the rate for any missing year(s) based upon the average of the annual rate(s) for the prior year(s).
(f) Method of Purchase.
(1) The member may elect to pay on an after-tax basis in a lump sum or in biweekly installments through payroll deduction, subject to any applicable Internal Revenue Code restrictions.
(2) The Board may establish rules to allow members to pay for purchases via rollovers of funds.
(3) Should the member elect to purchase the buy back service credit through payroll deduction, annual interest at a rate determined by the Board and set at the commencement of the agreement shall be charged. The Board may establish a minimum biweekly payroll deduction.
(g) Execution of the Agreement. A member entering into a buy back agreement shall complete all contributions prior to the effective date of retirement in order to receive agreed upon buy back credit. In the event the member elects to retire prior to completion of the buy back agreement, the member may receive prorated buy back credit for that portion of the service with other governmental entities or uncompensated maternity leave which have been purchased by contributions already made and forfeit the remainder of credit covered by the agreement; or the member may make a lump sum payment sufficient to complete the total payment covered by the agreement. Additionally, a member who elects to terminate an after-tax agreement prior to its completion, or at the time of retirement, may elect to receive a cash refund of the buy back contributions and interest payable upon the earlier of death, termination of employment or retirement or prorated buy back credit.
(h) Member’s Death. In the event that a member who has entered into a buy back agreement dies prior to retirement, the funds paid for this purchase shall be considered to be a part of the member’s accumulated contributions and shall be refunded accordingly, with interest thereon computed at the rate applicable to regular member contributions.
(i) Member’s Disability Retirement. Because purchased service credit does not count towards disability retirement benefits, at the time of the member’s disability retirement the member may elect either to receive a refund of the funds paid for this purchase, including interest thereon, or to apply these funds to purchase a larger annuity.
(j) Limits on Purchase. In the event part or all of the purchased service credit at the time of retirement would cause the member’s service retirement allowance to exceed 75% of final compensation, the purchase cost attributable to any excess service credit that may not be used in the retirement formula, including interest thereon, shall be refunded or may be applied by the member to purchase a larger annuity if doing so does not cause the retirement allowance to exceed any federal limitations that may apply.
(k) Administration. The administration of this section shall be under the exclusive management and control of the Board of Administration. Said Board shall have, and is hereby granted, full power and authority to adopt and enforce all such rules and regulations as it may deem necessary for the carrying out of the provisions of this ordinance. The Board of Administration shall have the right to construe this section, to interpret any provision thereof, to make rules and regulations relating to this section, and to determine any factual questions arising in connection with this section’s operation after such investigation or hearing as the Board may deem appropriate. Any decision made by the Board under the provisions of this section shall be conclusive and binding on all parties concerned.
SECTION HISTORY
Added by Ord. No. 182,629, Eff. 7-25-13.