(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. Purchase by a member of service credit for periods of eligible service with other governmental entities or purchase by a member of service credit for uncompensated maternity leave.
Full-time Service. A minimum of six (6) months of uninterrupted service with an eligible governmental entity, excluding part-time service.
Governmental Entity. The United States Government, including its territories; Indian tribal governments, including subdivisions, agencies, or instrumentalities of Indian tribal governments, in accordance with Internal Revenue Code section 414(d); any agency of the United States Government; the United States Postal Service; 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. The method for the buy back of service credit set forth in this section.
Military Service. Full-time service in the Armed Forces of the United States, for which no retirement benefit is or will be payable to the member. To qualify as military service, the character of the member’s service in the Armed Forces of the United States must have been “Honorable.”
Prior Plan. A retirement plan of a governmental entity in which the member was a participant during full-time service.
Uncompensated Maternity Leave. A leave of absence from City Service taken for maternity reasons without pay, for which the member did not otherwise receive service credit. Such periods of uncompensated maternity leave shall not be subject to any continuous months requirement, nor shall such periods be rounded down to the nearest whole month, but purchases may be restricted to whole biweekly payroll periods. Such leave shall be a minimum of one (1) month and a maximum of twelve (12) months with respect to any one (1) pregnancy.
(b) Eligibility. Subject to any applicable limitations under federal law, 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 on the following terms and conditions:
(1) 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 pursuant to Section 4.1096. 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.
(2) 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 provided, however, that to the extent required by federal law, periods of service in the United States military reserve may be purchased even if the Member is eligible to receive a retirement benefit from the prior plan. The Member must obtain certification from the governmental entity or its public retirement system showing the full-time paid employment periods and further certifying that the member is not eligible and will not be eligible for retirement benefits for that service. Such certification must be sufficient to satisfy the Board of Administration that the service qualifies for purchase as provided in this section. Service in the Armed Forces of the United States may be certified by an official discharge document issued by said Armed Forces showing the character of the Member’s service and the Member’s dates of service in said Armed Forces.
(3) If the member has contributions and interest on deposit in the prior plan, the member may purchase credit for the full-time paid employment period represented by such contributions and interest by withdrawing these contributions and interest and rolling them over to the Retirement System, as permitted by the Internal Revenue Code and by the Board of Administration, to be credited as a partial payment towards the cost for purchasing this service as determined pursuant to Subsection (e). Partial payment may also be accomplished via a trustee-to-trustee transfer of funds as authorized elsewhere in this article. The remaining balance due under the purchase agreement shall be either deposited in a lump-sum or by payroll deduction as provided by Board rule pursuant to Subsection (f)(2).
(4) If the member does not have contributions and interest on deposit in the prior plan of the Qualified Governmental Organization, the member may purchase credit for the full-time paid employment period as provided in Subsection (e).
(5) 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 an uncompensated maternity leave. No member shall be permitted to purchase more than one (1) year of uncompensated maternity leave per pregnancy.
(c) Application of Buy Back Credit. Purchased service credit shall count for all purposes under this chapter and Chapter 11, except that purchased service shall not count toward any period of time required to establish eligibility to retire for disability under Section 4.1080.8, nor toward any period of service as a contributing member of the Retirement System required to establish eligibility for service retirement under Section 4.1080.5 or deferred service retirement under Section 4.1080.6.
(d) Application to Purchase Buy Back Credit. 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. Buy back credit for one or more periods of full-time service with another governmental entity 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.
(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:
(1) Up to five (5) years of military service and up to one (1) year of uncompensated maternity leave per pregnancy may be purchased at the cost which would have applied had such service been at the cost which would have applied had such service been purchased pursuant to the Tier 1 Government Service Buy Back Program set forth in Section 4.1020 of this Code. Military time in excess of five (5) years must be purchased at the cost provided in Subsection (e)(2) below. No member shall be permitted to purchase more than one (1) year of uncompensated maternity leave per pregnancy.
(2) The cost for all service purchased under this exception, except for service that qualifies for purchase under Subsection (e)(1) above, shall be determined as follows:
The member’s contribution rate, as established in 4.1080.3(a), 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 that the member agrees to purchase. Compensation as used in this subsection shall refer to the member’s compensation earnable, as defined in Section 4.1080.1, Subsection (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 eleven percent (11%), the City Contribution Rate is nine percent (9%), and the period of service credit to be purchased is two years, the cost would be determined as follows:
The eleven percent (11%) member contribution rate plus the nine percent (9%) City Contribution Rate results in a total contribution rate of twenty percent (20%). Thus, to purchase two years of service credit would cost the member a total of $40,000.00: twenty percent (20%) 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 (including contributions allocated to fund the 401(h) account) for Tier 3 based upon the City’s payments for the seven years prior to the time of purchase. For the first seven years commencing February 21, 2016, this rate shall be computed upon the City’s average annual percentage of payroll contributions to Tier 3, with the rate for any missing year(s) based upon the average of the annual rate(s) for the prior year(s), except that for the first year, the Retirement System shall base the “City Contribution Rate” upon a figure to be determined by the Retirement System’s actuary.
(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. A member may, at any time, complete payment of a buy back agreement by a lump sum payment. 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 service or disability 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) Termination of Agreement. Any member who has entered into a purchase agreement to make partial payments to buy back credit, may, at any time, voluntarily terminate this purchase agreement, and be relieved of the member’s obligation to make further payments, by filing a written termination notice with the Retirement System. A member who has voluntarily terminated a purchase agreement shall receive credit as provided herein, but shall not be allowed to acquire the remaining buy back credit.
(i) 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. However, if the deceased is survived by a survivor who may become eligible to receive a monthly benefit from the Retirement System, then such survivor may make a single lump-sum payment to partially or fully complete the purchase of buy back service under the member’s agreement, or elect to apply the service credit, or a portion thereof, to the calculation of the benefit for which the survivor qualifies.
(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 eighty percent (80%) 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.
SECTION HISTORY
Added by Ord. No. 184,134, Eff. 1-22-16.
Amended by: Subsec. (b)(2), Ord. No. 184,853, Eff. 4-6-17.