(a) Definitions. For the purposes 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:
Airport Peace Officer Service Purchase Program means the program that requires persons appointed prior to January 7, 2018, and who, on that date, or on the date immediately preceding the date of such persons' appointment as a firefighter and employment by the Fire Department, were sworn in, as provided by Penal Code Section 830.1, to perform police or firefighting duties for the Department of Airports, in class codes 3225-1, 3225-2, 3225-3, 3202-0, 3202-1, 3202-2, 3236, 3226-0, 3226-1, 3226-2, 3227, 3203, 3203-9, 3228-0, 3228-1, 3228-2, 3205, 3234 or 3232, and who made an irrevocable election in writing to become a member of Tier 6 in lieu of membership in LACERS, to purchase all of their prior LACERS service from the Plan on the terms and conditions established in this section.
Board means the Board of Fire and Police Pension Commissioners.
DROP means the Deferred Retirement Option Plan established in Chapter 21 of Division 4 of the Los Angeles Administrative Code.
Full Actuarial Cost means the cost to be paid for purchased service in order to achieve cost neutrality to the Plan as determined by the Board's actuary.
LAAC means the Los Angeles Administrative Code.
LACERS means the Los Angeles City Employees' Retirement System.
Plan means the Fire and Police Pension Plan established in Article XI, Part 3 of the Los Angeles City Charter.
Purchased Service means service purchased under the Airport Peace Officer Service Purchase Program.
(b) Participation in the Program. Only persons who were appointed prior to January 7, 2018, and who, on that date, or on the date immediately preceding the date of such persons' appointment as a firefighter and employment by the Fire Department, were sworn in, as provided by Penal Code Section 830.1, to perform police or firefighting duties for the Department of Airports, in class codes 3225-1, 3225-2, 3225-3, 3202-0, 3202-1, 3202-2, 3236, 3226-0, 3226-1, 3226-2, 3227, 3203, 3203-9, 3228-0, 3228-1, 3228-2, 3205, 3234 or 3232, and who made an irrevocable election in writing to become a member of Tier 6 in lieu of membership in LACERS, on the terms and conditions set forth in Charter Section 1704 and in Sections 4.1002(e)(1), 4.1080.2(e)(1), and this Section 4.2215 of the LAAC.
(c) All Prior Service Must Be Purchased. Consistent with Charter Section 1704(b), all members who elected to enter Tier 6 membership in lieu of membership in LACERS must transfer all prior service from LACERS to the Plan, including prior City service earned as a contributing member of LACERS and any service purchased from LACERS, and pay the full actuarial cost of the service to be transferred, as determined by the Plan's actuary and pursuant to the requirements of this section.
(d) Transfer of Funds from LACERS to the Plan. For each member who purchases prior service pursuant to this section, LACERS shall transfer to the Plan by way of a direct trustee-to-trustee transfer and in a manner consistent with the Internal Revenue Code:
(1) Sufficient funds to cover all funded accrued liability related to the benefits provided in Chapter 10 of Division 4 of the LAAC for all periods of the member's prior service to include, but not necessarily be limited to, employee contributions, City/Department of Airports contributions, and earnings. The funds that are transferred from the member's contribution account with LACERS, including interest, shall be transferred to the member's individual contribution account with the Plan (where they shall earn interest and be refundable as provided in Charter Section 1714); the balance of the funds transferred from LACERS shall be transferred to the appropriate Plan account and credited toward satisfying the City's liability for the benefits provided in Tier 6 of the Plan (excluding the City's liability for benefits provided in Chapter 11.5 of Division 4 of the LAAC).
(2) Sufficient funds from LACERS' 401(h) account shall be transferred to cover all funded accrued liability related to the benefits provided in Chapter 11 of Division 4 of the LAAC for all periods of the member's service to include, but not necessarily be limited to, City/ Department of Airports contributions and earnings. These funds shall be transferred in a manner consistent with the Internal Revenue Code directly to the Plan's 401(h) account and credited toward satisfying the City's obligation to fund benefits provided in Chapter 11.5 of Division 4 of the LAAC.
The amount of funds due to the Plan from LACERS shall be mutually agreed upon between the Plan and LACERS, subject to all requirements of the Internal Revenue Code, upon advice from the plans' actuaries, and is to include, but not necessarily be limited to, employee contributions, City/Department of Airports contributions, and earnings to cover all funded accrued liability for the period of the transferred service determined by first using the results in the most recent actuarial valuation as of June 30, 2016, and then adjusting those results for the passage of time, including adjustments for both time value of money and City and employee contributions made from June 30, 2016, to the date of fund transfer to the Plan, using the actuarial assumptions from the June 30, 2016, valuation. All the relevant actuarial assumptions used in the June 30, 2016, LACERS actuarial valuations, with adjustment to a unisex basis, are to be used in the calculations. There shall be a separate calculation for purposes of Subdivision (1) and for purposes of Subdivision (2) above. The total sum transferred shall be credited towards the member's purchase costs, as provided in Subsections (f), (g) and (h) herein, and the member shall forfeit all right to benefits from LACERS.
(e) Requirement to Purchase Years of Service. A member shall purchase Years of Service with the Plan for all prior periods of service with LACERS by entering into a purchase agreement, subject to the following terms and conditions:
(1) All Service Must Be Purchased. The member must elect to purchase the total period of prior LACERS service from the Plan.
(2) Purchase Deadline. The right to become a member of LAFPP and purchase service granted in this section shall terminate on January 7, 2018, or upon the date of the employee's graduation from the Fire Department drill tower, whichever is earlier, except that written purchase agreements entered into on or before that date may be completed thereafter.
(f) Cost of Purchased Service. The member shall be required to pay the full actuarial cost of the purchased service as determined by the Plan's actuary without taking into consideration incidental administrative expenses incurred by the Plan, reduced by the amount of any funds transferred from LACERS to the Plan as provided in Subsection (d) above, except as may be otherwise provided in Subsection (g) below. The total purchase cost for each member, including funds transferred pursuant to Subsection (d) above, shall be allocated between the portion necessary to fund the Tier 6 health benefits provided in Chapter 11.5 of Division 4 of the LAAC and to fund all the other benefits provided in Tier 6.
In determining the purchase cost, the actuary shall determine the full actuarial cost utilizing the actuarial assumptions in the most recent actuarial valuation as of June 30, 2016, and then adjusting those results for the passage of time from June 30, 2016, to the date of the actual payment for the purchase contracted using the actuarial assumptions from the June 30, 2016, valuation, and taking into consideration the benefits that may be provided by the Plan as a result of the purchased service. Factors to be considered by the actuary shall include: (a) projected salary increases; (b) probabilities of service retirement, disability retirement, DROP participation, termination, death; (c) probability of leaving a spouse or domestic partner eligible for a continuance benefit; and (d) medical inflation and other assumptions included in the actuarial valuations. All the relevant actuarial assumptions used in the June 30, 2016, Plan actuarial valuations, with adjustment to a unisex basis, will be used in the calculations. There shall be a separate calculation for each of the benefits referenced in Subsections (g) and (h) below.
(g) Purchase Costs Attributable to Tier 6 Health Benefits. The member shall pay the full actuarial cost for the Years of Service purchase attributable to the Tier 6 health benefits provided in Chapter 11.5 of Division 4 of the LAAC, as determined in Subsection (f).
In accordance with the Internal Revenue Code, in the event that the funds transferred from LACERS' 401(h) account to the Plan's 401(h) account (as provided in Subsection (d)(2)) are not sufficient to fund the full actuarial cost of the purchased service attributable to the benefit provided in Chapter 11.5 of Division 4 of the LAAC to a given member (as determined in Subsection (f)), the member shall make additional contributions on an after-tax basis to fund the member's other Tier 6 benefits in an amount equal to the amount by which the 401(h) account has been underfunded. The purpose of such additional contributions (which reduce the City's obligation to fund other Tier 6 benefits) is to offset the additional liability incurred by the City for the benefits payable to the member from the Plan's 401(h) account, pursuant to the provisions in Chapter 11.5 of Division 4 of the LAAC, so as to render the member's purchase of this service cost neutral to both the City and the Plan. These additional contributions shall be placed in the member's individual contribution account and shall be credited with interest and be refunded on the terms set forth in Charter Section 1714. Such additional contributions shall be paid as provided in Subsection (i) below.
(h) Purchase Costs Attributable to Other Tier 6 Benefits. The member shall pay the full actuarial cost for the Years of Service purchase attributable to other Tier 6 benefits (excluding the cost for the health benefits provided in Chapter 11.5 of Division 4 of the LAAC) as determined in Subsection (f).
To the extent that the purchase cost required to fund other Tier 6 benefits exceeds the funds transferred under Subsection (d)(1), the member shall make additional contributions, which shall be placed in the member's individual contribution account and shall be credited with interest and be refunded on the terms set forth in Charter Section 1714. Such additional contributions shall be paid as provided in Subsection (i) below.
(i) Written Purchase Agreement Required. The member shall, on the date upon which he or she files his or her election form with LACERS, pursuant to Section 4.1002(e)(1) or Section 4.1080.2(e)(1), enter into a written purchase agreement with the Plan for the purchase of service. If this purchase requires the member to make additional contributions as provided in Subsection(s) (g) and/or (h) herein, the written purchase agreement shall specify whether these payments shall be paid by lump sum payment(s) or on an installment basis through payroll deductions or by both.
A member's election to become a member of LAFPP and purchase service under this provision shall become irrevocable once the member files his or her election form with LACERS.
At the time a member is provided with a cost estimate for the purchase of service, the member shall be advised of the interest rate that will accrue on any unpaid balance if not paid in full by a specified date. The interest rate that a member shall be charged on the unpaid balance of any purchase agreement shall be the same rate as the assumed investment earnings rate used in the Plan's June 30, 2016, actuarial valuations.
Subject to requirements of the Internal Revenue Code, lump sum payments for amounts due in excess of the funds transferred pursuant to Subsection (d) above may be paid by a cash payment on an after-tax basis (including a post-tax payroll deduction), by a trustee-to-trustee transfer from the City's Deferred Compensation Plan pursuant to Internal Revenue Code Section 457(e)(17) or by a rollover from an eligible retirement plan (as defined in Internal Revenue Code Section 402(c)(8)), or by a combination of these methods.
Installment payments shall be made in a fixed amount by payroll deduction on a post-tax basis pursuant to the terms of the member's written agreement with the Plan. An installment payment agreement may be initiated or ended by a lump sum payment.
All payments, whether by lump sum or on an installment basis, must be completed prior to the member's retirement or, if applicable, DROP entry date, whichever occurs first.
In the event a member who has not completed payment for Purchased Service dies prior to entering DROP or prior to retirement, if not a DROP participant, and leaves a Qualified Survivor, as defined in Charter Section 1702(h), the Qualified Survivor shall have the right to make a lump sum payment to complete the member's purchase, rather than to have the member's Years of Service pro-rated based upon the payments made prior to the member's death. The Qualified Survivor shall have ninety (90) days following the member's death to make his or her election, unless the Board, by rule, shall establish a different election period. No benefits shall be paid from the Plan on account of the member's death until the Qualified Survivor has either: (i) elected to complete the purchase and made timely payment; or (ii) elected not to complete the purchase. Failure to make timely payment within the election period shall constitute an election by the Qualified Survivor not to complete the purchase and receive benefits based on the pro-rated service as determined by the Plan's actuary. The Board, by rule, shall establish a deadline for the receipt of payment from a Qualified Survivor who has elected to complete the purchase.
(j) Reversion of Funds to LACERS. In the event a former Plan member who purchased service under this section should become employed by the City in a position in which he or she becomes a member of LACERS, the Board, upon receipt of a written request from such former member, shall authorize a transfer of all the former member's contributions, including interest, from the Plan to LACERS, provided that the former member shall be required to waive all rights to benefits from the Plan. The member contributions to be transferred shall include all member contributions made to the Plan during periods of Plan membership plus any member contributions made to LACERS that were previously transferred from LACERS to the Plan pursuant to a purchase under this section. In addition to transferring all member contributions, the Plan shall transfer to LACERS all other funds transferred to the Plan from LACERS on account of such former Plan member, together with any interest and/or earnings attributable thereto. These funds shall be transferred from the appropriate Plan account (member contributions, City regular contributions and investment income, and 401(h) account) and shall be returned to the appropriate LACERS fund (member contributions, City regular contributions and investment income, and 401(h) account).
(k) Board Administration of the Program. The Board shall administer the Airport Peace Officer Service Purchase Program and adopt all rules necessary to implement the program. The Board shall determine any factual questions arising in connection with the program's operation after investigation or hearing, as the Board deems appropriate. The Board's decision shall be conclusive and binding on all parties concerned.
(l) Department of Airports Responsibility for Payment. The Department of Airports shall pay LAFPP for all costs and expenses incurred by the Plan in connection with administering this Airport Peace Officer Service Purchase Program including but not limited to the cost of any necessary reports prepared by the Plan's actuary, the cost of any changes to the pension administration system, any legal expenses incurred by the Plan in connection with this election, and any staff time dedicated to administering this election. LAFPP shall be responsible for preparing invoices of all expenses incurred and submitting them to the Department of Airports for its review and approval.
SECTION HISTORY
Added by Ord. No. 184,853, Eff. 4-6-17.