ORDINANCE NO. WHEREAS, in order to implement Measure F, the following changes are required to be made to Title 3; and

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1 ORDINANCE NO. AN ORDINANCE OF THE CITY OF SAN JOSE AMENDING VARIOUS SECTIONS OF CHAPTERS 3.28 AND 3.44 AND ADDING A NEW CHAPTER 3.58 OF TITLE 3 OF THE SAN JOSE MUNICIPAL CODE TO IMPLEMENT THE TERMS OF THE ALTERNATIVE PENSION REFORM SETTLEMENT FRAMEWORK AGREEMENT WITH CITY NONSWORN EMPLOYEE BARGAINING GROUPS WHEREAS, on November 8, 2016, San José voters approved Measure F, which modified provisions of Title 3 of the San José Municipal Code which were previously adopted by Measure B, approved by San José voters on June 5, 2012; and WHEREAS, in order to implement Measure F, the following changes are required to be made to Title 3; and WHEREAS, the ordinance will also include modifications to Title 3 to allow reenrollment after alternative health coverage and flexibility in designation of death benefit; NOW THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF SAN JOSE: SECTION 1. Section of Chapter 3.28 of Title 3 of the San José Municipal Compensation A. "Compensation" means the remuneration paid in cash out of funds controlled by the City, plus the monetary value, as determined by the Board, of living quarters, board, lodging, fuel, laundry and other advantages furnished to a member by the City in payment for the member's services or for time during which the member is excused from work because of holidays, sick leave, vacation, or compensating time off or leave of absence. B. "Compensation" shall include holiday in lieu pay. C. "Compensation" shall include incentive pay for successful completion, on an annual basis, of training in Police Anti-Terrorist Tactics as certified by the Police Department to the City Finance Department. T-32736\ _2 1

2 D. "Compensation" shall not include the provision by the City of any medical or hospital service or care plan for its employees, any contribution by the City to meet the premium or charge for such plan, or any payment into any fund to provide any death, retirement or survivorship benefits for employees or their survivors, or to provide any health or welfare benefits for employees, value of living quarters, board, lodging, fuel, laundry, and other advantages provided by the City in payment for the member's services, or any payment by the City of the employee portion of any taxes imposed by federal law, or any payment made by the City to the federal or state government for any social security system or program. Compensation also shall not include any payments based on overtime pay; travel, uniform or expense allowances; insurance, medical, surgical or hospital benefits; workers compensation benefits; retirement, death or survivorship benefits; per diem payments; or any other fringe benefits. SECTION 2. Section of Chapter 3.28 of Title 3 of the San José Municipal Final Compensation A. For a member who separated from Ccity service prior to July 1, 2001, "final compensation" means the highest average annual compensation earnable by the member during any period of three (3) consecutive years of Ffederated Ccity Sservice, including time prior to entering Ffederated Ccity Sservice at the compensation earnable by the member in the position first held by him or her in such service as may be necessary to complete three (3) consecutive years. B. For a member, other than a Tier 2 member, who separated from ccity service on or after July 1, 2001, "final compensation" means the highest average annual compensation earnable by the member during any period of twelve (12) consecutive months of Ffederated Ccity Sservice, including time prior to entering Ffederated Ccity Sservice at the compensation earnable by the member in the position first held by him or her in such service as may be necessary to complete twelve (12) consecutive months; provided, however, that such final compensation shall not exceed one hundred eight percent (108%) of the second-highest average annual compensation earnable by the member during any twelve (12) consecutive months, excluding all of the months used to determine the highest average annual compensation earnable; and provided further if the member has been subject to a mandatory reduction in paid working time, the calculation for compensation earnable shall include the compensation that would have been earnable had the member not been subject to a mandatory reduction in paid working time. T-32736\ _2 2

3 C. For Tier 2 members, "final compensation" means the average annual compensation earnable as defined for Tier 2 members in Section , by the member during the highest three (3) consecutive years of Ffederated Ccity Sservice. "Final compensation" will consist only of base pay, excluding premium pay and any other additional compensation. D. For the purposes of this cchapter, periods of service separated by breaks in service may be aggregated to constitute a period of three (3) consecutive years or twelve (12) consecutive months, as applicable, if the periods of service are consecutive except for such breaks. If a break in service did not exceed six (6) months in duration, time included in the break and compensation earnable during such time shall be included in computation of final compensation. If a break in service exceeded six (6) months in duration, the first six (6) months thereof and the compensation earnable during those six (6) months shall be included in computation of final compensation, but time included in the break which is in excess of six (6) months, and the compensation earnable during such excess time shall be excluded in computation of final compensation. SECTION 3. Section of Chapter 3.28 of Title 3 of the San José Municipal Tier 2 Member A. "Tier 2 member" means any person who is hired, rehired or reinstated by the City on or after September 30, 2012 except for any person who is eligible and elects to participate in a defined contribution plan established under the San José Municipal Code. B. Notwithstanding subsection A., the following persons who do not elect to participate in a defined contribution plan established under the San José Municipal Code shall not be considered Tier 2 members under this Plan and their benefits shall be determined under the same terms as those members hired prior to September 30, 2012: 1. Any person who was a member of this Plan prior to September 30, 2012, and terminated employment with the City and did not take a return of contributions, and returned to employment with the City in a position covered by this Plan on or after September 30, 2012; or T-32736\ _2 3

4 2. Any person accepting employment on or after September 30, 2012 who is otherwise eligible for this Plan and who was an active member in another California public retirement system, with which this Plan has reciprocity under Part 21, and who has a break in service of less than six (6) months from that covered employment and employment with the City, other than those who meet the definition of a new member as defined by Government Code Section (f) as may be amended, or are rehired or reinstated City employees without a work history prior to September 30, SECTION 4. A new Section is added to Chapter 3.28 of Title 3 of the San José Municipal Code to be numbered, entitled and to read as follows: Independent Medical Panel "Independent medical panel means the independent medical review panel or disability review panel appointed by the Retirement Board as specified in Section of this Chapter. SECTION 5. A new Section is added to Chapter 3.28 of Title 3 of the San José Municipal Code to be numbered, entitled and to read as follows: "New Employee" "New Employee" means, except as may be provided in Part 16 or Part 17 of this Plan, any employee initially hired on or after September 30, SECTION 6. Section of Chapter 3.28 of Title 3 of the San José Municipal Retirement Board - Authority to Secure Medical Service and Advice A. The Board may enter into contractual arrangements for such medical service and advice, and may secure and pay reasonable compensation for such independent medical examiners, as the Board deems necessary to discharge its duties respecting matters involving disability or death or botheffectuate the terms of this Chapter. Such contracts for medical services shall be entered into in the name of the Board of Administration for the Federated City Employees Retirement System. The cost of obtaining such medical services and advice, and any cost for appeals therefrom to an administrative law judge shall be administrative expenses of the Plan. T-32736\ _2 4

5 B. Effective as of [date this Ordinance becomes effective] with respect to applications for disability benefits under the Plan, the Board shall appoint an independent medical panel of three (3) medical experts to evaluate and approve or deny, by a majority vote, all disability applications. The Board shall establish processes and procedures by which the independent medical panel shall carry out and document its responsibilities. Once the independent medical panel is formed, responsibility for reviewing disability applications and making disability determinations will be the sole responsibility of the independent medical panel, or, if the decision of the independent medical panel is appealed, an administrative law judge. The independent medical panel may, upon its own initiative or upon request, reassess the status of a disability retirement recipient to confirm whether the recipient's disability continues. The individuals who may be appointed to such panel by the Board shall be determined as follows: 1. Individuals shall be recruited to serve on the independent medical panel by the Board using the City's established request for proposal process. 2. Each individual selected to serve on the independent medical panel shall be approved by a vote of no less than four (4) of the seven (7) members of the Board and shall serve for a four (4)-year term. 3. Individuals serving on the independent medical panel shall have experience in varying fields of medicine and shall meet the following minimum qualifications: a. Ten (10) years of practice after completion of residency; and b. Practicing or retired Board Certified physician; and c. No current or previous employment with the City; and d. Except for prior service on the independent medical panel established under this Section , is not providing or has not provided medical services to the City or retirement boards; and e. No prior experience as a Qualified Medical Evaluator or Agreed Medical Evaluator. T-32736\ _2 5

6 SECTION 7. Section of Chapter 3.28 of Title 3 of the San José Municipal Authority to Determine Employee Status and Benefits The Board, subject to the provisions of this cchapter, shall determine who are employees of the City eligible for membership in this Rretirement Ssystem. Except as provided in Section regarding decisions of the independent medical panel or, where the independent medical panel's determination is appealed to an administrative law judge, the Board is the sole judge of the conditions under which persons may be admitted to and received or continue to receive benefits under this Ssystem, and shall determine, modify or terminate benefits for service or disability or death or any other benefits provided for in this cchapter. SECTION 8. Section of Chapter 3.28 of Title 3 of the San José Municipal Authority to Adopt Tables, Revise Contribution Rates A. Upon the basis of any or all of such investigations, valuations and determinations, the Board shall adopt such mortality, service and other tables, actuarially assumed annual rate of return, and other actuarial assumptions as it may deem reasonably necessary, and, subject to such limitations as are set forth elsewhere in this Chapter, it shall fix and from time to time make such revisions or changes in the rates of contribution required of members and of the City as it may determine reasonably necessary to provide the benefits provided for by this Retirement Plan and make this System at all times actuarially sound in a manner consistent with Article XVI, Section 17 of the California Constitution (the "1992 California Pension Protection Act"); provided that, as may be otherwise provided elsewhere in this Chapter, the share of the normal cost portion of contributions made to the Plan on behalf of the City and members who are not Tier 2 members shall at all times be shared in the ratio of three to eight (3:8). with the City bearing the total cost of any associated actuarially accrued unfunded liability for such members. For Tier 2 members, except as provided in Section B, the proportionate share of contributions on behalf of the City and Tier 2 members shall at all times be in the ratio of one for the City to one for the Tier 2 members (1:1) (sharing equally), including any unfunded actuarially accrued liability. 1. Notwithstanding the foregoing, the following shall apply to the manner of determining contributions on behalf of the City and members who had been prior members of this Plan and then became Tier 2 members prior to [date this Ordinance becomes effective] but on and after September 30, 2012 remain in the Plan but are no longer considered Tier 2 members as T-32736\ _2 6

7 defined under Section The costs, including but not limited to, any unfunded actuarial accrued liability, associated with benefit changes adopted on [date this Ordinance becomes effective] for such members any amounts associated with moving such members from Tier 2 status to non-tier 2 status, will be amortized as a separate liability over twenty (20) years or other period determined by the Board. Notwithstanding the cost sharing ratio for non-tier 2 members described in the first paragraph of this Section A above, the costs described in this Section A.1 shall at all times be shared in a ratio of one for the City and one for the affected member (1:1) and will be reflected as soon as practicable as an increase in the monthly contribution rates for these affected members. 2. Notwithstanding the foregoing, the following shall apply to the manner of determining contributions on behalf of the City and members who accept employment on or after September 30, 2012 who is otherwise eligible for this Plan and who was an active member in another California public retirement system, with which this Plan has reciprocity under Part 21, and who has a break in service of less than six (6) months from that covered employment and employment with the City, other than those who meet the definition of new members as defined by Government Code Section (f) as may be amended, but on and after [date this Ordinance becomes effective] remain in the Plan but are no longer considered Tier 2 members under the definition of Tier 2 member under Section Any cost, including but not limited to any unfunded actuarial accrued liability, associated with benefit changes adopted on [date this Ordinance becomes effective] for such members and any amounts associated with moving such members from Tier 2 status to non-tier 2 status, will be amortized as a separate liability over twenty (20) years or such other period determined by the Board. Notwithstanding the cost sharing ratio for non-tier 2 members described in the first paragraph of Section A above, the costs described in this subsection A.2. shall at all times be shared in the ratio of one for the City and one for the affected member (1:1) and will be reflected as soon as practicable in the monthly contribution rates for such members. B. Notwithstanding Section A, the following shall apply to the manner of determining contributions on behalf of the City and members who are Tier 2 members on or after [date this Ordinance becomes effective]: 1. The costs, including any unfunded actuarial accrued liability, associated with the Tier 2 benefit changes adopted on [date this Ordinance becomes effective] for members who were Tier 2 members prior to [date this T-32736\ _2 7

8 Ordinance becomes effective], will be amortized as a separate liability over twenty (20) years or other period determined by the Board and will be reflected as soon as practicable in contribution rates to be shared equally among the City and Tier 2 members and such increased rates shall not be subject to the incremental increases in amounts associated with unfunded actuarial accrued liability described in Section B Other than provided in Section A, in determining member contribution rates, to the extent an unfunded actuarial accrued liability is determined to exist with respect to the Plan, Tier 2 members will contribute toward the amount of such amortized unfunded actuarial accrued liability by increasing the Tier 2 member contribution rate by onethird of one percent (0.33%) of compensation each year until such time as the cost of the unfunded actuarial accrued liability is being shared equally by the Tier 2 members and the City. Until such time as the Tier 2 members and the City are sharing such cost equally, the City will include in its contribution rate the amount of the amortized unfunded actuarial accrued liability that would otherwise have been paid by the Tier 2 members in such year. SECTION 9. Section of Chapter 3.28 of Title 3 of the San José Municipal Hearings Authorized When A. The Board in its discretion may hold hearings for the purpose of determining any question presented to it involving any right, benefit or obligation of any person under this Chapter. Any applicant for any benefits may file an application for rehearing of his or her application for benefits within thirty (30) days after written notice of the determination of the Rretirement Bboard has been sent by mail to the applicant or his or her attorney of record, upon any of the following grounds: 1. That the Rretirement Bboard acted without and in excess of its powers; 2. That the order, decision or award was procured by fraud; 3. That the evidence does not justify the determination of the Rretirement Bboard; 4. That the applicant has discovered new evidence material to him or her which he or she could not with reasonable diligence have discovered or procured at the hearing. T-32736\ _2 8

9 B. The determination of the Rretirement Bhoard on any said application for rehearing shall be made within sixty (60) days from and after the date of filing of said application. C. Notwithstanding the foregoing, any decisions regarding a determination related to a member's disability shall be subject to review only in accordance with the process described in Sections , C, , and/or , as may be applicable. SECTION 10. Section of Chapter 3.28 of Title 3 of the San José Municipal Separate Medical Benefits Account A. There is hereby established as of July 1, 1995, the medical benefits account as a separate account within the retirement fund. The medical benefits account shall be maintained in compliance with Internal Revenue Code Section 401(h) and the regulations promulgated thereunder. Monies in the medical benefits account may be commingled with other monies in the retirement fund solely for the purposes of investment. B. All contributions made to the retirement fund to provide for the payment of benefits for sickness, accident, hospitalization, dental or medical expenses of persons receiving monthly allowances under the provisions of this Plan, and all earnings and interest attributable to such contributions to the retirement fund, shall be placed in the medical benefits account. All contributions to the medical benefits account shall be reasonable and ascertainable. At the time the City makes a contribution to the medical benefits account, the City shall designate in writing that such contribution is solely for the medical benefits account. C. Contributions to provide for the payment of benefits for sickness, accident, hospitalization, dental or medical expenses of persons receiving monthly allowances under the provisions of this Plan, and earnings and interest attributable to such contributions may be made to the medical benefits account or to the Trust established by Chapter D. All funds in the medical benefits account shall be used only for the payment of benefits and expenses allowed under Internal Revenue Code Section 401(h) and the regulations promulgated thereunder. The medical benefits account shall be used to provide medical and dental benefits in accordance with Parts 16 and 17 of this Chapter. Prior to the satisfaction of all liabilities T-32736\ _2 9

10 under this Plan to provide such benefits, no funds in the medical benefits account shall be used for, or diverted to, any other purpose. E. All benefits provided through the medical benefits account, plus any life insurance protection provided under the Plan, shall be subordinate to the retirement and survivors' benefits provided by the Plan. Accordingly, at all times after the date on which the medical benefits account is established, the aggregate of the City's contributions to the medical benefits account shall not exceed twenty-five percent (25%) of its total aggregate contributions to the Plan (other than contributions to fund prior service). For the purpose of this limitation, City contributions include any contributions which are "picked-up" pursuant to Internal Revenue Code Section 414(h). F. Upon the satisfaction of all liabilities under this Plan to provide the benefits described in this Section, any amount remaining in the medical benefits account shall be paid to the City. G. In the event that a member's interest in the medical benefits account is forfeited prior to the termination of the Plan, an amount equal to the forfeiture shall be applied as soon as practicable to reduce the City contributions, if any, to the medical benefits account. H. Except as otherwise provided under Section , City and member contributions to the medical benefits account shall be made on the same periodic basis as City and member contributions are made to the retirement fund. City contributions and member contributions to the medical benefits account may be paid on different payment schedules as may be determined by the Board. SECTION 11. A new Section is added to Chapter 3.28 of Title 3 of the San José Municipal Code, to be numbered, entitled and to read as follows: Contributions to Fund Retiree Healthcare Benefits A. Effective on the date determined by the City once the VEBA is established, contributions to fund the healthcare benefits for qualified members and qualified survivors who are eligible for benefits to be provided under the terms of Part 16 and 17 of this Plan who do not make the one-time irrevocable election described in subsection D. will be seven and one-half percent (7.5%) of compensation as defined under Section for members and such percentage of covered compensation for City contributions as determined by the actuary to be necessary to fund the amount of the annual required contribution each year; provided, however, that if the City's portion of the required contribution T-32736\ _2 10

11 is determined to be fourteen percent (14.0%) of covered compensation or greater for a year, the City may in its discretion choose to only contribute a maximum of fourteen percent (14.0%) of covered compensation for such year. B. Except as otherwise provided in Part 16 and Part 17 of this Plan, members, other than Tier 2 members, rehired after September 27, 2013, shall not be eligible for retiree healthcare benefits provided under Part 16 or Part 17 of this Plan. Effective on the date determined by the City once the VEBA is established, such members shall be provided retiree healthcare benefits in accordance with provisions of Chapter 3.58 and member's contribution rate to fund such benefits shall be determined under Chapter C. Subject to IRS approval of the ability of non-tier 2 members to elect out of the Part 16 and 17 coverage, except as otherwise provided in this Section , Tier 2 members shall not be eligible for the retiree healthcare benefits provided under Parts 16 and 17 of this Plan. Effective on the date determined by the City once the VEBA is established, Tier 2 members shall be provided retiree healthcare benefits in accordance with provisions of Chapter 3.58 and member's contribution rate to fund such benefits shall be determined under Chapter Notwithstanding the first paragraph of subsection C., Tier 2 members represented by the Operating Engineers, Local 3 and the Association of Building, Mechanical and Electrical Inspectors who were hired or rehired on or after September 30, 2012 but before September 27, 2013 are eligible for retiree health benefits under Part 16 and Part 17 of this Plan and shall make retiree healthcare contributions in accordance with Section A. D. On or soon after the date determined by the City once the VEBA is established, members described in subsection A, subsection B., or subsection C.1. who are eligible for benefits under Part 16 and/or Part 17 shall be provided a one-time irrevocable election to instead be covered under Chapter 3.58, in accordance with the process described in Chapter Upon opting into Chapter 3.58, such member's Chapter 3.57 account shall receive a credit for all prior contributions made by the member under Parts 16 and 17 of this Plan and such member's retiree health benefits and contribution rate shall be determined under Chapter E. Notwithstanding anything else in this Plan to the contrary, unrepresented Tier 2 members in Unit 99, Unit 81 and Unit 82 shall not be eligible for retiree healthcare benefits under Part 16 and Part 17 of this Plan nor retiree healthcare benefits under Chapter Unrepresented members of Unit 99, Unit 81 and Unit 82 who are not Tier 2 members as defined by Section that are T-32736\ _2 11

12 rehired after September 27, 2013 are also ineligible for retiree health benefits under Part 16 and Part 17 of this Plan and the retiree health benefits under Chapter 3.58 and shall not make contributions under either program. For members who previously made contributions under Part 16 and 17, the City shall transfer any amount equal to the member's prior contributions (without accrued interest) to the funding vehicle used to provide the benefits under Chapter 3.58 for such member's future use. F. The City Manager shall have the discretion to terminate the existing Tier 2 retiree medical benefits plan. In that event, Tier 2 members shall not be provided benefits or make contributions under Parts 16 and 17 of this Plan. SECTION 12. Section of Chapter 3.28 of Title 3 of the San José Municipal Reinstatement From Chapter 3.24 Service Retirement and Reentry Into Federated City Service A. A person who has been retired from service under the provisions of Chapter 3.24, at an age less than the age for compulsory retirement applicable to him or her, may be reinstated from retirement to Ffederated Ccity Sservice by the Rretirement Bboard in accordance with the provisions of this cchapter, and, upon such reinstatement or thereafter, such person may be reemployed by the ccity in a position in the Ffederated Ccity Sservice in accordance with the laws governing such employment in the same manner as a person who had not been so retired. B. The Rretirement Bboard shall not reinstate any such person from service retirement unless: 1. The person proposed to be reinstated has filed with the bboard a written application requesting such reinstatement; 2. At least one (1) year has or will have expired between the effective date of said person's last retirement and the date of reinstatement; and 3. The bboard has found and determined that said person's age on the effective date of his or her reinstatement is at least six (6) months less than age seventy (70). C. When a person is reinstated from service retirement and reenters Ffederated Ccity Sservice pursuant to this ssection, his or her service retirement allowance shall be canceled as of the effective date of the reinstatement, T-32736\ _2 12

13 and, subject to the exceptions and exclusions hereinafter set forth in Sections through inclusive of this Ppart, he or she shall become and be a member of this Rretirement Pplan as of the effective date of his or her new employment in the Ffederated Ccity Sservice. Upon becoming a member of this Pplan, any such person who formerly was retired for service under the provisions of Chapter 3.24 ceases to be governed by the provisions of Chapter 3.24, and he or she and all other persons or estates that might have any rights under Chapter 3.24 because of the person's coverage under Chapter 3.24 cease to have any rights under Chapter 3.24 but shall thereafter be governed by and have only such rights as are provided for in this cchapter. D. Any such person who is reinstated and reenters Ffederated Ccity Sservice on or after September 30, 2012 and meets the definition of Tier 2 member under Section at the time of reentry or reinstatement, who becomes a member of this plan shall become a Tier 2 member. SECTION 13. Section of Chapter 3.28 of Title 3 of the San José Municipal Reinstatement From or Reentry After Chapter 3.24 Disability Retirement If a person retired for disability under the provisions of Chapter 3.24 and the disability retirement allowance is canceled for either of the following reasons, then, subject to the exclusions and exceptions hereinafter set forth in Sections through inclusive of this Ppart, the person shall become and be a member of this Pplan upon being reinstated to a position in Ffederated Ccity Sservice or upon reentry into Ffederated Ccity Sservice. If the person meets the definition of a Tier 2 member under Section at the time he or she is reinstated or re-enters Ffederated Ccity Sservice on or after September 30, 2012, the person shall become a Tier 2 member. Upon becoming a member of this Pplan, any such person who formerly was retired for disability under the provisions of Chapter 3.24 ceases to have any rights thereunder but will thereafter be governed by and have only such rights as are provided for in this cchapter. This provision applies to: A. Any person retired for disability under the provisions of Chapter 3.24 whose disability retirement is canceled pursuant to the provisions of Section of the San José Municipal Code and who is reinstated, in accordance with the provisions of said Section to the Ccity position held by him or her when retired for disability or to a position in the same classification of positions with duties within his or her capacity; or T-32736\ _2 13

14 B. Any person retired for disability under the provisions of Chapter 3.24 whose disability retirement is canceled pursuant to the provisions of Section of the San José Municipal Code because of his or her reentry into Ffederated Ccity Sservice in a position other than the position held when he or she retired for disability and other than any position in the same classification of positions as the position held when he or she retired for disability. SECTION 14. Section of Chapter 3.28 of Title 3 of the San José Municipal Reentry in City Service, Before Retirement, by Persons Who Retained Membership in Chapter 3.24 Retirement System Pursuant to Section or Other Provisions of Chapter 3.24 System Subject to the exclusions and exceptions hereinafter set forth in Sections through , inclusive, of this Ppart, each person, other than persons covered by the provisions of Sections , and , who was a member of the Pplan as described in Chapter 3.24 and retained such membership upon leaving Ccity service by exercising the option given him or her by Section or other provisions of Chapter 3.24, shall become and be subject to the provisions of this Chapter pursuant to the provisions of this ssection if, on or after July 1, 1975, while he or she is still a member of the Pplan as described in Chapter 3.24, but before retirement thereunder for service or disability, he or she again becomes an officer or employee of the Ccity in the Ffederated Ccity Sservice. Upon the effective date the person again becomes an officer or employee in the Ffederated Ccity Sservice, such person shall cease to be subject to the provisions of Chapter 3.24, and he or she and all other persons or estates that might have any rights under Chapter 3.24 because of such person's coverage under Chapter 3.24, shall cease to have any rights under Chapter 3.24, but shall thereafter be governed by and have only such rights as are provided in this cchapter. If such person meets the definition of Tier 2 member in Section at the time he or she again becomes an officer or employee in the Ffederated Ccity Sservice on or after September 30, 2012, the person shall become a Tier 2 member. SECTION 15. Section of Chapter 3.28 of Title 3 of the San José Municipal Other Persons Who Become City Officers or Employees On or After September 30, 2012 Subject to the exclusions and exceptions hereinafter set forth in this Part, each person other than those persons specified or mentioned in Sections through , inclusive, who becomes an officer or employee of the Ccity on or after September 30, T-32736\ _2 14

15 2012 by virtue of an appointment made or employment begun on or after said date, and meets the definition of Tier 2 member under Section , shall become and be a Tier 2 member of this Pplan as of the effective date of his or her appointment, hire or rehire; provided however, that the foregoing provisions of this ssection do not apply to persons employed to render part-time service. SECTION 16. Section of Chapter 3.28 of Title 3 of the San José Municipal Election By Persons Who Became Members Pursuant to Sections through , Inclusive, to Allow Accumulated Contributions to Remain in Fund A. The provisions of this ssection apply only to persons who became subject to the provisions of this cchapter pursuant to the provisions of Sections through , inclusive, of this Ppart. B. If the Ffederated Ccity Sservice of a member described in ssubsection A. is discontinued by reason of resignation or discharge, or by reason of layoff or leave of absence deemed or found by the Rretirement Bboard to have resulted in permanent discontinuance (and in such case, as of the date of determination by the bboard that the discontinuance is permanent), or if such member retires for disability under the provisions of this cchapter but such retirement is followed by a cessation of the disability because of which the member was retired, and his or her disability retirement allowance is canceled, but he or she does not thereupon reenter Ffederated Ccity Sservice, then, in either of said events, if the amount of said member's accumulated normal contributions standing to his or her credit at that time is five hundred dollars ($500.00) or more, the member shall have the right to elect, not later than the ninetieth (90th) day from and after the date upon which notice of such right is mailed to him or her at the latest address on file with the bboard: 1. To continue (or in the case of the abovementioned person whose disability retirement allowance was canceled, to renew) his or her membership by allowing all of his or her accumulated prior service contributions and all or part (but in no event less than five hundred dollars ($500.00) of his or her accumulated normal contributions to remain in the retirement fund; provided, however, that anyone who renews membership in the Pplan on or after September 30, 2012 by virtue of employment begun on or after said date, shall become a Tier 2 member of this Pplan as of the effective date of his or her renewed membership in the Pplan; or T-32736\ _2 15

16 2. To terminate or not renew membership, as the case may be, by withdrawing all of his or her accumulated contributions. C. Failure to make such election within the above-specified time shall be deemed to be an irrevocable election to terminate or not renew membership, as the case may be, by withdrawing all of his or her accumulated contributions; provided and excepting, however, that if such member is entitled under this Pplan to credit for twenty (20) or more years of Ffederated Ccity Sservice, the failure to make such election within said time shall be deemed to be an election to continue or renew, as the case may be, his or her membership by allowing all of his or her accumulated contributions to remain in the retirement fund. D. An election to allow all or part of one's accumulated normal contributions to remain in the fund may be revoked at any time by said person as to all such normal contributions or as to any part of them in excess of five hundred dollars ($500.00). E. Upon electing to terminate or not renew membership by withdrawing all of his or her accumulated contributions, such person immediately: 1. Ceases to be a member of this Pplan (or loses the right to renew his or her membership, as the case may be); and 2. Loses all rights to any credit for Ffederated Ccity Sservice to which he or she was entitled hereunder; and 3. Except as may be otherwise provided elsewhere in this Pplan, loses all other rights or privileges under this Pplan excepting the right to the return of his or her said accumulated contributions, which said contributions shall be returned to the person forthwith. F. Upon electing to continue or renew membership by allowing all of his or her accumulated prior service contributions and all or part (but not less than five hundred dollars ($500.00)) of his or her accumulated normal contributions to remain in the retirement fund: 1. The said person continues to be or again becomes a member,; provided however, that if said person again becomes a member on or after September 30, 2012 and meets the definition of Tier 2 member under Section , said person shall become a Tier 2 member; and T-32736\ _2 16

17 2. The member and his or her survivors shall thereafter have such rights, if any, as are provided elsewhere in this Chapter 3.28 for the member and his or her survivors, except that, unless otherwise provided elsewhere in this Pplan, he or she shall lose and shall no longer be entitled to credit for any Ffederated Ccity Sservice on account of which such withdrawn contributions had been paid into the retirement fund. In determining the Ffederated Ccity Sservice for which a person is no longer entitled to credit upon such partial withdrawal, the withdrawn contributions shall be deemed to have been paid into the retirement fund on account of the latest Ffederated Ccity Sservice rendered by the person to the Ccity, or on account of the person's earliest Ffederated Ccity Sservice if so requested by said person at the time he or she withdraws a part of his or her accumulated normal contributions. G. A member may at any time, if he or she so elects, voluntarily relinquish such right as the member may have to be credited for Ffederated Ccity Sservice for such periods of time as may be designated by him or her, without withdrawing any contributions paid by the member because of such service, provided he or she retains credit for not less than five (5) years of continuous Ffederated Ccity Sservice; and in such event, in determining the member's eligibility for or the amount of any benefits to which he or she may subsequently be entitled, the member shall be given no credit for any Ffederated Ccity Sservice so relinquished, and any contributions left in the fund which were made because of the service for which the member has relinquished credit shall be treated as income of the retirement fund. H. If, on or after March 28, 2005, the member is to receive a distribution of an eligible rollover distribution, with a present value greater than one thousand dollars ($1,000.00), and if a member does not elect to have such distribution paid directly to an eligible retirement plan specified by member in a direct rollover or to receive the distribution directly, then the Ssystem shall pay the distribution in a direct rollover to an individual retirement plan designated by the bboard in accordance with Section 401(a)(31)(B) of the Internal Revenue Code and IRS Notice SECTION 17. Section of Chapter 3.28 of Title 3 of the San José Municipal Election By Members Other Than Those Specified in Section to Allow Accumulated Contributions to Remain in Fund A. The provisions of this ssection apply only to members of this Pplan who are entitled to credit for five (5) or more years of Ffederated Ccity Sservice T-32736\ _2 17

18 rendered after June 30, 1975, and who are not covered by the provisions of Section B. If the Ffederated Ccity Sservice of a member described in ssubsection A. above is discontinued by reason of resignation or discharge or by reason of layoff or leave of absence which is determined by the Rretirement Bboard to have resulted in permanent discontinuance (the effective date of such discontinuance to be the date of said determination by the bboard), then such member shall have the right to elect: 1. To continue membership in this Ssystem by allowing all of his or her accumulated contributions to remain in the retirement fund; or 2. To terminate membership in this Ssystem by withdrawing all of his or her accumulated contributions. C. If a member described in ssubsection A. above retires for disability but the disability retirement allowance is canceled because of a cessation of the disability for which the member retired and such member does not thereupon reenter Ffederated Ccity Sservice, then such member shall have the right to elect: 1. To renew membership in this Ssystem by allowing all of his or her accumulated contributions to remain in the retirement fund; provided however, that; if said person renews membership on or after September 30, 2012 and meets the definition of Tier 2 member under Section , said person shall become a Tier 2 member; or 2. Not to renew membership in this Ssystem by withdrawing all of his or her accumulated contributions. D. The election described in ssubsections B. and C. shall be made not later than the ninetieth (90th) day from and after the date notice of the right to make such election is mailed to the member at the latest address on file with the bboard. 1. In the case of a member entitled to credit for less than twenty (20) years of Ffederated Ccity Sservice, failure to make such election within said ninety (90) days shall be deemed to be an irrevocable election to terminate or not renew, whichever is applicable, membership in this Ssystem by the withdrawal of all of the member's accumulated contributions. T-32736\ _2 18

19 2. In the case of a member entitled to credit for twenty (20) or more years of Ffederated Ccity Sservice, failure to make such election within said ninety (90) days shall be deemed to be an election to continue or renew, whichever is applicable, membership in this Ssystem by allowing all of the member's accumulated contributions to remain in the retirement fund. E. Upon electing to terminate or not renew membership in this Ssystem pursuant to ssubsection B., C. or D. above, the person immediately: 1. Ceases to be a member of this Ssystem or loses the right to renew membership in this Ssystem, whichever is applicable; and 2. Unless otherwise provided elsewhere in this cchapter, loses all credit for any Ffederated Ccity Sservice to which he or she was entitled under this Ssystem; and 3. Loses all other rights and privileges under this Ssystem except the right to the return of his or her accumulated contributions, and such contributions shall be returned to such person forthwith. F. Upon electing to continue or renew membership in this Ssystem, whichever is applicable, by allowing all of his or her accumulated contributions to remain in the fund, the person: 1. Continues to be, or again becomes, a member of this Ssystem; provided, however that said person again becomes a member of this Ssystem on or after September 30, 2012 and meets the definition of Tier 2 member under Section , said person shall become a Tier 2 member; 2. Shall continue to be entitled to credit for such Ffederated Ccity Sservice as he or she was entitled as of the time the person made such election; and 3. Shall thereafter have such rights, if any, as are provided in this cchapter for such person or such person's survivors. G. If, on or after March 28, 2005, the member is to receive a distribution of an eligible rollover distribution, with a present value greater than one thousand dollars ($1,000.00), and if a member does not elect to have such distribution paid directly to an eligible retirement plan specified by member in a direct rollover or to receive the distribution directly, then the Ssystem shall pay the distribution in a direct rollover to an individual retirement plan designated by T-32736\ _2 19

20 the bboard in accordance with Section 401(a)(31)(B) of the Internal Revenue Code and IRS Notice SECTION 18. Section of Chapter 3.28 of Title 3 of the San José Municipal Service Credit for Absence on or After July 1, 1975, Because of Service- Connected Injury or Illness A. Time on or after July 1, 1975, during which a member is a member of this Ssystem and during which he or she is absent from Ffederated Ccity Sservice by reason of injury or illness determined within one (1) year after the end of such absence to have arisen out of and in the course of his or her employment with the Ccity, shall be deemed to be "Ffederated Ccity Sservice" for which such member is entitled to credit for the purpose of qualifying for benefits under this Ssystem but not for the purpose of determining the amount of such benefits, unless he or she contributes during such absence, or upon his or her return to Ccity service at times and in the manner prescribed by the bboard, the same amount of contributions as he or she would have been required to contribute if he or she were not absent because of any said injury or illness. If he or she does contribute as aforesaid, said time shall be deemed "Ffederated Ccity Sservice" for which he or she shall be entitled to credit the same as if he or she were not absent from Ffederated Ccity Sservice because of such injury or illness. The provisions of this ssection do not apply to time during which a person is retired for disability or service. Also, the provisions of this ssection do not apply to part-time employees. B. Subject to any limits on annual contributions imposed by Section 415 of the Internal Revenue Code of 1986, as amended, a member who elects to make contributions to purchase full service credit for a period of leave of absence pursuant to ssubsection A. above may pay the contributions: 1. In one lump sum within sixty (60) days from and after the date the member returns to Ccity service; or 2. For elections made on or before January 31, 2011, in monthly or biweekly installments by pre-tax payroll deductions, paid over a period of time not to exceed eight (8) years; or 3. For elections made on or after February 1, 2011, in monthly or biweekly installments by post-tax payroll deductions, paid over a period of time not to exceed eight (8) years; or T-32736\ _2 20

21 4. In a combination of a lump sum and post-tax installments. C. Any member electing to pay the contributions in installments or to make the lump sum payment by payroll deduction shall execute a payroll authorization form authorizing the payment of the required contributions by payroll deduction. The payroll authorization form shall be filed with the Ddirector of Ffinance. D. The election to purchase credit through post-tax payroll deductions, pursuant to ssubsection B.3. or B.4. above, may be revoked. During the time the posttax payroll deduction election is in effect, the member may make additional payments to the retirement fund for the purchase of such service credit. E. All contributions under ssubsections B.2. and C. shall be treated as pre-tax salary reductions pursuant to Internal Revenue Code Section 414(h)(2). F. The provisions of this Section shall not be applicable to Tier 2 members, provided that the Tier 2 member shall be responsible for paying the entire cost of the service credit purchase. SECTION 19. Section of Chapter 3.28 of Title 3 of the San José Municipal Service Under Police and Fire Department Retirement Plan Where Member Elects to Pay Contributions to Federated System for Such Service Subject to the following conditions, restrictions, limitations and other provisions, a person who becomes a member of this Ssystem on or after July 1, 1975, pursuant to the provisions of Section and who, prior to becoming a member of this Ssystem but on or after February 1, 1962, was a member of the Ppolice and Ffire Ddepartment Rretirement Pplan established pursuant to Chapter 3.32 or Chapter 3.36 of the San José Municipal Code, shall be entitled to credit under this Ssystem for service, if any, for which the person was entitled to credit under said Ppolice and Ffire Ddepartment Rretirement Pplan at the time his or her membership therein was last terminated, if all of the following conditions exist and are satisfied: A. Such person must have held, prior to becoming a member of this Ssystem, a Ccity position in the Ppolice Ddepartment or Ffire Ddepartment of the Ccity which qualified the person for membership in, and because of which the person was a member of the Ppolice and Ffire Ddepartment Rretirement Pplan; and T-32736\ _2 21