SECTIONS 45300-45317 - California Statutes

GOVERNMENT CODE

SECTION 45300-45317

45300. It is the intent of this article to enable any city to adopt
such a retirement system as is adaptable to its size and type.

45301. By ordinance, any city may establish a retirement system for
its officers and employees and provide for the payment of retirement
allowances, pensions, disability payments, and death benefits, or
any of them.

45301.5. Notwithstanding any provision of this chapter to the
contrary, separate rates of contribution for male and female
employees shall not be maintained or established, nor shall different
allowances or benefits be established for male and female employees.

45302. Before the ordinance establishing a retirement system is
adopted, the city legislative body shall adopt a resolution giving
notice of intention to adopt the ordinance. The resolution shall
contain a summary of the major provisions of the proposed retirement
system.

45303. The ordinance shall not be adopted unless an election is
first held to permit the employees proposed to be included in the
system to express by secret ballot their approval or disapproval of
the retirement proposal.

45304. The ballot used at the election shall include a summary of
the retirement system as set forth in the resolution.

45305. The election shall be conducted in a manner to be prescribed
by the legislative body, and permit firemen, policemen, and other
city employees included in the system, as separate groups, to express
their approval or disapproval. The ordinance shall not include in
the system any group a majority of whose members disapproves the
system. Membership in the system is compulsory for all members of
each group approving the system.

45306. The ordinance establishing a retirement system may be
adopted either by a majority vote of the electorate of the city or by
approval of a two-thirds majority of the legislative body of the
city. The ordinance shall not be repealed except by a vote of the
electorate.

45307. The ordinance shall provide for the appointment of a
retirement board and for the delegation to the board of such powers
and duties in relation to the system as are deemed advisable to carry
out the intent and purpose of this article.

45308. The legislative body may maintain its own pension and
retirement fund or may contract with the legislative body of any city
or county in the State, or any state department, for:
(a) The performance of any service in connection with the
establishment or administration of the retirement system.
(b) The investment, care, or administration of retirement funds.
(c) Any other service relating to the system or its funds.

45308.1. All funds received by city retirement systems and not
required for current disbursements shall be invested only in:
(a) Securities which are legal for savings bank investments in
this state, or which have been certified as legal investments for
savings banks pursuant to Division 10 (commencing at Section 20000)
of the Water Code.
(b) Securities which, pursuant to the statutes or laws providing
for the issuance of such securities, are entitled to the same force
or value or use as bonds issued by any municipality.
(c) Securities issued pursuant to those acts, statutes or laws of
this state, wherein such law specifically states by reference or
otherwise that such securities shall be legal investments for either
savings banks, insurance companies, all trust funds, state school
funds, and any funds which may be invested in bonds of cities,
counties, cities and counties, school districts, or municipalities in
the state.
(d) Securities which have been investigated and approved by a
commission or board now or hereafter authorized by law to conduct
such investigation and give such approval, and by authority of which
such securities are declared to be legal investments for insurers.
(e) Securities issued pursuant to those acts, statutes or laws of
this state, wherein such law specifically states by reference or
otherwise that such securities shall be legal investments for any
pension fund, retirement fund, or retirement plan.
(f) Deposits at interest in any state or national bank in
accordance with law authorizing and controlling the deposit of public
funds in banks.
(g) Certificates and shares of a savings and loan association or a
federal savings and loan association, if the certificates or shares
are insured as defined in Title IV of the National Housing Act.
(h) Registered warrants of any political subdivision of this
state.
(i) A contract with an insurance company to whom the insurance
commissioner has issued a certificate of authority entitling it to
transact life and disability insurance, which contract may be for a
deposit administration or immediate participation guarantee type of
group annuity for members of the retirement system whereby
contributions paid to the insurance company will be held and used to
pay benefits.

45308.2. Notwithstanding Section 45308.1 funds received by city
retirement systems and not required for current disbursements may be
invested in real property or improvements constructed or to be
constructed on real property, when such real property or such
improvements are acquired for sale or lease to a city, county, school
district, political subdivision, or political corporation of this
State, subject to the following limitations:
(1) No investment shall be made in such real property or
improvements unless it is approved by a four-fifths vote of the
members of the body authorized by ordinance to invest the retirement
funds.
(2) No such investment shall be made unless the assets of the
retirement system exceed five hundred thousand dollars ($500,000),
and the investment, together with other investments in real property
and improvements, do not exceed twenty-five percent (25%) of the
assets of the retirement system.
(3) Before an investment is made in such real property or
improvements, the investing authority shall enter into a lease or
lease-option agreement with the public agency hereinbefore mentioned,
under which said public agency agrees to rent the property at a
monthly rental and for a period not to exceed 50 years, sufficient to
return not less than the investment, together with interest at a
rate hereinafter prescribed. The agreement may contain an option or
options to purchase; provided, such option, together with the
rentals, will return not less than the investment, together with
interest at a rate hereinafter prescribed. In the event a building is
built on land owned by the public agency, the agreement may contain
an option to purchase the land at any time or at the termination of
the lease at its fair market value.
(4) The interest rate each year shall be one-fourth percent (
1/4%) higher than the average interest rate received by the
retirement system on assets other than real property or improvements
for the preceding year.
(5) In order to make the provisions of this section relating to
the investment in real property or improvements completely effective,
the investing authority is authorized, for investment purposes only,
to purchase, sell, or lease real property, or to enter into options
therefor; and when necessary for investment purposes to enter into
contracts for the construction of buildings, and to repair and
maintain such property, and do any and all things necessary to
protect the investment including, but not limited to, purchasing
insurance against the loss of the property or the loss of use and
occupancy of the property. It may also take any other action
necessary to carry out the investment provisions of this section. In
the construction of buildings the investing authority shall follow,
substantially and insofar as applicable, the procedure and
limitations prescribed by law for the construction of buildings by
the city in which the retirement system is established.

45308.3. Notwithstanding Section 45308.1, funds received by city
retirement systems and not required for current disbursements may be
invested in bonds issued pursuant to the Improvement Bond Act of
1915; provided, that an ad valorem tax on all property taxable by the
public agency which authorized the issuance of such bonds, at a rate
not exceeding ten cents ($0.10) for each one hundred dollars ($100)
of assessed value, computed as of the date of such investment, would
produce an amount equal to at least 100 percent of the principal and
interest payable in any year thereafter on the issue of bonds in
which such investment is made.

45308.4. Notwithstanding Section 45308.1, funds received by city
retirement systems and not required for current disbursements may be
invested in any of the following:
(a) First liens on real property if the loan is fully guaranteed
or insured or covered by a commitment to guarantee or insure by the
Federal Housing Commissioner.
(b) First liens on real property if the loan is fully guaranteed
by the United States or any agency thereof pursuant to the
"Servicemen's Readjustment Act of 1944" or any act of Congress
supplementary or amendatory thereof.

45308.5. Notwithstanding Section 45308.1, in addition to any other
investments as are authorized by this article, city retirement
systems may in their discretion under the advice of proper counsel
invest the assets of the retirement fund in an amount, determined on
the basis of cost, not to exceed 10 percent of the assets in the
first two years after the effective date of this section, not to
exceed 15 percent during the third year after the effective date of
this section, and not to exceed 25 percent thereafter, in common
stock or shares, and not to exceed 2 percent of the assets in the
first year after the effective date of this section, not to exceed 3
percent during the second year after the effective date of this
section, and not to exceed 5 percent thereafter, in preferred stock
or shares, of corporations created or existing under the laws of the
United States, or any state, district, or territory thereof; provided
that
(a) The stock is registered on a national securities exchange, as
provided in the "Securities Exchange Act of 1934" as amended, or is
listed on the National Market System of the NASDAQ Stock Market. The
registration shall not be required with respect to the following
stocks:
(1) The common stock of a bank which is a member of the Federal
Deposit Insurance Corporation and has capital funds, represented by
capital, surplus, and undivided profits, of at least fifty million
dollars ($50,000,000);
(2) The common stock of an insurance company which has capital
funds, represented by capital, special surplus funds, and unassigned
surplus, of at least fifty million dollars ($50,000,000);
(3) Any preferred stock.
(b) The corporation has total assets of at least one hundred
million dollars ($100,000,000);
(c) Bonds of that corporation, if any are outstanding, qualify for
investment of the retirement fund, and that there are no arrears of
dividend payments on its preferred stock;
(d) The corporation has paid a cash dividend on its common stock
in at least 8 of the 10 years next preceding the date of investment,
and the aggregate net earnings available for dividends on the common
stock of the corporation for the whole of that period have been equal
to the amount of the dividends paid, and the corporation has paid an
earned cash dividend in each of the last three years;
(e) The investment in any one company may not exceed 5 percent of
the common shares outstanding; and
(f) No single common stock investment, based on cost, may exceed 2
percent of the assets of the fund.

45308.55. Notwithstanding Section 45308.1 the board may also invest
in any stocks or shares of a diversified management investment
company registered under the "Investment Company Act of 1940" which
has total assets of at least fifty million dollars ($50,000,000);
except that the total investment in such stocks and shares, together
with stocks and shares of all other corporations, may not exceed 25
percent of the assets of such fund determined on the basis of the
cost of the stocks or shares.

45308.6. For purposes of Section 45308.5, city retirement systems
shall employ investment counsel or trust companies or trust
departments of banks to render service in connection with the city
retirement system's investment program.

45308.7. The city retirement board, if there is one, or the city
treasurer with the approval of the city council, may enter into
security loan agreements with broker-dealers and with California or
national banks for the purpose of prudently supplementing the income
normally received from investments.
(b) "Security loan agreement" means a written contract whereby a
legal owner, the lender, agrees to lend specific marketable corporate
or government securities for a period not to exceed one year. The
lender retains the right to collect from the borrower all dividends,
interest, premiums, rights, and any other distributions to which the
lender would otherwise have been entitled. The lender waives the
right to vote the securities during the term of the loan. The lender
may terminate the contract upon not more than five business days'
notice as agreed, and the borrower may terminate the contract upon
not less than two business days' notice as agreed. The borrower shall
provide collateral to the lender in the form of cash or bonds or
other interest-bearing notes and obligations of the United States or
federal instrumentalities eligible for investment by a lending
retirement fund.
Such collateral shall be in an amount equal to at least 102
percent of the market value of the loaned securities as agreed. The
lender shall monitor the market value of the loaned securities daily.
The loan agreement shall provide for payment of additional
collateral on a daily basis, or at such times as the value of the
loaned securities increases, to agreed-upon ratios. In no event,
shall the amount of the collateral be less than the market value of
the loaned securities.
(c) "Marketable securities" means securities that are freely
traded on recognized exchanges or marketplaces.
(d) Each board or city treasurer entering into security loan
agreements shall do all of the following:
(1) Maintain detailed records of all security loans.
(2) Develop controls and reports to monitor the conduct of the
transactions.
(3) Publicize the net results of the security loan transaction
separate from the results of other investment activities.

45309. Among other matters, the ordinance establishing the system
shall provide for:
(a) The amount of benefits to be paid to any officers or
employees, or their beneficiaries, and the terms and conditions upon
which the benefits will be paid.
(b) The contribution to be paid by the officers or employees to
the pension and retirement fund.
(c) The contribution to be paid by the city to the pension and
retirement fund, which, exclusive of contributions paid on account of
service rendered prior to the effective date of the ordinance, shall
not exceed the total contribution paid to the pension and retirement
fund by the officers and employees.
(d) The personnel of the retirement board, which shall consist of
not less than five members, at least two of whom shall be elected by
the officers and employees who are included in the retirement system.
(e) The adoption of regulations for the administration of the
system by the retirement board.
(f) The refunding to any officer or employee who withdraws from
the system, prior to retirement, of the amount of his or her
contribution and the interest credited to his or her contribution
upon the officer's or employee's request following withdrawal from
the system.

45309.5. A member of a pension or retirement system established
pursuant to this chapter shall not receive credit for service or
contributions for credit for service in violation of the prohibitions
provided in Section 34095 or Section 50033.

45310. The ordinance may provide that:
(a) The amount of the retirement, compensation, or pension may be
predicated, in part, upon services rendered the city by an officer or
employee prior to the establishment of the system.
(b) The contribution of officers and employees included in the
system may be collected by deducting the amounts of such
contributions from the salary or wages due the officers and
employees.

45310.3. Notwithstanding any other provision of law, a person
ceases to be a member for any portion of his or her service as an
elected public officer that is forfeited pursuant to Section 1243.

45310.5. The ordinance may provide for a modification of rights and
benefits of a member because of membership in a reciprocal system
similar to and under the same conditions as those provided under the
County Employees' Retirement Law of 1937 and the Public Employees'
Retirement Law because of membership in two or more retirement
systems established by or pursuant to such laws. The ordinance shall
be filed with each board administering a reciprocal system and shall
become effective upon the adoption of a resolution of such
administering board accepting the city system as a reciprocal system.
Such modification shall apply only to a member whose termination and
entry into employment resulting in a change in membership from the
city system to a reciprocal system or from a reciprocal system to the
city system occurs after such effective date; provided, however,
that provisions relating to computation of final compensation shall
apply to any other member if such provision would have applied had
the termination and entry into employment occurred after such
effective date.
A reciprocal system, for purposes of this section, means a
retirement system established under the County Employees' Retirement
Law of 1937, the Public Employees' Retirement System, a retirement
system of a city whose retirement ordinance contains the provisions
authorized by this section, or a retirement system of a city or city
and county established by its charter and providing for modifications
of rights and benefits similar to and under the same conditions as
those provided for under this section.
When a city has established a reciprocal retirement system under
this section and has received approval thereof from the Public
Employees' Retirement System, then such system shall be automatically
reciprocal with all other state, local and public agencies who are
members, or contracting members of the Public Employees' Retirement
System or any retirement system established under the County
Employees Retirement Law of 1937.

45310.6. When a city has established a reciprocal retirement system
under this chapter, the following shall apply:
(a) Any former member who left service under that system and
became a member of a reciprocal retirement system or a retirement
system established under the Public Employees' Retirement Law, and
who did not elect to, or was not eligible to, leave his or her
contributions on deposit, may elect to redeposit those contributions
if he or she is an active member of a reciprocal retirement system or
the Public Employees' Retirement System at the time of redeposit. A
former member may exercise this right by redepositing in the
retirement fund of the city he or she left, the amount of accumulated
contributions and interest that he or she withdrew from that
retirement fund plus regular interest thereon from the date of
separation.
(b) A former member who redeposits under this section shall have
the same rights as a member who elected to leave his or her
accumulated contributions on deposit in the fund. The deferred
retirement allowance of the member shall be determined in accordance
with provisions applicable to a member retiring directly from city
employment on the date of his or her retirement.
(c) A former member who redeposits under this section shall be
entitled to a reduced age at entry, commencing with contributions
payable the first day of the month following the date the association
receives notice of the redeposit, if applicable.
(d) This section does not apply to either of the following:
(1) A member or former member who is retired.
(2) A former member who is not in the service of an employer
making him or her a member of a retirement system established under
the Public Employees' Retirement Law or a reciprocal retirement
system.
(e) This section shall only apply to either of the following:
(1) A former member who is in the service of an employer as an
officer or employee of a law enforcement agency or fire department
whose principal duties consist of active law enforcement or
firefighting and prevention service, but excluding one whose
principal duties are those of a telephone operator, clerk,
stenographer, machinist, mechanic, or otherwise, and whose functions
do not clearly come within the scope of active law enforcement or
firefighting and prevention service, even though the officer or
employee is subject to occasional call, or is occasionally called
upon, to perform duties within the scope of active law enforcement or
firefighting and prevention service.
(2) A former member who is in the service of an employer and seeks
to redeposit contributions for past employment as an officer or
employee of a law enforcement agency or fire department in the city's
retirement system whose principal duties consisted of active law
enforcement or firefighting and prevention service, but excluding one
whose principal duties were those of a telephone operator, clerk,
stenographer, machinist, mechanic, or otherwise, and whose functions
did not clearly come within the scope of active law enforcement or
firefighting and prevention service, even though the officer or
employee was subject to occasional call, or was occasionally called
upon, to perform duties within the scope of active law enforcement or
firefighting and prevention service.
(f) For purposes of this section, a "former member" is a member
who left service under a retirement system established under this
chapter and who did not elect to, or was not eligible to, leave his
or her contributions on deposit with the system.
(g) Each city retirement system subject to this section shall
establish criteria to determine the eligibility of a former member to
redeposit contributions, and the amount of contributions that may be
redeposited, in those cases in which the system no longer maintains
complete records with respect to the former member.
(h) It is the intent of the Legislature in enacting this section
to recognize a statewide public obligation to all those whose duties
as local public safety officers expose them to more than ordinary
risks through their contribution to ensuring public safety and to
ensure that those who do serve or have served as local public safety
officers shall have the ability to receive pension benefits for past
public service in other jurisdictions within the state.

45310.7. (a) On and after January 1, 2003, a member who is credited
with less than the number of years of service required for vesting
shall have the right to elect to leave accumulated contributions on
deposit in the retirement fund of the city's retirement system.
Failure to make an election to withdraw accumulated contributions
shall be deemed an election to leave accumulated contributions on
deposit in the system's retirement fund.
(b) An election to allow accumulated contributions to remain in
the system's retirement fund may be revoked by the member at any time
except: (1) while the member is employed in service in a position in
which the member is not excluded from membership in the system with
respect to that service; (2) while the member is in service as a
member of a public retirement system supported, in whole or in part,
by state funds; or (3) while the member is in service in a reciprocal
retirement system, entered within six months after discontinuing
service in the city's retirement system. All accumulated
contributions made up to the time of revocation may then be
withdrawn.
(c) A member whose membership continues under this section is
subject to the same age, service, and disability requirements as
apply to other members for service or disability retirement. After
the qualification of the member for retirement by reason of age,
which shall be the lowest age applicable to any membership category
in which the member has credited service, or disability, the member
shall be entitled to receive a retirement allowance based upon the
amount of the member's accumulated contributions and service standing
to the member's credit at the time of retirement and on the employer
contributions held for the member and calculated in the same manner
as for other members.
(d) Service, solely for purposes of meeting minimum service
qualifications for service or disability retirement, shall also
include service credited as an employee of a reciprocal system when
the member retires concurrently from all reciprocal retirement
systems. A member whose combined service from all reciprocal
retirement systems does not meet the minimum service qualifications
may not receive a service or disability retirement from this system.
(e) For purposes of this section, "accumulated contributions"
means the sum of all member contributions standing to the credit of a
member's individual account, and interest thereon.
(f) It is the intent of the Legislature in enacting this section
to recognize that the state has a compelling interest in ensuring
that its public agencies recruit and retain the highest caliber of
public employees by allowing local public employees to retain the
service credit that they earned through their service as local public
employees in order to encourage them to return to public employment
and continue to serve the public.

45311. (a) It is the intent of the Legislature in enacting this
section to recognize a public obligation to all those whose duties as
local prosecutors, local public defenders, and local public defender
investigators expose them to more than ordinary risks in their
contribution to an effective statewide criminal justice system and to
ensure that those who serve as local prosecutors, local public
defenders, and local public defender investigators and who become
incapacitated in the performance of their duties or by age may be
replaced by more capable employees and shall receive pension benefits
commensurate with those received by local prosecutors, local public
defenders, and local public defender investigators in other
jurisdictions within the state.
(b) The ordinance shall provide that the officers and employees of
the city whose positions meet or, on or after January 1, 2002, met
the criteria of a local prosecutor, local public defender, or local
public defender investigator, as described in Section 20423.6 or
31469.2, shall be accorded those pension benefits accorded to safety
members under the retirement system of the city. Notwithstanding the
foregoing, the pension benefits accorded to a local prosecutor, local
public defender, or local public defender investigator may not be
greater than those benefits provided to local safety members of the
Public Employees' Retirement System under Section 21363.1 or safety
members of a county retirement system under Section 31664.2.
(c) Except as provided in subdivision (e) and notwithstanding any
other provision of this chapter, past service shall be converted to
safety service, if the past service was rendered in a position that
has been made subject to safety benefits pursuant to this section.
For local prosecutors described in paragraph (2) of subdivision (b)
of Section 20423.6, and paragraph (2) of subdivision (a) of Section
31469.2, service in the office of a district attorney and a local
child support agency shall be considered service for the district
attorney for purposes of this section. Any unfunded liability
resulting from this section shall be paid by the employer.
(d) This section shall apply only to a person whose effective date
of retirement is on or after the date this section becomes operative
in the city.
(e) Notwithstanding any other provision of this chapter, within 90
days after this section becomes operative in the city, or on the
first day of the calendar month following his or her entrance into
service, whichever is later, any local prosecutor, local public
defender, or local public defender investigator may file a written
election not to become subject to the pension benefits accorded to
safety members under the retirement system of the city.
(f) This section shall not be operative in a city unless and until
the city council or board of supervisors, by ordinance adopted by
majority vote, makes this section operative in the city. A resolution
to make this section operative in the city shall include all local
prosecutors, local public defenders, and local public defender
investigators as described in Section 20423.6 or 31469.2.
(g) This section does not apply to any local prosecutor, local
public defender, or local public defender investigator, as described
in Section 20423.6 or 31469.2, who dies prior to the date this
section becomes operative in the city.

45312. Nothing in this article prohibits the enhancement of the
pension and retirement fund by private or voluntary contributions,
nor the transfer to the fund of any surplus funds of the city which
in the sound discretion of the legislative body may properly be used
for such purpose.

45313. The retirement board shall require competent medical proof
before retiring any officer or employee for physical disability.

45314. After the retirement of a person for disability, if it
appears that the disability has diminished, the board shall reduce
the retirement payment to correspond with the degree of disability.
The retirement payment shall cease when the disability has fully
ceased.

45315. The determination of the retirement board is final and shall
not be modified or set aside except for fraud or abuse of
discretion.

45316. This article provides an alternative procedure for the
establishment of retirement systems in cities.

45317. Any regularly established fire or police protection district
may adopt a retirement system for its employees pursuant to this
article.