§ 17. Post-retirement benefit increases to certain retirees and beneficiaries.

This section applies only to post-retirement benefit increases determined before July 1, 2007. Each retired member or beneficiary (Classes A, B, and C) who is receiving periodic benefits from the Retirement System may be eligible for an increase in the amount of those periodic benefits subject to the following provisions.

(a) Eligibility.

(1) For increases determined as of or before June 30, 1995, each member who has retired from active service, whether before or after the effective date of this ordinance, and each beneficiary of a deceased member who is or will be receiving periodic retirement benefits, whether before or after the effective date of this ordinance, and who receives periodic benefit payments for 2 or more years may be eligible for an increase in such periodic benefit determined according to this § 17. Such 2-year period shall be calculated commencing with the effective date of the 1^st retirement benefit payment paid to either the retired member or the beneficiary of a deceased member and shall be determined on June 30 of each year commencing with June 30, 1983. Years retired as a beneficiary of a former retired member shall include the years that the member was retired. Eligible members and beneficiaries are also referred to herein as "persons".

(2) For increases determined as of June 30, 1996, and as of any subsequent June 30 determination date, each member who has retired from active service, whether before or after the effective date of this ordinance, and each beneficiary of a deceased member who is or will be receiving periodic retirement benefits, whether before or after the effective date of this ordinance, and who is receiving periodic benefit payments as of the June 30 determination date may be eligible for an increase in the periodic benefit determined according to this § 17. Eligibility for this increase shall be calculated commencing with the effective date of the 1^st retirement benefit payment paid to either the retired member or the beneficiary of a deceased member and shall be determined on the June 30 determination date of each year, commencing with June 30, 1996. A beneficiary of a former retired member is eligible to receive any percentage increase under this section that the retired member was eligible to receive. Eligible members and beneficiaries are also referred to herein as "persons".

(3)(i) This paragraph (3) applies to members who are no longer employed in a permanent full-time or permanent part-time position with the City and were either:

1. members of this system who were eligible to retire but chose to postpone receipt of retirement benefits to begin employment in a position covered by another City system; or

2. retirees who were receiving retirement benefits from this system but chose to suspend receipt of those benefits to begin employment in a position covered by another City system.

(ii) Pursuant to § 48 of this article and notwithstanding the waiting period required by this section, members described in subparagraph (i) of this paragraph (3), on ceasing all permanent full-time and permanent part-time employment with the City, shall receive benefits calculated to include all post-retirement increases, in accordance with the rates of increase set by this system, that the member or retiree would have been eligible to receive as a retiree had retirement benefits not been postponed or suspended.

(4) Notwithstanding paragraph (3) of this subsection, former members of this system who ceased all permanent full-time and permanent part-time employment covered by this system, with entitlement to deferred vested pension benefits, and who then chose to begin employment in a position covered by another City system, on vesting and ceasing all permanent full-time and permanent part-time employment with the City, shall receive benefits calculated to include only those post-retirement increases that the member otherwise would have been eligible to receive under paragraph (2) of this subsection from the commencement of the former member's actual receipt of vested benefits pursuant to §§ 6(a)(12) and 9(l) of this article.

(b) Amount of benefit increase.

As of the end of each fiscal year, a determination shall be made of the amount of increase (if any) of retirement benefit payments which may be payable to eligible persons. The amount of retirement benefit increase shall be calculated with reference to excess investment earnings of the Annuity Reserve Fund and the Pension Reserve Fund only, and according to the method described in subsection (c) below.

After determination of the amount of excess investment earnings available for retirement benefit increases, such excess investment earnings shall be allocated to eligible retired members and beneficiaries according to the following method. The percentage which the benefits shall be increased shall be determined by the actuary as the amount that the investment earnings determined in subsection (c) below would be sufficient to fund on a single premium paid up annuity basis using the actuarial valuation assumptions on the June 30 preceding the effective date of the increase.

(i) Effective as of January 1, 1984, an increase may be payable to each retiree or beneficiary eligible pursuant to subsection (a) of this section as of June 30, 1983.

(ii) Until the benefit increase objectives set forth in paragraph (iii) below have been met, the allocation to eligible persons shall be made with reference to the number of full continuous years that each person has been receiving retirement benefits from this plan and the amount of each person's benefit being paid as of June 30, 1983. A percentage factor will be determined by the actuary to increase benefits to those eligible. The percent increase in an eligible member's or beneficiary's benefit will equal the percentage factor times full years which the member or beneficiary has been receiving benefits. No fractional years will be used.

(iii) The allocation method set forth in paragraph (ii) above shall apply only until the following benefit increase objectives have been met:

After the above objectives have been met, the allocation of new excess investment earnings shall be made without reference to the number of years any member or beneficiary has been receiving benefits. The allocation to eligible persons shall then be made by the actuary on an equal percentage basis.

(iv) For each June 30 after June 30, 1983, the determination of the amount of excess investment earnings and allocation of such earnings to eligible persons shall be calculated using the appropriate method outlined in paragraph (ii) or (iii) above with the amount of distribution and the allocation of such amount being calculated as of the end of the fiscal year, with any increase to commence effective as of the following January 1.

The benefit increase payable pursuant to this section shall be payable in the same form as the basic benefit being received by the eligible person.

(c) Amount of investment income to be used to increase benefits.

(1) Notwithstanding § 7 as it applies to excess earnings, the amount of excess investment earnings available as of each June 30 (prior to June 30, 1993) for an increase in benefits will be equal to the product of items (i), (ii), and (iii) below. Each item below except for item (ii) under this subsection (c) is determined as of each June 30 beginning with June 30, 1983, and any benefit increase shall become effective as of the following January 1. Item (ii) below is determined as of the June 30 that is 18 months prior to the effective date of the benefit increase, beginning with June 30, 1982.

(i) The dollar amount of net excess investment earnings determined on the following basis:

Before the Reserve for Book Value is paid off, net excess investment earnings shall be that portion of total fund earnings between 8% and 10½% of average market value, plus ½ of the fund earnings in excess of 10½%.

After the Reserve for Book Value is paid off, net excess investment earnings shall be that portion of total fund earnings between 7½% and 10% of average market value, plus ½ of fund earnings in excess of 10%.

For purposes of the above calculations, earnings shall be net of expenses and include realized and unrealized gains and losses and all other sources of investment gains and losses as shown in the actuary's report submitted pursuant to § 5(p). The investment return used in this section shall be based on the annual return as of each June 30, commencing with the year ending June 30, 1983. The average market value for the year shall equal ½ of the market value of the 4 funds as of the beginning of the year plus ½ of the market value of the funds as of the end of the year minus ½ of the earnings during the year. The earnings and market values of the funds for the purpose of this section are assumed to be equal to the values contained in the actuary's report.

(ii) The ratio of the sum of the Annuity Reserve Fund plus the Pension Reserve Fund to the sum of all 4 funds: Annuity Savings Fund, Annuity Reserve Fund, Pension Accumulation Fund, and the Pension Reserve Fund.

(iii) ¾ on June 30, 1983 for the initial increase (if any) and ¾ for each subsequent year until a Contingency Reserve Fund has been accumulated according to the following method. The remaining ¼ of excess investment earnings as of June 30, 1983, and each June 30 thereafter shall be set aside as a Contingency Reserve Fund until the value of such fund is at least equal to 2½% of the Annuity Reserve Fund and the Pension Reserve Fund as of the end of the most recent June 30. The Contingency Reserve Fund shall serve as a reserve to insure payment of previously accrued benefit increases for any year in which the Paid-Up Benefit Fund does not meet its interest assumption. While the Board of Trustees may fund increases through the establishment of a Paid-Up Benefit Fund, it shall also have the option of funding any increases through the purchase of annuity contracts from one or more insurance companies. For each year when the Contingency Reserve Fund is not less than 2½% of the Annuity Reserve Fund and the Pension Reserve Fund, the ¾ fraction shall not apply and the amount available to increase benefits shall be the product of items (i) and (ii).

(2) Notwithstanding § 7 as it applies to excess earnings, the amount of excess investment earnings available as of each June 30 (on or after June 30, 1993) for an increase in benefits will be equal to the product of items (i), (ii), and (iii), plus items (iv) and (v) below. For increases determined as of or before June 30, 1995, the increase provided by the excess earnings calculated herein shall be a minimum of 1% and a maximum of 5% in any 1 year. For increases determined as of or after June 30, 1996, the minimum increase shall be increased from 1% to 2% whenever the Contingency Reserve Fund shall equal the maximum 2.5% (as described in item (iii) below) as of the June 30 1 year prior to the end of the year in which the current excess investment earnings are derived.

Each item below except for item (ii) under this subsection (c)(2) is determined as of each June 30 beginning with June 30, 1993, and any benefit increase shall become effective as of the following January 1. Item (ii) below is determined as of the June 30 that is 18 months prior to the effective date of the benefit increase.

(i) the dollar amount of net excess investment earnings determined on the following basis:

Net excess investment earnings shall be that portion of total fund earnings between 7½% and 10% of average market value, plus ½ of fund earnings in excess of 10%.

For purposes of the above calculations, earnings shall be net of expenses and include realized and unrealized gains and losses and all other sources of investment gains and losses as shown in the actuary's report. The investment return used in this section shall be based on the annual return of each June 30. The average market value for each year shall equal ½ of the market value of the Annuity Savings Fund, the Annuity Reserve Fund, the Pension Accumulation Fund, and the Pension Reserve Fund as of the beginning of the year plus ½ of the market value of these funds as of the end of the year minus ½ of the earnings during the year. The earnings and market values of these funds for the purpose of this section are assumed to be equal to the values contained in the actuary's report.

(ii) the ratio of the sum of the Annuity Reserve Fund plus the Pension Reserve Fund to the sum of the following 4 funds: Annuity Savings Fund, Annuity Reserve Fund, Pension Accumulation Fund, and the Pension Reserve Fund.

(iii) ¾ on June 30, 1993, and ¾ for each subsequent year until a Contingency Reserve Fund has been accumulated according to the following method. The remaining ¼ of excess investment earnings as of June 30, 1993, and each June 30 thereafter shall be set aside as a Contingency Reserve Fund until the value of such fund is at least equal to 2½% of the Annuity Reserve Fund and the Pension Reserve Fund as of the end of the most recent June 30. The Contingency Reserve Fund shall serve as a reserve to insure payment of previously accrued benefit increases for any year in which the Paid-Up Benefit Fund does not meet its interest assumption. While the Board of Trustees may fund increases through the establishment of a Paid-Up Benefit Fund, it shall also have the option of funding any increases through the purchase of annuity contracts from one or more insurance companies. For each year when the Contingency Reserve Fund is not less than 2½% of the Annuity Reserve Fund and the Pension Reserve Fund, the ¾ fraction shall not apply.

(iv) any additional amount of funds needed (above those provided by items (i) times (ii) times (iii)) to provide the minimum benefit increase. This amount will be transferred from the Contingency Reserve Fund to the Paid-Up Benefit Fund in the month of the benefit increase, notwithstanding that such transfer creates a deficit or increases an existing deficit in the Contingency Reserve Fund.

(v) any net funds provided under items (i) to (iv) above that would result in a variable benefit increase greater than 5%. Such excess funds shall be used to provide an increase in the following years which shall be in addition to the normal variable benefit increase provided the combined increase does not exceed the 5% limit on increases. Carried over excess funds shall not be used to provide the minimum benefit or to offset any prior deficit in item (iv).

(d) Paid-Up Benefit Fund and Contingency Reserve Fund.

(i) The existence of a Paid-Up Benefit Fund and a Contingency Reserve Fund is hereby specifically authorized, § 8 to the contrary notwithstanding.

(ii) The Paid-Up Benefit Fund shall be the primary fund from which shall be paid all benefit increases provided under this section. The Paid-Up Benefit Fund shall be funded with excess investment earnings consistent with subsection (c) above. For any year in which the investment return of the Paid-Up Benefit Fund exceeds the interest assumption on which the purchase of paid up benefits is based, such excess shall remain in the fund and thereby help insure payment of previously accrued benefit increases.

(iii) Prior to June 30, 1993, the Contingency Reserve Fund shall be a reserve to insure payment of previously accrued benefit increases for any year in which the Paid-Up Benefit Fund does not meet its interest assumption. Should there be a deficit in the Paid-Up Benefit Fund, the Board of Trustees shall transfer assets from the Contingency Reserve Fund to the Paid-Up Benefit Fund in order to offset such deficit. The Contingency Reserve Fund shall be funded with excess investment earnings consistent with subsection (c) above. For any year in which the value of the Contingency Reserve Fund is equal to or exceeds 2½% of the Annuity Reserve Fund and the Pension Reserve Fund, earnings on the Contingency Reserve Fund shall be applied by the Board of Trustees in such amount or amounts as they determine (1) to decrease the amount contributed by the City of Baltimore and/or (2) to decrease the period over which the unfunded accrued liability will be amortized.

(iv) On and after June 30, 1993, the Contingency Reserve Fund shall be a reserve to insure payment of previously accrued benefit increases for any year in which the Paid-Up Benefit Fund does not meet its interest assumption. In addition, the Contingency Reserve Fund shall be used to provide the minimum benefit consistent with § 17(c) above. Should there be a deficit in the Paid-Up Benefit Fund, the Board of Trustees shall transfer assets from the Contingency Reserve Fund to the Paid-Up Benefit Fund in order to offset such deficit, notwithstanding that such transfer creates a deficit or increases an existing deficit in the Contingency Reserve Fund. The Contingency Reserve Fund shall be funded with excess investment earnings consistent with subsection (c) above.

(v) The Board shall have the duty and responsibility of periodically determining investment policies for the Paid-Up Benefit Fund and the Contingency Reserve Fund, and such policies shall be consistent with the limitations set forth in this section.

(vi) The Board shall segregate or invest separately the Paid-Up Benefit Fund and the Contingency Reserve Fund. Furthermore, while the Board is empowered to invest and reinvest such funds in any class of investment set forth at § 7, the Board is specifically empowered to invest and reinvest the Paid-Up Benefit Fund and/or the Contingency Reserve Fund in the medium of paid up annuity contracts or guaranteed investment contracts purchased from one or more insurance companies, provided that any such insurance company shall have no less than the highest rating from A.M. Best Company or a comparable company.

(e) Benefit increases to be paid only from Paid-Up Benefit Fund and Contingency Reserve Fund.

(i) Any benefit increase provided under this section shall be funded on a single premium paid-up annuity basis. The words "single premium paid-up annuity basis" shall have the common actuarial meaning of spreading the amount available to provide a benefit over the lifetime of an individual in the form of an annuity. It is intended that any such benefit increase shall continue for the lifetime of the eligible member and any beneficiary, consistent with any option elected under § 6 or § 9. The foregoing Contingency Reserve Fund has been established to insure payment of previously accrued benefit increases for any year in which the Paid-Up Benefit Fund does not meet its interest assumption.

(ii) Prior to June 30, 1993, the granting of any benefit increase under this section is contingent on the performance of the Retirement System's investment funds. On and after June 30, 1993, the granting of any benefit increase under the provisions of this section shall be subject to the minimum benefit provided for in § 17(c). The continuation of any benefit increase previously accrued under this section is specifically made contingent on the ability of the Paid-Up Benefit Fund and the Contingency Reserve Fund to provide such benefits in the future. § 10 and § 42 to the contrary notwithstanding, any benefit increase provided under this section shall not become an obligation of the City of Baltimore. In the event of any conflict between § 10 and/or § 42 and this section, the terms of this section shall prevail.

(iii) If the performance of the Retirement System's investment funds causes a decline in the value of the Paid-Up Benefit Fund and the Contingency Reserve Fund, with the result that full benefit increases previously accrued under this section cannot be continued, then the Trustees can reduce or eliminate previously accrued increases on an equal percentage basis, effective as of January 1 following the June 30 on which a deficit exists. An equal percentage reduction shall be made to all benefits granted under this section regardless of when such increases were granted. If the Paid-Up Benefit Fund and the Contingency Reserve Fund should become exhausted or decline in value to the point of having no value, previously accrued increases shall be eliminated in full. Any excess investment earnings available under subsection (c) above in a subsequent year shall be used to provide an increase in benefits without regard to any prior reduction or elimination of benefit increases previously accrued.

(f) Any retired member or beneficiary who began receiving periodic retirement benefits prior to June 28, 1991, shall receive a 3% increase in periodic benefits effective July 1, 1992.