§ 8. Method of financing.

(a) Assets to meet obligations.

All of the assets of the Retirement System shall be credited toward meeting the aggregate obligations of the Retirement System.

(b) Retirement System Fund.

(1) The Retirement System shall maintain a fund in which shall be accumulated all reserves for the payment of all pensions and other benefits payable from contributions made by the City of Baltimore and from which shall be paid all pensions and other benefits on account of members with prior service credit and lump sum death benefits for all members payable from the those contributions.

(2) Contributions by the City Baltimore to the Retirement System Fund shall be made as follows:

(i) On the basis of regular interest and of such mortality and other tables as are adopted by the Board of Trustees, the actuary engaged by the Board shall make a valuation to determine the required contribution by the City of Baltimore for the Retirement System Fund.

(ii) The actuary shall determine for each member a normal cost that is equal to the amount of annual contribution as a constant percentage of compensation that is necessary to provide the member's benefit, if the contributions had been made annually from the member's date of entry into the system, together with any other service credit acquired under any provisions of this subtitle and under Division II of the State Personnel and Pension Article, to the member's date of retirement. The total amounts so determined shall be known as "normal cost contribution."

(iii) An accrued liability shall be calculated for each member equal to the accumulation of the annual normal cost contribution, as described in subparagraph (ii) of this paragraph (2), from the date of entry into the system, together with any other service credit acquired under any provisions of this subtitle and under Division II of the State Personnel and Pension Article, to the valuation date on the basis of the actuarial assumptions adopted by the Board of Trustees.

(iv) The accrued liability computed under subparagraph (iii) of this paragraph (2) shall be added to the reserve for retirement benefits payable to retired members from the Retirement System Fund to obtain the total accrued liability.

(v) The assets of the Retirement System Fund shall be applied against the total accrued liability, computed for all members, retirees, and beneficiaries, to determine the amount of unfunded accrued liability. An accrued liability contribution shall be determined as the amount sufficient to meet regular interest on the unfunded accrued liability, and to amortize the principal of the unfunded accrued liability over the period of time determined by the Board of Trustees.

(vi) The required contribution by the City of Baltimore shall be the sum of the normal cost and accrued liability contribution determined in accordance with this paragraph. The aggregate payment by the City of Baltimore shall be, when combined with the amount in the Retirement System Fund, sufficient to provide the pensions and other benefits payable out of the Fund during the year then current.

(vii) The accrued liability contribution shall be discontinued as soon as the accumulated reserve in the Retirement System Fund equals the present value, as actuarially computed and approved by the Board of Trustees, of the total liability of the Fund, less the present value, computed on the basis of the normal contribution rate then in force, of the prospective normal contributions to be received on account of persons who are at that time members.

(c) Certification of appropriation.

(1) On or before January 1 of each year, the Board of Trustees shall certify to the Board of Estimates the amount of the appropriation necessary to pay to the Retirement System the amounts payable by the City of Baltimore, as enumerated in this article, for the fiscal year beginning on the ensuing July 1.

(2) The amount so certified is due to the System on July 1 of the fiscal year, and appropriations for that amount shall be included in the Ordinance of Estimates for that fiscal year.

(d) Member contributions.

(1) Class C members.

(i) Subject to subparagraph (ii) of this paragraph (1), and notwithstanding any other provision of this subtitle, effective with the 1st full payroll period that begins after the applicable effective date shown below, each Class C member shall contribute the percentage of his or her earnable compensation (as defined in § 1(11) of this subtitle) that corresponds to the effective date, these contributions to continue throughout the member's remaining period of service:

(ii)(A) The scheduled increases in a member's contribution, as provided for in subparagraph (i) of this paragraph (1), apply only for a fiscal year in which a minimum 2% raise (or in which a series of prior non-minimum annual raises, first effective after the immediately preceding contribution increase, reaches an aggregate of 2% (the "aggregate minimum")):

1. has been subject to negotiation or meet-and-confer, as the case may be, with the certified employee organization or professional association representing that employee; and

2. has become effective for that employee and for all other employees represented by that organization or association.

(B) For any fiscal year in which a member does not receive this minimum raise (or minimum aggregate), the scheduled increase in that member's contribution is suspended and the schedule of increased contributions will resume only for the next fiscal year in which there is a minimum raise (or aggregate minimum).

(C) Notwithstanding City Code Article 12, § 5-8 {"Labor Negotiations: Time table"}, if a minimum raise (or minimum aggregate) only becomes effective after a fiscal year has begun, the contribution increase for that fiscal year is suspended until the date on which the minimum raise (or minimum aggregate) is effective and is then applied pro rata for the period from the effective date of the raise through the remainder of the fiscal year.

(D) For any fiscal year in which a raise (or aggregate of raises) exceeds 2%, the excess over 2% shall be calculated with all other subsequent raises for purposes of determining the next minimum aggregate requiring the next contribution increase.

(E) At all times, notwithstanding any suspension of a scheduled increase, a member's then required contribution, as established in prior fiscal years, remains intact.

(2) Class D members.

Effective with the 1^st full payroll period that begins after an employee begins her or his Class D membership, the employee shall contribute 5% of his or her earnable compensation (as defined in § 1(11) of this subtitle), these contributions to continue throughout the member's remaining period of service.

(3) "Picked-Up" status.

(i) The contributions described in paragraphs (1) and (2) of this subsection shall be treated as being "picked up" by the City of Baltimore within the meaning of Internal Revenue Code ("IRC") § 414(h)(2).

(ii) These picked-up contributions may not be excluded from "average final compensation" in computing the amount of any retirement allowance under this System or any other benefit paid or payable in connection with the member's employment. Each member is at all times fully vested in these contributions.

(iii) As soon as administratively practicable, the City shall request a private letter ruling from the Internal Revenue Service to the effect that the contributions so picked up by the City on behalf of members of this System will be treated as employer contributions described in IRC § 414(h)(2) and will not be includible in the member's gross income for federal income tax purposes for the year in which they are contributed. If the Internal Revenue Service rules that the City's picked-up contributions do not satisfy the requirements of IRC § 414(h)(2), or if § 414(h)(2) is repealed, the contribution rates set forth in paragraphs (1) and (2) of this subsection will remain in effect, but the contributions may no longer be treated as picked up by the City and shall be paid instead directly by the member.

(iv) For each payroll period, the Department of Finance shall cause to be deducted from the earnable compensation of each Class C and Class D member the percentage of contributions described in paragraphs (1) and (2) of this subsection. These deductions shall be paid into the Retirement System Fund and credited, with regular interest (as defined in § 1(9)(i)(B) of this subtitle), on behalf of the member from whose earnable compensation the deductions were made.

(v) A member's accumulated contributions that are withdrawn by the member, or paid to the member's estate or designated beneficiary in event of death as provided in this subtitle, shall be paid from the Retirement System Fund.