Health Benefit Fund.
Ann Arbor City Code § 1:576
in effect1:576. - Health Benefit Fund.
The Health Benefit Fund is the accounting Fund which shall be credited with (i) contributions by the City for the purpose of funding all or a portion of the cost of providing health insurance coverage to eligible Retired Members and other qualified Beneficiaries, and (ii) investment experience allocated to the Health Benefit Fund, and which shall be charged with all, or a portion of, applicable premiums or contract charges for such coverage. Eligibility for coverage and the portion of the premium or contract charge to be paid from the Health Benefit Fund shall be determined in accordance with section 1:577. Except as provided at section 1:576(1), contributions to the Health Benefit Fund by the City, when added to any City contributions for life insurance protection provided by the Retirement System, shall not exceed 25% of the total actual contributions to the Retirement System (other than contributions to Fund past Service) for all years since the Health Benefit Fund has been in effect and shall be reasonable and ascertainable. Amounts allocated to the Health Benefit Fund may only be used for retiree health benefits described in section 1:577 and in the City's Retiree Health Care Benefits Plan and Trust, and may not be used for any purpose other than providing such retiree health benefits or until the satisfaction of all liabilities under section 1:577, at which time any amount remaining in the Health Benefit Fund shall be returned to the City. Amounts in the Health Benefit Fund shall be allocated to separate 401(h) subaccounts which shall be established for any key employee (as defined in Code Section 416(i)(I)) of the City, and benefits may be paid only from such key employee's subaccount. The City shall not contribute any amounts to the Health Benefit Fund or a Welfare Benefit Fund (as defined in Code Section 419(e)(1)) with respect to Qualified Current Retiree Health Liabilities as defined in Code Section 420(e)(1)(A) for which transferred assets are required to be used as described in section 1:576(1)(c) below.
(1) Code Section 420 Transfer of Excess Assets to the Health Benefit Fund. In addition to contributions made directly by the City under section 1:576, the Health Benefit Fund may be funded by a Qualified Transfer of "Excess Assets" of the Retirement System to the Health Benefit Fund. "Excess Assets" means those assets in excess of the Retirement System's (i) full funding limit; or (ii) 125% of the Retirement System's current liability (as described in Code Section 412(c)(7)(B)). The Qualified Transfer of assets does not otherwise count against the limits on City Contributions described in section 1:576 to the Health Benefit Fund. The Qualified Transfer of excess assets is subject to the requirements described below:
(a) Limitation on Number of Qualified Transfers Per Taxable Year. No more than 1 transfer of excess assets under this section 1:576(1) during a taxable year of the City; provided that in no event shall any such Qualified Transfer be made after December 31, 2013.
(b) Limit on Amount of Transfer. The amount of excess assets transferred from the Retirement System to the Health Benefit Fund shall not exceed the amount reasonably estimated to be paid during the tax year of the transfer for "Qualified Current Retiree Health Liabilities" as defined in Code Section 420(e)(1)(A). The amount to be transferred shall be reduced by the ratio of (i) assets (as of June 30 preceding the Plan Year of the transfer) previously set aside to pay for the Qualified Current Retiree Health Liabilities (as defined in Code Section 420(e)(1)(B)(i)), to pay for the Qualified Current Retiree Health Liabilities, to (ii) the present value of the Qualified Current Retiree Health Liabilities for all Plan Years (as defined in Code Section 420(e)(1)(B)(ii)). In the event the amount transferred exceeds the amount used to pay Qualified Current Retiree Health Liabilities, the excess (including income thereon) shall be returned from the Health Benefit Fund to the Retirement System.
(c) Use of Transferred Assets. Any assets (and any income allocable thereto) of the Retirement System transferred to the Health Benefit Fund shall be used only to pay reasonably estimated Current Retiree Health Liabilities (other than liabilities of key employees not taken into account under Section 420(e)(1)(D)) for the taxable year of the transfer. For purposes of this section, any amount paid out of the Health Benefit Fund shall be treated as first being paid out of excess assets transferred to the Health Benefit Fund pursuant to this section 1:595(1) and income thereon.
(d) Accelerated Vesting Requirement.
(i) An employee who is a Member in the Retirement System on the date of the transfer shall be 100% vested on the date of the Qualified Transfer in his then currently accrued benefit in the Retirement System, in the same manner as if the Retirement System had terminated immediately before the Qualified Transfer.
(ii) A Member who separated from Service at the City during the 1-year period ending on the date of the Qualified Transfer shall be 100% vested in his then currently accrued benefit as if the Retirement System had terminated immediately before his separation from Service.
A Member who vests in an accrued benefit under this section 1:576(1)(d) shall nonetheless be subject to the vesting requirements of section 1:558, with respect to future benefit accruals in the Retirement System. In the case of a Member who becomes vested pursuant to section 1:576(1)(d)(ii) above, which Member has been paid his Accumulated Member Contributions and has accordingly forfeited his Credited Service, such Member shall have his accrued benefit based upon his previously forfeited Credited Service retroactively reinstated and vested, provided that the vested accrued benefits so reinstated and vested shall be reduced by the actuarial equivalent of his Accumulated Member Contributions previously paid to him/her.
(e) Maintenance of Applicable Retiree Health Care Costs. As more fully set forth in section 1:734(1) of the City's Retiree Health Care Benefits Plan and Trust, in the event of a Qualified Transfer after December 17, 1999, the City shall maintain levels of Applicable Employer Retiree Health Costs during the Cost Maintenance Period, as such terms are defined in section 1:734(1) of the City's Retiree Health Care Benefits Plan and Trust.
(f) Maintenance of Applicable Retiree Health Care Benefits. As is more full set forth in section 1:734(2) of the City Retiree Health Care Benefits Plan and Trust, in the event of a Qualified Transfer occurring before December 17, 1999, the City shall maintain levels of Applicable Employer Retiree Health Benefits during the Health Benefits Period, as such terms are defined in section 1:734(2) of the City Retiree Health Care Benefits Plan and Trust.
(g) Key Employees Excluded. Assets transferred to the Health Benefit Fund cannot be used to pay the retiree health benefits of any Member who was a key employee (within the meaning of Code Section 416(i)(11)) at any time during the Plan Year ending within the tax year of the City in which the Qualified Transfer was made. If an employee is a key employee with respect to any Plan Year, such employee shall not be taken into account in computing Qualified Current Retiree Health Liabilities for such taxable year, or in calculating Applicable Employer Retiree Health Costs during the Cost Maintenance Period as such terms are defined in section 1:734(1) of the City's Retiree Health Care Benefits Plan and Trust.
(h) Limitation of City Deductions. The City shall not be entitled to a deduction for (i) amounts transferred to the Health Benefit Fund in a Qualified Transfer (nor for any excess Qualified Transfer funds returned to the Retirement System pursuant to Code Section 420(c)(1)(B)(i)); (ii) for amounts which are used from the Health Benefit Fund to pay Retiree Health Benefits which otherwise would have been deductible in the tax year of the Qualified Transfer had the expenses been paid directly by the City; nor (iii) for any Retiree Health Benefits for the year of the Qualified Transfer that are paid directly by the City, except such expenses which exceed the excess (if any) of the amount of the Qualified Transfer reduced by the amounts paid from the Health Benefit Fund pursuant to subsection (g)(ii) above.
(2) Notwithstanding anything to the contrary in this Retirement Ordinance, excess amounts transferred under section 1:576(1)(b), "Limit on Amount of Transfer" shall not exceed state law limitations as set forth in Michigan Compiled Laws Annotation (MCLA) 38.571 which section is incorporated by reference in this Retirement Ordinance.
(Ord. No. 16-28, § 1, 1-3-17)
Source: City of Ann Arbor, Michigan, Code (Municode Library, library.municode.com)URL: https://library.municode.com/mi/ann_arbor/codes/code_of_ordinances?nodeId=TITIAD_CH18EMRESY_1_576HEBEFUFetched: 11/8/2026