1. All of the assets of the retirement system (other than tangible real or personal property owned by the retirement system for use in carrying out its duties, such as office supplies and furniture) shall be credited, according to the purpose for which they are held, in either the employees’ contribution fund or the general reserve fund.

(1) The employees’ contribution fund shall be the fund in which shall be accumulated the contributions of the members. The employer shall, except as provided in subdivision (5) of this subsection, cause to be deducted from the compensation of each member on each and every payroll, for each and every payroll period, the pro rata portion of five and nine-tenths percent of his annualized compensation. Effective January 1, 1999, through December 31, 2013, the employer shall deduct an additional one and six-tenths percent of the member’s annualized compensation. For 2014 and for each subsequent year, the employer shall deduct from each member’s annualized compensation the rate of contribution determined for such year as provided in subsections 4, 5, and 6 of this section.

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(2) The employer shall pay all such deductions and any amount it may elect to pay pursuant to subdivision (5) of this subsection to the retirement system at once. The retirement system shall credit such deductions and such amounts to the individual account of each member from whose compensation the deduction was made or with respect to whose compensation the amount was paid pursuant to subdivision (5) of this subsection. In determining the deduction for a member in any payroll period, the board of trustees may consider the rate of compensation payable to such member on the first day of the payroll period as continuing throughout such period.

(3) The deductions provided for herein are declared to be a part of the compensation of the member and the making of such deductions shall constitute payments by the member out of the person‘s compensation and such deductions shall be made notwithstanding that the amount actually paid to the member after such deductions is less than the minimum compensation provided by law for any member. Every member shall be deemed to consent to the deductions made and provided for herein, and shall receipt for the person’s full compensation, and the making of the deduction and the payment of compensation less the deduction shall be a full and complete discharge and acquittance of all claims and demands whatsoever for services rendered during the period covered by the payment except as to benefits provided by sections 169.270 to 169.400.

(4) The accumulated contributions with interest of a member withdrawn by the person or paid to the person’s estate or designated beneficiary in the event of the person’s death before retirement shall be paid from the employees’ contribution fund. Upon retirement of a member the member’s accumulated contributions with interest shall be transferred from the employees’ contribution fund to the general reserve fund.

(5) The employer may elect to pay on behalf of all members all or part of the amount that the members would otherwise be required to contribute to the employees’ contribution fund pursuant to subdivision (1) of this subsection. Such amounts paid by the employer shall be in lieu of members’ contributions and shall be treated for all purposes of sections 169.270 to 169.400 as contributions made by members. Notwithstanding any other provision of this chapter to the contrary, no member shall be entitled to receive such amounts directly. The election shall be made by a duly adopted resolution of the employer’s board and shall remain in effect for at least one year from the effective date thereof. The election may be thereafter terminated only by an affirmative act of the employer’s board notwithstanding any limitation in the term thereof in the adopting resolution. Any such termination resolution shall be adopted at least sixty days prior to the effective date thereof, and the effective date thereof shall coincide with a fiscal year-end of the employer. In the absence of such a termination resolution, the election shall remain in effect from fiscal year to fiscal year.

2. The general reserve fund shall be the fund in which shall be accumulated all reserves for the payment of all benefit expenses and other demands whatsoever upon the retirement system except those items heretofore allocated to the employees’ contribution fund.

(1) All contributions by the employer, except those the employer elects to make on behalf of the members pursuant to subdivision (5) of subsection 1 of this section, shall be credited to the general reserve fund.

(2) Should a retirant be restored to active service and again become a member of the retirement system, the excess, if any, of the person’s accumulated contributions over benefits received by the retirant shall be transferred from the general reserve fund to the employees’ contribution fund and credited to the person’s account.

3. Gifts, devises, bequests and legacies may be accepted by the board of trustees and deposited in the general reserve fund to be held, invested and used at its discretion for the benefit of the retirement system except where specific direction for the use of a gift is made by a donor.

4. Beginning in 2013, the actuary for the retirement system shall annually calculate the rate of employer contributions and member contributions for 2014 and for each subsequent calendar year through 2018, expressed as a level percentage of the annualized compensation of the members, subject to the following:

(1) The rate of contribution for any calendar year shall be determined based on an actuarial valuation of the retirement system as of the first day of the prior calendar year. Such actuarial valuation shall be performed using the actuarial cost method and actuarial assumptions adopted by the board of trustees and in accordance with accepted actuarial standards of practice in effect at the time the valuation is performed, as promulgated by the actuarial standards board or its successor;

(2) The target combined employer and member contribution rate shall be the amount actuarially required to cover the normal cost and amortize any unfunded accrued actuarial liability over a period that shall not exceed thirty years from the date of the valuation;

(3) The target combined rate as so determined shall be allocated equally between the employer contribution rate and the member contribution rate, provided, however, that the level rate of contributions to be paid by the employers and the level rate of contributions to be deducted from the compensation of members for any calendar^* year shall each be limited as follows:

(a) The contribution rate shall not be less than seven and one-half percent;

(b) The contribution rate shall not exceed nine percent; and

(c) Changes in the contribution rate from year to year shall be in increments of one-half percent such that the contribution rate for any year shall not be greater than or less than the rate in effect for the prior year by more than one-half percent;

(4) The board of trustees shall certify to the employers the contribution rate for the following calendar year no later than six months prior to the date such rate is to be effective.

5. The member contribution rate for 2019 and subsequent periods shall be nine percent of compensation unless a lower member contribution rate applies for any period beginning on or after July 1, 2021, in accordance with the provisions of subdivision (4) of subsection 6 of this section.

6. The employer contribution rate for calendar year 2019 shall be ten and one-half percent. The employer contribution rate for the eighteen-month period beginning January 1, 2020, through June 30, 2021, shall be twelve percent. For the twelve-month period beginning July 1, 2021, and for each subsequent twelve-month period beginning July first each year, the employer contribution rate shall be determined as follows:

(1) The actuary shall determine the total actuarially required contribution based on an actuarial valuation of the retirement system as of the first day of the preceding calendar year. Such actuarial valuation shall be performed using the actuarial cost method and actuarial assumptions adopted by the board of trustees and in accordance with actuarial standards of practice applicable as of the valuation date. The total actuarially required contribution rate, including both employer and member contributions, shall be an amount determined in accordance with the board’s current funding policy, expressed as a level percentage of the annualized compensation of the members;

(2) If the retirement system’s funded ratio as of the first day of the preceding calendar year is below one hundred percent, the employer contribution rate shall be the greater of twelve percent or the difference between the total actuarially required contribution rate and the nine percent member contribution rate, subject to the limits on annual adjustments stated in subdivision (6) of this subsection;

(3) If the retirement system’s funded ratio as of the first day of the preceding calendar year equals or exceeds one hundred percent and the total actuarially required contribution rate exceeds eighteen percent, the employer contribution rate shall be the difference between the total actuarially required contribution rate and the nine percent member contribution rate, subject to the limits on annual adjustments stated in subdivision (6) of this subsection;

(4) If the retirement system’s funded ratio as of the first day of the preceding calendar year equals or exceeds one hundred percent and the total actuarially required contribution rate does not exceed eighteen percent, the total actuarially required contribution rate shall be allocated equally between the employer contribution rate and the member contribution rate. If the total actuarially required contribution rate falls below eighteen percent after being above eighteen percent for the preceding twelve-month period, the member contribution rate and the employer contribution rate shall be adjusted to one-half of the total actuarially required contribution rate for such period, regardless of the magnitude of the decrease from the rate in effect for the prior period, in order to equalize the employer and member contribution rates. Otherwise, adjustments in the contribution rates shall be limited by the annual adjustment limits stated in subdivision (6) of this subsection;

(5) If the retirement system’s funded ratio as of the first day of the preceding calendar year again falls below one hundred percent, or if the total actuarially required contribution rate rises above eighteen percent, the provisions of subdivision (2) or (3) of this subsection shall apply, as applicable, subject to the limits on annual adjustments stated in subdivision (6) of this subsection;

(6) Except as stated in subdivision (4) of this subsection, in transitioning to the contribution rates prescribed in this subsection for periods beginning on or after July 1, 2021, the employer contribution rate and the member contribution rate, respectively, shall not increase by more than one percent or decrease by more than one-half percent for any period from the corresponding rate in effect immediately before such increase or decrease; and

(7) The board of trustees shall certify to the employers the contribution rate to be effective for July 1, 2021, and for each following July first, no later than six months prior to the date such rate is to be effective.