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(1) The effective range of rates for said management employees assigned to one of the five (5) step salary schedules listed in Section 2 of this Resolution shall be limited to the first three (3) steps, A through C. The remaining steps in each schedule, namely D and E, shall only have applicability to classes of employment which have not been designated as Executive or Middle-Managem~ent. (2) An officer or employee appointed to class of employment designated as management may be placed by the appropriate appointing authority at any step within the applicable three (3) step salary range (A, B, or C) in the schedule which has been allocated by this Resolution to the class of employment to which said officer or employee has been appointed. (3) For any such management officer or employee initially appointed to a step lower than step C, advancement to the next higher step (step B from step A or step C from step B) may be granted only for contin- ued satisfactory and efficient service by said officer or employee in the effective performance of the duties of his or her position. The effective date of such step increase, if granted, shall be the first day of the month following the completion of one year of service at the step from which said officer or employee is being advanced. (4) Any such management officer or employee who is being paid on a salary step higher than step A may be reduced by one or more steps but not lower than step A of the appropriate salary schedule with the approval of the City Manager. (5) When any such management officer or employee has not been approved for advancement to the next higher salary step, or has been reduced by one or more steps in accordance with subparagraph (4) above, he or she may be reconsidered for advancement to the next higher step above his or her then current step after the completion of three (3) months of additional service and shall be reconsidered for such advancement after the completion of six (6) months of additional service. (6) Reallocation of Salary Rate Ranges. The provisions of Section 11 of this Resolution shall not apply to management personnel during the initial conversion from the five (5) step salary rate range to the three (3) step salary rate range established by this Section. The initial con- version to this new plan requires that the salary schedule to which each management employee is allocated on the day preceding the effective date of this new plan be automatically increased twenty (20) salary schedule numbers so that the C, D. and E steps of the previously assigned schedule will become the A, B, and C steps, respectively, of the newly assigned schedule. Subsequent to the initial conversion, the provision of Section 11 shall then apply to the management pay plan hereinabove set forth. (b) Employee Benefits. Each officer and employee who is employed in a position in a class of employment designatedinSection 3 of this Resolution as Executive Management (EM) or Middle-Management (MM), shall receive as additional compensation, the following employee benefits: (1) Retirement. The terms of the existing contract between the City and the California Public Employees' Retirement System (PERS) gov- erning the retirement benefits for affected employees, as said contract shall be amended prior to October 1981 to provide a different schedule of benefits for employees hired after the effective date of such amendment, are incorporated by reference herein. The City shall continue to make contributions to PERS in accordance with its contract with PERS for affected employees covered by said contract as amended. (2) Deferred Retirement. The City shall continue to pay to PERS, on behalf of each affected employee, an amount equal to five percent (5.0%) times the compensation upon which such retirement contributions are calculated subject to the following conditions: i. Such payments are not part of or an increase in base salary. As a result, the City will not treat these payments as ordinary income and, thus will not withhold federal or state income tax from said payments.