AGENDA MEMORANDUM

 

 

Meeting Date:              June 23, 2008

 

From:                           Edward F. Smyth, Jr., Deputy City Manager

 

Subject:                       Resolution amending the agreement with the ICMA Retirement Corporation for an Amendment to the 401 Governmental Money Purchase Plan & Trust.

 

 

Staff Recommendation:

Staff recommends approving the attached resolution amending the agreement with ICMA Retirement Corporation.

Analysis:

The 2007 actions of the Legislature, voter approval of Amendment 1 in January 2008, and the economic downturn have significantly impacted the City’s ability to continue many of the benefits and services that have been made available in the past.

One of the cost saving options is to change the retirement benefit from a defined benefit (DB) plan to a defined contribution (DC) plan.  The current DB plan requires the City to make contributions to the plan each year sufficient to properly fund the plan, which has been in the range of 12% of salaries for the past few years.  The plan is valued at approximately $34 million, and is funded to 98% of the value.  Within the industry this is considered very good.  The plan currently has a shortfall estimated at $750,000 between the actuarial liability and the market value of the fund. 

Private firms (and some public sector organizations) have moved from the defined benefit plans to defined contribution plans over the past 30 years.  Depending upon the structure of the employer sponsored plan, the employee is responsible, to some degree, for selecting the types of investments.  The cost of a defined contribution plan is easily calculated, and can be performed without an actuary, further reducing the costs of administration.  These plans can be structured so that they are paid exclusively by the employer, or through a matching program.

The City of Leesburg modified the General Employees Retirement plan in 2003 to provide the option for senior management (City Manager, Administration Executives & Department Heads) to participate in an alternative pension plan (opt out of the General Employees Plan).  The alternate plan selected was the ICMA Retirement Corporation (ICMA-RC), which is a non-profit corporation exclusively for the benefit of the public sector employees.

To attract and retain a skilled work force, public-sector employers have increased their use of defined contribution plans to supplement defined benefit plans, and to replace them.  This becomes more important as younger employees enter government service.  The combined federal-state regulatory framework has encouraged certain plan design features, unavailable in the private sector, which include multiple tiers for successive generations of employees in a single plan and different strategies to increase portability.  By moving from a defined benefit plan to a defined contribution plan, the City of Leesburg better positions itself to attract the younger “emerging professionals” that will be necessary as our graying workforce retires.

The City is now proposing to “freeze” The Retirement Plan for General Employees of the City of Leesburg as of September 30, 2008, and amend the existing 401(a) plan to include all City of Leesburg employees (except those covered under the Firefighters Retirement Plan), effective October 1, 2008.  Current employees will be fully vested in the plan on that date, but employees hired after this date will have a three year vesting period. 

Options:

1.  Approve the Resolution; or

2.  Such alternative action as the Commission may deem appropriate

Fiscal Impact: 

The Plan currently serves 128 retirees and beneficiaries, and has 448 vested members.  The Plan’s assets are $34,379,653.64 as of the current years report.  Each year the City makes contribution into this fund sufficient to cover the costs of the plan plus any amortized amount to cover the unfunded past service liability as required by Florida Statutes.  For the past several years this has been averaging around +/- 12% of salaries each year.  In fiscal year 2007 the contribution amount was $1,640,655.80. The defined contribution plan will have a level 6% annual contribution.  Based upon the 2007 requirements, this will be a savings of approximately $820,327.90.  This City will still be responsible for any performance shortfalls in the General Employees Pension Plan.

Submission Date and Time:    6/20/2008 4:48 PM____

 

Department:       Administration

Prepared by:        EF Smyth, DCM                     

Attachments:         Yes____   No ______

Advertised:   ____Not Required ______                     

Dates:   _________________________

 

Attorney Review :       Yes___  No ____

_______________________________

Revised 6/10/04

 

Reviewed by: Dept. Head ________

 

Finance  Dept. __________________                                     

                              

Deputy C.M. ________EFS________                                                                         

 

Submitted by:

City Manager ___________________

 

Account No. _________________

 

Project No. ___________________

 

WF No. ______________________

 

Budget  ______________________

 

Available _____________________

 


 

RESOLUTION NO._______________

 

A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA, AUTHORIZING THE MAYOR AND CITY CLERK TO AMEND THE AGREEMENT WITH ICMA RETIREMENT CORPORATION FOR THE 401 GOVERNMENTAL MONEY PURCHASE PLAN & TRUST ; AND PROVIDING AND EFFECTIVE DATE.

 

BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA:

 

THAT, the Employer wishes to modify the existing money purchase retirement plan for the benefit of all employees formerly covered under the City of Leesburg Retirement Plan for General Employees;

THAT, the Employer desires that its money purchase retirement plan continue to be administered by the ICMA Retirement Trust, a trust established by public employers for the collective investment of funds held under their retirement and deferred compensation plans;

THAT, the Employer has established a money purchase retirement plan (the Plan) in the form of:

The ICMA Retirement Corporation Governmental Money Purchase Plan & Trust, pursuant to the specific provisions of the Adoption Agreement (copy attached).

The Plan shall be maintained for the exclusive benefit of eligible employees and their beneficiaries; and

THAT, the Declaration of Trust executed by the Employer on September 22, 2003, shall continue to be operative with respect to any retirement or deferred compensation plan subsequently established by the Employer, if the assets of the plan are to be invested in the ICMA Retirement Trust;  and

THAT, the City Manager shall continue to be the coordinator for the Plan; shall receive reports, notices, etc, from the ICMA Retirement Corporation or ICMA Retirement Trust; shall cast, on behalf of the Employer, any required votes under the ICMA Retirement Trust; may delegate any administrative duties relating to the Plan to appropriate departments; and is authorized to execute all necessary agreements with the ICMA Retirement Corporation incidental to the administration of the Plan.

THAT, the Mayor and City Clerk are hereby authorized to sign an agreement between the City of Leesburg, Florida, and ICMA Retirement Corporation, Whose address is 777 North Capitol Street NE, Washington, DC 20002-4240, for a 401 Governmental Money Purchase Plan & Trust.

THAT this resolution shall become effective immediately.

 

PASSED AND ADOPTED by the City Commission of the City of Leesburg, Florida, at a regular meeting held the   23rd    day of    June   , 2008.

 

 

 

 

 

 

                                                                            __________________________

                                                                             Mayor

 

ATTEST:

 

 

 

__________________________

City Clerk

 


ICMA RETIREMENT CORPORATION

GOVERNMENTAL MONEY PURCHASE PLAN & TRUST

ADOPTION AGREEMENT

 

PLAN NUMBER 10- 8473

                                                                                        

The Employer hereby establishes a Money Purchase Plan and Trust to be known as CITY OF LEESBURG GENERAL EMPLOYEES RETIREMENT PLAN (the "Plan") in the form of the ICMA Retirement Corporation Governmental Money Purchase Plan and Trust (MPP 01/01/06). 

______________________________________________________________________________

 

This Plan is an amendment and restatement of an existing defined contribution money purchase plan. 

                   X        Yes                  _____                 No

 

If yes, please specify the name of the defined contribution money purchase plan which this Plan hereby amends and restates:  CITY OF LEESBURG ALTERNATIVE PLAN  

______________________________________________________________________________

 

I.               Employer:  City of Leesburg, Florida                                                                                                                     

                

II.             The Effective Date of the Plan shall be the first day of the Plan Year during which the Employer adopts the Plan, unless an alternate Effective Date is hereby specified: October 1, 2008  (e.g., January 1, 2006 for the MPP 01/01/06 Plan)

                                                                             . 

III.            Plan Year will mean:

 

            ( )        The twelve (12) consecutive month period which coincides with the limitation year.  (See Section 5.03(f) of the Plan.)

 

                             (X)       The twelve (12) consecutive month period commencing on October 1, 2008  and each anniversary thereof.

 

IV.            Normal Retirement Age shall be age   65   (not to exceed age 65).

 


V.              ELIGIBILITY REQUIREMENTS

 

                 1.         The following group or groups of Employees are eligible to participate in the Plan: 

 

                             _____                 All Employees

                             _____                 All Full‑Time Employees

                             _____                 Salaried Employees

                             _____                 Non‑union Employees

                             __X__                Management Employees

                             __X__                Public Safety Employees (Police Dept Employees Only)

                             __X__                General Employees

                             _____                 Other (specify below)

                                                     _______________________________

 

The group specified must correspond to a group of the same designation that is defined in the statutes, ordinances, rules, regulations, personnel manuals or other material in effect in the state or locality of the Employer.

 

                 2.         The Employer hereby waives or reduces the requirement of a twelve (12) month Period of Service for participation.  The required Period of Service shall be  N/A_        (write N/A if an Employee is eligible to participate upon employment). 

 

                             If this waiver or reduction is elected, it shall apply to all Employees within the Covered Employment Classification. 

 

                 3.         A minimum age requirement is hereby specified for eligi­bility to participate.  The minimum age requirement is   N/A   (not to exceed age 21.  Write N/A if no minimum age is declared.) 

 

VI.            CONTRIBUTION PROVISIONS

 

                 1.         The Employer shall contribute as follows (choose all that apply):

 

(X)       Fixed Employer Contributions With or Without Mandatory Participant Contributions

 

A.         Fixed Employer Contributions.  The Employer shall contribute on behalf of each Participant   6%    of Earnings or $ N/A for the Plan Year (subject to the limitations of Article V of the Plan).  Mandatory Participant Contributions

                                    ___        are required

  X        are not required      

to be eligible for this Employer Contribution.

B.         Mandatory Participant Contributions for Plan Participation.  A Participant is required to contribute (subject to the limitations of Article V of the Plan)

 

(i)    __N/A_% of Earnings,

(ii)   $__N/A__, or

(iii) a whole percentage of Earnings between the range of ______N/A_____(insert range of percentages between 0% and 20% (e.g., 3%, 6%, or 20%; 5% to 7%)), as designated by the Employee in accordance with guidelines and procedures established by the Employer

for the Plan Year as a condition of participation in the Plan.  A Participant shall not have the right to discontinue or vary the rate of such contributions after becoming a Plan Participant.

The Employer hereby elects to "pick up" the Mandatory Participant Contributions.[1]

            ______   Yes                     X              No

 

( )             Fixed Employer Match of Voluntary Participant Contributions.

 

The Employer shall contribute on behalf of each Participant ___% of Earnings for the Plan Year (subject to the limitations of Article V  of the Plan) for each Plan Year that such Participant has contributed ____% of Earnings or $____.  Under this option, there is a single, fixed rate of Employer contributions, but a Participant may decline to make the required Participant contributions in any Plan Year, in which case no Employer contribution will be made on the Participant's behalf in that Plan Year.

 

                   ( )        Variable Employer Match of Voluntary Participant Contributions. 

 

The Employer shall contribute on behalf of each Participant an amount determined as fol­lows (subject to the limitations of Article V of the Plan):

 

_____% of the Voluntary Participant Contributions made by the Participant for the Plan Year (not including Participant contributions exceeding ____% of Earnings or $________);

 

PLUS _____% of the contributions made by the Participant for the Plan Year in excess of those included in the above paragraph (but not including Voluntary Participant Contributions exceeding in the aggregate ____% of Earnings or $________).

 

Employer Matching Contributions on behalf of a Participant for a Plan Year shall not exceed $_______ or ____% of Earnings, whichever is ___ more or ___ less.

 

2.         Each Participant may make a voluntary (unmatched), after‑tax contri­bution, subject to the limitations of Section 4.05 and Article V of the Plan. 

 

                                         Yes                                          _ X_      No

 

3.                     Employer contributions shall be contributed to the Trust in accordance with the following payment schedule: 

 

                             ____Bi-Weekly

                                                                                                      

 

4.         Participant contributions shall be contributed to the Trust in accordance with the following payment schedule:

 

      _____N/A        

 

VII.           EARNINGS

 

Earnings, as defined under Section 2.09 of the Plan, shall include:

 

                        (a)       Overtime

                

                                                                 Yes                                X        No

 

                        (b)       Bonuses

 

                                                Yes                                X        No

           

                        (c)       Other

_____________________________________________

 

_____________________________________________

 

VIII.         The Employer will permit rollover contributions in accordance with Section 4.11 of the Plan.

                   X    Yes                            ____   No


IX.            LIMITATION ON ALLOCATIONS

 

If the Employer maintains or ever maintained another qualified plan in which any Participant in this Plan is (or was) a participant or could possibly become a participant,  the Employer hereby agrees to limit contributions to all such plans as provided herein, if necessary in order to avoid excess contributions (as described in Sections 5.02 of the Plan).

 

                 1.         If the Participant is covered under another qualified defined contribution plan maintained by the Employer, the provisions of Section 5.02(a) through (f) of the Plan will apply unless another method has been indicated below.

 

( )        Other Method.  (Provide the method under which the plans will limit total Annual Additions to the Maximum Permissible Amount, and will properly reduce any excess amounts, in a manner that precludes Employer discretion.)

______________________________________________

______________________________________________

______________________________________________

 

                 2.         The limitation year is the following 12‑consecutive month period: 

 

__________________________________________________________________________

 

X.             VESTING PROVISIONS

 

The Employer hereby specifies the following vesting schedule, subject to (1) the minimum vesting requirements and (2) the concurrence of the Plan Administrator.

 

Employees covered under this plan on October 1, 2008 shall be 100% vested on that date and only new employees hired after October 1, 2008 shall be required to adhere to the vesting schedule.

 

                             Years of                                     

                              Service                                  Percent 

                             Completed                              Vested__ 

 

                             Zero                                           5    %          

                             One                                         _20_ %           

                             Two                                        _60_ %           

                             Three                                      100_ %          

                             Four                                        _____ %           

                             Five                                         _____ %           

                             Six                                           _____ %           

                             Seven                                      __       %          

                             Eight                                       _____ %

                             Nine                                        _____ %

                             Ten                                         _____ %

 

XI.            Loans are permitted under the Plan, as provided in Article XVII: 

 

                                                       X        Yes                              ____      No

 

 XII.         Age 70-1/2 in-service distributions are permitted under the Plan as provided in Section 9.08.

 

              X                    Yes                              _____  No

 

XIII.         In-service distributions of the Rollover Account are permitted under the Plan as provided in Section 9.07.

               X   Yes                                  _____  No

 

XIV.          SPOUSAL PROTECTION

 

                 The Plan will provide the following level of spousal protection (select one):

 

          _X_       A.    Participant Directed Election.  The normal form of payment of benefits under the Plan is a lump sum.  The Participant can name any person(s) as the Beneficiary of the Plan, with no spousal consent required.

 

                      B.    Beneficiary Spousal Consent Election (Article XII).  The normal form of payment of benefits under the Plan is a lump sum.  Upon death, the surviving spouse is the Beneficiary, unless he or she consents to the Participant’s  naming another Beneficiary.  (This is the default provision under the Plan if no selection is made.)

 

          ____      C.    QJSA Election (Article XVII).  The normal form of payment of benefits under the Plan is a 50% qualified joint and survivor annuity with the spouse (or life annuity, if single).  In the event of the Participant's death prior to commencing payments, the spouse will receive an annuity for his or her lifetime. 

                

XV.           The Employer hereby attests that it is a unit of state or local government or an agency or instrumentality of one or more units of state or local government. 

 

XVI.          The Plan Administrator hereby agrees to inform the Employer of any amendments to the Plan made pursuant to Section 14.05 of the Plan or of the discontinuance or abandonment of the Plan.

 

XVII.        The Employer hereby appoints the ICMA Retirement Corporation as the Plan Administrator pursuant to the terms and condi­tions of the ICMA RETIREMENT CORPORATION GOVERNMENTAL MONEY PURCHASE PLAN & TRUST. 

 

The Employer hereby agrees to the provisions of the Plan and Trust. 

 

XVIII.       The Employer hereby acknowledges it understands that failure to properly fill out this Adoption Agreement may result in disqualification of the Plan.

 

 XIX.         An adopting Employer may rely on an advisory letter issued by the Internal Revenue Service as evidence that the Plan is qualified under section 401 of the Internal Revenue Code to the extent provided in applicable IRS revenue procedures and other official guidance.

 

In Witness Whereof, the Employer hereby causes this Agreement to be executed on this   23rd    day of   June   , 200 8 .

 

 

EMPLOYER                                                    

 

By:       __________________________________

Title:   _______     Mayor_________________

Attest: ___________________________________

H:\011070\00001\Money Purchase Adopt agree -2006 Restatement.DOC

 

 

                        City Clerk

 

 

ICMA RETIREMENT CORPORATION

777 North Capital St., NE

Washington, DC 20002-4290

202-962-8096

By:  ___________________________

Title:   _________________________

Attest:  ________________________

 

 



[1]   Neither an IRS advisory letter nor a de­termination letter issued to an adopting Em­ployer is a ruling by the Internal Revenue Service that Participant contributions that are picked up by the Employer are not includ­able in the Participant's gross income for federal income tax purposes.