HomeMy WebLinkAbout09.b. Approve updated procedures for emergency withdrawals from 457 Deferred Compensation PlanCentral Contra Costa Sanitary District
BOARD OF DIRECTORS.
POSITION PAPER
Board Meeting Date: March 15, 2012
subject: UPDATE ADMINISTRATIVE PROCEDURES FOR EMERGENCY
WITHDRAWALS
Submitted By Initiating Dept. /Div.:
Debbie Ratcliff, Controller Administration - Finance
REVIEWED AND RECOMMENDED FOR BOARD ACTION:
Debbie RatcliVf ndall Musgraves,
Ann Farrell,
James M. Kelly,
Control lerr' ! Director of
Deputy General
General Manager
!/ Administration
Manager
ISSUE: Board approval is requested to give authority to the Deferred Compensation
Advisory Committee to approve or deny requests for emergency withdrawals.
RECOMMENDATION: Approve the updated Administrative Procedures for emergency
withdrawal from the District's 457 Deferred Compensation Plan giving authority to the
Deferred Compensation Advisory Committee (DCAC) to approve or deny requests for
emergency withdrawal.
FINANCIAL IMPACTS: None.
ALTERNATIVES /CONSIDERATIONS: The Board could continue to approve
emergency withdrawals from the 457 Deferred Compensation Plan, however, there are
no Internal Revenue Service (IRS) requirements for Board approval and other agencies
typically handle emergency withdrawals at the DCAC level.
BACKGROUND: In 1982, the Board of Directors approved procedures regarding the
processing of emergency withdrawals from the 457 Deferred Compensation Plan. The
procedures stated that the DCAC would make a recommendation to the Board, the
Board would review the application in Closed Session, and advise the DCAC of its
decision. In 2000, this procedure changed to include the position paper on the Consent
Calendar. In 2007, staff recommended to the Board that emergency withdrawals remain
on the consent calendar with a Closed Session scheduled on the agenda should the
Board wish to discuss the matter in more detail due to confidentiality concerns.
Staff researched the necessity of Board approval for emergency withdrawals. There are
no IRS requirements for Board approval. Board approval is strictly an internal
administrative policy and other agencies handle emergency withdrawals at the DCAC
level.
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02/17/2011
POSITION PAPER
Board Meeting Date: March 15, 2012
subject: UPDATE ADMINISTRATIVE PROCEDURES FOR EMERGENCY
WITHDRAWALS
The IRS has very strict rules and requirements regarding emergency withdrawals, and
the DCAC adheres to those regulations. If the Board were to deny a withdrawal that met
the requirements of the IRS, the District could be subject to a discrimination lawsuit.
Conversely, if the Board overturned a recommendation to deny a withdrawal, again the
District could be at risk for a possible discrimination lawsuit.
A revised Administrative Procedure is attached which covers the duties of the DCAC
including the processing of emergency withdrawals. (See attachment)
RECOMMENDED BOARD ACTION: Approve the updated Administrative procedures
for emergency withdrawal from the District's 457 Deferred Compensation Plan giving
authority to the Deferred Compensation Advisory Committee to approve or deny
requests for emergency withdrawal.
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CENTRAL CONTRA COSTA SANITARY DISTRICT
DEFFERED COMPENSATION PLAN
ADMINISTRATIVE PROCEDURES
INTRODUCTION
1.1. Purpose
The purpose of the Deferred Compensation Plan (Plan) is to offer an attractive employee
benefit under which tax - deferred contributions, in lieu of current income, will provide future
payments upon death, disability, retirement, or other termination of employment with the
District.
1.2. Origin
In January 1976, the District voluntarily withdrew from participation in the Federal Social
Security System and established a Deferred Compensation Plan. Current Federal Law allows
employees to defer a portion of their salary that would otherwise be considered taxable wages
by participating in a Deferred Compensation Plan.
To participate in the Plan, an employee must contribute a minimum of $10 per month. The
maximum contribution during any tax year shall not exceed the limit established by law.
1.3. Administration
The District has entered into agreements with three deferred compensation providers to act as
Plan Administrators. The District has the sole authority to enforce the Plan and is responsible
for the operation of the Plan.
2. DEFERRED COMPENSATION PLAN ADVISORY COMMITTEE
To facilitate the internal administration of the Plan, a Deferred Compensation Plan Advisory
Committee (Committee), operating under the guidance of the District Controller as Chairperson
was established.
2.1. Committee Membership
One non - management employee is selected from each department to serve on the
Committee. Selection of department representatives to the Committee is the responsibility of
the Department Directors. The Controller is responsible for notifying the Department Director
when a representative's term has expired or when a replacement is needed for any other
reason.
2.2. Term of Service
Committee members serve a minimum of a two -year term.
Should a department representative resign, terminate employment, or transfer to another
department during the term, the Director of the department losing representation selects a
replacement member.
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2.3. Scope of Committee Activities
Included in the scope of activities are (1) establish internal administrative procedures, (2)
develop a document summarizing the Plan, (3) review accountability by Plan Administrators,
(4) review requests for emergency withdrawals, (5) review investment performance, (6) report
to District management and the Board of Directors.
2.4. Operation of the Committee
The Committee meets as often as it determines necessary, agrees upon rules of order, and
keeps the records it deems appropriate.
3. CHANGES AFFECTING THE DEFERRED COMPENSATION PLAN
Any changes in the Internal Revenue Service regulations and laws which would affect the
contribution amount are communicated by the Controller to the employees and the Committee for
revisions to various written documents.
The Committee shall establish a review schedule for the Administrative Procedures and the Plan
Summary to ensure that these documents are current.
4. DOCUMENT PROCESSING
All forms required for enrollment, changes, emergency withdrawals, and termination withdrawals,
are available through the Accounting Office.
The three providers prepare a quarterly statement of earnings for each employee which is sent to
the employee's current address. Usually, statements distributed each quarter are for the quarter
ending the previous month.
4.1. Enrollment
The Human Resources Division provides all new employees with an information packet
containing the Administrative Procedures for the Deferred Compensation Plan and a copy of
the Plan summary.
A representative from each of the three providers is available to meet with the employee and
explain the Plan (including the fees and risks associated with various options). If the
employee elects to participate, the plan representative has him /her sign enrollment forms,
which are returned to the Accounting Division by the employee for processing. The employee
can elect to enroll at any time.
The Accounting Office processes the enrollment application as follows:
4.1.1. Checks forms to see that they have been filled out completely and correctly. Confers
with the employee on any questions.
4.1.2. Obtains authorized District Signature (Controller).
4.1.3. Forwards the signed enrollment forms to the selected Plan Provider.
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4.1.4. Sends a copy of the signed forms to the employee.
4.1.5. Starts payroll deductions.
4.2. Changes to a Participant's Account
Employees may make changes to their account during any month. By filling out the
appropriate forms obtained through the Accounting Office, an employee may make one or
more of the following changes to his /her account, effective the following pay period.
4.2.1. An employee who elected not to participate when hired may enroll in the Plan.
4.2.2. An employee may change the amount of his /her personal contribution to the Plan
(increase or decrease).
4.2.3. An employee may change the account allocation of moneys previously contributed
(move money among fixed and variable accounts).
4.2.4. An employee may change the allocation of future contributions.
4.2.5. An employee may change providers.
Forms are available in the Accounting Office and will be processed by the Accounting staff.
4.3. Emergency Withdrawal
Only in the event of extreme financial hardship may an employee make a cash withdrawal
from the Plan. An unforeseeable emergency beyond the employee's control must exist. Any
amount withdrawn is subject to federal and state taxes.
Emergency Withdrawal Applications are available in the Accounting Office. Although
applications are processed as expeditiously as possible, the approval procedure may take as
long as 30 days. The procedure is as follows:
4.3.1. The employee receives an emergency withdrawal packet from the Accounting Office
and returns the completed forms and required documents to the Controller.
4.3.2. The Controller notifies Committee members of the application.
4.3.3. The Controller and the Administrative Department representative review the request
and back up support documents to ensure the request meets the IRS requirements.
4.3.4. The Committee advises the applicant, in writing, of its position on the application.
4.3.5. An authorized District signature (the Controller) is obtained.
4.3.6. The Controller sends a cover letter and the withdrawal form to the appropriate Plan
Provider.
4.3.7. The employee receives a check from the Plan Provider in approximately two weeks.
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4.3.8. If the application for emergency withdrawal is approved, the applicant may also reduce
his /her personal contribution to the minimum amount ($10).
4.4. Terminations (Includes Retirement)
Upon termination, a number of options are available to employees, as described in the Plan
Summary.
An employee leaving the District will be encouraged to meet with their Plan Provider to
discuss the various withdrawal options.
If the employee elects to make a full or partial cash withdrawal, he /she completes a
"Withdrawal Request" form and returns it to the Accounting Office where it is processed as
follows:
4.4.1. Form is checked for accuracy and completeness.
4.4.2. An authorized signature is obtained (the Controller).
4.4.3. A copy is sent to the employee.
4.4.4. The completed form is sent to the appropriate Plan Provider.
4.4.5. The employee receives a check from the Plan Provider in approximately two weeks.
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