The URL can be used to link to this page

Home My WebLink About07.a. Establish CCCSD Replacement Benefits PlanCentral Contra Costa Sanitary District '7a ' BOARD OF DIRECTORS POSITION PAPER Board Meeting Date: November 1, 2012 subject: ADOPT A RESOLUTION ESTABLISHING THE CENTRAL CONTRA COSTA SANITARY DISTRICT REPLACEMENT BENEFITS PLAN Submitted By Initiating Dept. /Div.: Thea Vassallo, CPA, CMA Administrative /Finance & Accounting Finance Manager REVIEWED AND RECOMMENDED FOR BOARD ACTION: J T. Vassallo Kent Alm Ann Farrell, General Manager ISSUE: The Central Contra Costa Sanitary District (CCCSD) defined benefit plan with Contra Costa County Employees' Retirement Association (CCCERA) must comply with Section 415 of the Internal Revenue Code (IRC). Under Section 415, benefits paid to a member by a defined benefit plan cannot exceed a certain amount per year. This limitation will reduce benefit payments to certain retired employees unless the District establishes a "Replacement Benefits Plan" as required by the California Government Code prior to December 31, 2012. RECOMMENDATION: Adopt a resolution establishing the Central Contra Costa Sanitary District Replacement Benefits Plan. FINANCIAL IMPACTS: None. The amount paid by the District directly to the member will be credited by CCCERA. ALTERNATIVES /CONSIDERATIONS: Provisions of the Public Employees' Pension Reform Act of 2013 (PEPRA) and amendments to the County Employees' Retirement Law of 1937 (CERL) enacted during the 2012 Legislative Session will prohibit employers from setting up Replacement Benefit Plans providing benefits in excess of IRC 415 limits after December 31, 2012. BACKGROUND: California Code Section 31899.4.(a) states each District shall provide a program to replace the benefits that are limited by Section 415 of the IRC for members whose retirement benefits are limited by Section 415 and cannot be fully maximized pursuant to Section 31538. The replacement benefits program shall provide benefits that, together with the benefits provided by the retirement system, are the same as, and may not exceed the benefits that would have been paid by the retirement system but for the application of the limits of Section 415. A replacement benefit may not be reduced if the reduction would impair the vested rights of any person. In accordance with IRC Section 415 the CCCERA actuarial valuation for the District is run without reflecting the 415 limits on benefits. Therefore, our employer retirement POSITION PAPER Board Meeting Date: November 1, 2012 subject ADOPT A RESOLUTION ESTABLISHING THE CENTRAL CONTRA COSTA SANITARY DISTRICT REPLACEMENT BENEFITS PLAN rates represent "total cost" for benefits both within and above the 415 limits. The IRC allows employers to pay excess benefits through a Qualified Government Excess Benefit Arrangement ( QGEBA). There is no additional fiscal impact on the District to establish a QGEBA plan or to make replacement benefit payments to members for benefits in excess of 415 limits through the QGEBA plan. Any excess 415 limit QGEBA contributions paid directly by the District to District retirees will be credited against the CCCERA employer retirement contribution requirements. This matter will be reviewed by the Human Resources Committee at the October 30, 2012 meeting. RECOMMENDED BOARD ACTION: Adopt a resolution establishing the Central Contra Costa Sanitary District Replacement Benefits Plan. RESOLUTION NO. 2012-085 A RESOLUTION ESTABLISHING CENTRAL CONTRA COSTA SANITARY DISTRICT REPLACEMENT BENEFITS PLAN WHEREAS, it is necessary and presently in the best interests of the District to establish a Qualified Governmental Excess Benefit Arrangement (QGEBA) entitled "Central Contra Costa Sanitary District Replacement Benefits Plan" (Plan) under Section 415 (m) of the Internal Revenue Code and Section 31899 et seq. of the California Government Code and operate and construe in accordance with those provisions; and WHEREAS, the Plan, which is attached as Exhibit "A" and incorporated by this reference, is designed to, and does, operate in coordination with the Contra Costa County Employees' Retirement Association (Retirement Association), NOW, THEREFORE BE IT RESOLVED, by the Board of Directors of the Central Contra Costa Sanitary District, that a member or beneficiary whose benefits from the Retirement Association at the time of payment are reduced by Section 415 of the Internal Revenue Code will be eligible to receive an Excess Benefit from the Plan. PASSED AND ADOPTED this 1st day of November 2012, by the Board of Directors of the Central Contra Costa Sanitary District by the following vote: AYES: Members: NOES: Members: ABSENT: Members: James A. Nejedly President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California COUNTERSIGNED: Elaine R. Boehme, CMC Secretary of the District Central Contra Costa Sanitary District County of Contra Costa, State of California Approved as to form: Kenton L. Alm, Esq. Counsel for the District EXHIBIT "A" CENTRAL CONTRA COSTA SANITARY DISTRICT REPLACEMENT BENEFITS PLAN PREAMBLE THE CENTRAL CONTRA COSTA SANITARY DISTRICT (the "District ") hereby establishes the Central Contra Costa Sanitary District Replacement Benefits Plan (the "Plan ") effective as of November 1, 2012 except as otherwise indicated. The Plan is designed to be a "Qualified Governmental Excess Benefit Arrangement" (QGEBA) under Section 415(m) of the Internal Revenue Code (the "Code ") and Section 31899 et seq. of the California Government Code and will be operated and construed in accordance with those provisions. SECTION 1 DEFINITIONS 1.1 "Beneficiary" means a person entitled to payment of benefits from the Retirement Association upon a Member's death. 1.2 "Board" means the Board of Directors of the District. 1.3 "Code" means the Internal Revenue Code of 1986, as amended, and regulations there under. 1.4 "District" means the Central Contra Costa Sanitary District. 1.5 "Excess Benefit" means a benefit provided under this Plan to a Member or a Member's Beneficiary whose annual retirement benefit otherwise payable from the Retirement Association is reduced by the limitations of Section 415 of the Code. 1.6 "Member" means an employee of the District who is entitled to receive a retirement benefit from the Retirement Association. 1.7 "Plan" means the Central Contra Costa Sanitary District Replacement Benefits Plan. 1.8 "Retirement Association" means the Contra Costa County Employees' Retirement Association. Page 1 of 3 SECTION 2 ELIGIBILITY A Member or Beneficiary whose benefits from the Retirement Association at the time of payment are reduced by Section 415 of the Code will be eligible to receive an Excess Benefit from the Plan. SECTION 3 BENEFITS 3.1 The amount of a Member's Excess Benefit under this Plan will be the difference between the benefit that would be payable to the Member under the Retirement Association without regard to Section 415 of the Code, and the benefit actually payable to the Member, as reduced by Section 415 of the Code. 3.2 An Excess Benefit payable to a Member or Beneficiary under this Plan will be paid in the same form, at the same times and for the same period as benefits are paid to the Member or beneficiary under the Retirement Association. 3.3 The District will arrange to deduct from all amounts paid under this Plan any taxes required to be withheld with respect to Excess Benefits by any government or governmental agency. 3.4 A Member's Excess Benefit will not be subject to execution, garnishment, attachment or any other process of any court with respect to a participant or beneficiary under this Plan, nor to any anticipation, alienation, sale, assignment, pledge, encumbrance or charge by any person. Any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the Excess Benefit will be void. No right of a Member of Beneficiary under the Plan is transferable by inter vivos gift or testamentary disposition. SECTION 4 ADMINISTRATION 4.1 The Plan will be under the exclusive management and control of the Board. The Board will have full power and authority to adopt and enforce all rules and regulations it may deem appropriate for carrying out the provisions of the Plan. The Board will have the right and discretion to construe the Plan, to interpret any Plan provision, to determine eligibility, the amount and time of any payment of Excess Benefits and to determine any factual questions arising in connection with the Plan's operation after any investigation or hearing the Board deems appropriate. Any decision made by the Board under the provisions of this Plan will be conclusive and binding on all parties. Page 2 of 3 4.2 The costs of administering this Plan will be paid by the District. 4.3 The Board will obtain from the Retirement Association any information concerning Members that it deems necessary and appropriate to determine the rights and benefits of Members and Beneficiaries under this Plan. SECTION 5 FUNDING The Plan will be unfunded, and benefits under the Plan will be paid from the general assets of the District. No person other than the District will have any interest in amounts that may be allocated to such a fund. Title to and beneficial ownership of any assets that the District may earmark to pay expenses or benefits under the Plan will belong to the District, and no Member or Beneficiary will have any property interest in any specific assets of the District. No Member or Beneficiary will have a preferred claim or lien on any assets of the District. SECTION 6 AMENDMENT AND TERMINATION OF PLAN The District will have the right to amend the Plan to the extent it deems advisable and to terminate the Plan. No amendment or termination will deprive any Member or Beneficiary of benefits to which he or she is entitled under the Plan as of the date of amendment or termination. Page 3 of 3