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HomeMy WebLinkAbout06. Adopt resolution authorizing new adoption agreement for 457 Deferred Compensation Plan Page 1 of 10 Item 6. CENTRAL SAN CENTRAL SAN BOARD OF DIRECTORS POSITION PAPER MEETING DATE: JULY5, 2018 SUBJECT: ADOPT RESOLUTION NO. 2018-012 AUTHORIZING THE EXECUTION OFA NEW ADOPTION AGREEMENT FOR THE 457 DEFERRED COMPENSATION PLAN RESTATING EXISTING PROVISIONS AND INCORPORATING UPDATES, AND ALLOWING BOARD MEMBERS THE ABILITY TO BENEFIT FROM THE LOW-COST INVESTMENT OPPORTUNITIES AVAILABLE THROUGH THE PLAN SUBMITTED BY: INITIATING DEPARTMENT: THEAVASSALLO, FINANCE MANAGER ADMINISTRATION-FINANCE REVIEWED BY: PHIL LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION ANN SASAKI, DEPUTY GENERAL MANAGER Roger S. Bailey General Manager ISSUE I CMA-RC, the service provider for the District's 457 plan, periodically updates their plan documents and incorporates amendments for legislative and regulatory changes. In addition to the legislative and regulatory updates, staff is proposing additional changes to the 457 plan as part of the updates. Historically, updates and changes to the documents have been adopted and approved by the Board via resolution. BACKGROUND The District established a Deferred Compensation Plan under Section 457 of the Internal Revenue Code in May 1976 after voluntarily withdrawing from the Social Security System. The 457 Plan is administered by the District's Deferred Compensation Advisory Committee which was established by the Board of Directors in July 5, 2018 Regular Board Meeting Agenda Packet- Page 66 of 195 Page 2 of 10 January 1982. In 2017, I CMA-RC updated the 457 Deferred Compensation Plan and Trust document, and received a favorable Private Letter Ruling (PLR)from the Internal Revenue Service (I RS). The updated document incorporates previously adopted amendments for legislative and regulatory changes, including the Roth provisions, and introduces a new optional feature, Automatic Enrollment (which is not an option under California law). Adopting the updated plan document ensures that the District is operating the plan with the most current I RS 457 provisions. Most employers who use the I CMA-RC current 457 plan document will not need to take any action, unless required to do so by their legislative body and/or plan administrative committee and want to make any changes to the optional provision available within the plan. Over the past few years, several elected Board Members have inquired about investment options for the District's contributions in lieu of Social Security. For purposes of the 457 plan, the District has in the past considered Board Members as part-time employees and they are currently enrolled in the 457 Part-Time, Temporary, and Seasonal (PTS) plan. A 457 PTS plan is designed specifically for part-time, temporary, or seasonal employees who are not covered by their employer's regular retirement program. These are often called F I CA Alternative plans. Employers can adopt this plan as an alternative to putting all part-time, temporary, and seasonal employees in the Social Security System. A minimum contribution of 7.5% of the employee's gross salary is required and contributed to the employee's 457 PTS account. Under the 457 PTS plan, the Plus Fund is the only investment option. The Plus Fund is essentially a savings account with minimal interest earnings. Since I CMA-RC updates are historically adopted by the Board, staff is proposing that the 457 adoption package be updated to further specify eligibility requirements and allow Board Members the ability to benefit from the low-cost investment opportunities available through the 457 Deferred Compensation Plan. Updating the plan documents periodically allows the employer the option to introduce or remove any optional provisions included in the plan document. District staff has inquired with Erika Armstrong, I CMA- RC Regional Manager of Northern California, and Kim Hammond, the District's Retirement Plans Specialist, and both agree that changes can be made to specify who may participate. The attached proposed 457 Plan Adoption Package has been revised to include all full-time and part-time regular employees and Board Members. Per discussion with I CMA-RC, the District may specify eligible employees as long as the group specified corresponds to a group 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. That said, there are some potential limitations that may affect individual Board members. Per I CMA-RC, under the I RS rules, a rehired participant can continue withdrawals from a 457 plan if such withdrawals were initiated before the rehire date and the distributions are from the pre-severance event contributions. If the rehired participant stops the installment payments, he or she cannot resume taking distributions from the plan until he or she has another qualifying event (e.g., separation from service, emergency, termination, etc.). Furthermore, a participant is not allowed to contribute and take lump sum distributions at the same time. Co-op's, District Temporaries, and Seasonal employees will continue to be enrolled in the 457 PTS plan as the majority of this group of employees request a withdrawal upon termination. ALTERNATIVES/CONSIDERATIONS None, for the updated trust document. This action is automatically being done by I CMA-RC to ensure that the District is operating the plan with the most current 457 provisions. The Board could decide not to include Board Members for eligibility to participate in the regular 457 plan. July 5, 2018 Regular Board Meeting Agenda Packet- Page 67 of 195 Page 3 of 10 FINANCIAL IMPACTS There are no additional costs to the District with any of the recommended changes; however, minimal additional administrative and accounting activities will be necessary to implement, monitor, and maintain the 457 Plan. COMMITTEE RECOMMENDATION This matter was reviewed by the Finance Committee at its April 24, 2018 meeting and the Committee recommended Board approval. RECOMMENDED BOARD ACTION Adopt proposed resolution that: 1)Allows Board members the ability to benefit from the low-cost investment opportunities available through the 457 Plan; and 2) Incorporates amendments for legislative and regulatory changes. Strategic Plan Tie-In GOAL THREE:Be a Fiscally Sound and Effective Water Sector Utility Strategy 1 - Conduct Long-Range Financial Planning ATTACHMENTS: 1. 457 Deferred Compensation Plan Adoption Agreement 2. Proposed Resolution July 5, 2018 Regular Board Meeting Agenda Packet- Page 68 of 195 Page 4 of 10 Governmental 457 Plan and Trust Optional Provisions Election Form Employers should execute this form to make elections, or change prior elections,related to optional provisions contained in the ICMA Retirement Corporation 457 Governmental Deferred Compensation Plan and Trust document. This form may also be used by plan sponsors utilizing an individually designed plan document. Plan Number: 303896 Employer Plan Name: Central Costa Sanitary District L PLAN DOCUMENT(If you are establishing a new plan, please skip this section.) Our Plan currently uses: x❑ ICMA-RC's model plan document ❑ An individually designed plan document IL PLAN YEAR The Plan Year will be(select one): ® January 1 —December 31 (Default): or ❑ The 12 month period beginning Month Day M ELIGIBIT.TTY REQUUMVEViTS The following group or groups of Employees are eligible to participate in the Plan: ❑ All Employees{Default) X❑ All Full Time Employees X❑ Salaried Employees ❑ Non-union Employees X❑ Management ❑ Public Safety Employees ❑ General Employees ❑ Other Employees(specify the group(s) of eligible employees): Other includes Elected Board Members,and Management Support and Confidential Group(MSCG). Co-op's,District Temporaries, and Seasonal employees will participate in the 457 PTS plan. 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. July 5, 2018 Regular Board Meeting Agenda Packet- Page 69 of 195 Page 5 of 10 N LOANS Loans are allowed under the Plan. Yes F No(Default) If you select"Yes" above,you must also complete and return the Loan Chlidelines A, reenient in the Loan Implementation Package for 457/401 Plan Sponsors. V. DISTRIBUTIONS a Distributions while employed with the Employer(in-service distributions)at 70%will be allowed. Yes(Default) F No a In-service distributions of rollovers are allowed at any time. F Yes FX_ No(Default) b. Tax-free distributions for the payment of qualifying insurance premiums for eligible retired public safety officers are available under the Plan. F Yes FX_ No(Default) c. Unforeseeable emergency withdrawals are permitted. Yes(Default) F No i In applying the rules for unforeseeable emergency withdrawals,the determination of any unforeseen emergency shall include circumstances applying to a Primary Beneficiary. Yes(Default) F No VI. ROTH PROVISIONS a The Plan will offer Designated Roth Accounts as described in Article IX. F Yes FX_ No(Defaull) [If No is selected,skip the remainder of this Section VI] b. The Plan will allow In-Plan Roth Conversions as provided in Section 9.05. F Yes(Default) F No c Designated Roth Accounts will be available as a source for loans under the Plan F Yes ❑ No or NIA(Default) VIL AUTOMATIC ENROLLMENT F:NT The Plan will offer automatic enrollment. F Yes FX_ No(Defaua) If you select "Yes" above, further steps are required to implement this feature, including completing implementation forms.We will contact you. 9 July 5, 2018 Regular Board Meeting Agenda Packet- Page 70 of 195 Page 6 of 10 VIII.DEFERRAL OF SICK PAY,VACATION AND SACK PAY(MOOSE ANY/ALL THAT APPLY) Participants may elect to defer Q Accumulated Sick Pay Q Accumulated Vacation Pay ❑ Back Pay Note:If no election is made, a Participant will not be able to defer any of these. The Participant's election to defer accumulated sick pay,accumulated vacation pay,or back pay must be made before the beginning of the month in which these amounts would otherwise be paid or made available to the employee. DL EMPLOYER MATCH Employer will match Elective Deferrals and Default Elective Deferrals("Deferrals"), beginning with the first payroll period occurring 91 days after a Participant's first Deferral. F Yes FX— No(Defaull) [If No is selected,skip the remainder of this Section IX.IF YES,COMPLETE ALL THAT APPLY] ❑ Employer Percentage Match of Deferrals 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 Deferrals made on behalf of the Participant for the Plan Year (not including Deferrals exceeding % of Earnings or$ PLUS %of the Deferrals made on behalf of the Participant for the Plan Year in excess of those included in the above paragraph(but not including Deferrals 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 (CHOOSE ONE)F— more F—] less. ❑ Employer Dollar Match of Deferrals The Employer shall contribute on behalf of each Participant an amount determined as follows(subject to the limitations of Article V of the Plan): $ for each % of Earnings or$ that the Employer contributes on behalf of the Participant as Deferrals for the Plan Year(not including Deferrals exceeding_ % of Earnings or 10 July 5, 2018 Regular Board Meeting Agenda Packet- Page 71 of 195 Page 7 of 10 PLUS $ for each %of Earnings or $ that the Employer contributes on behalf of the Participant as Deferrals for the Plan Year in excess of those included in the above paragraph[but not including Deferrals 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 [CHOOSE ONEF more F less. X AI LI I'ARY SERVICE ELECTIONS a Plan contributions shall be made under the plan for differential wage payments (i.e. payments made by the employer to an individual performing military service that represents all or a portion of the wages he/she would have received). Yes(Default) F No If yes is selected,this is effective beginning January 1,2009 (or if later,the effective date of the Plan),unless another effective date is filled in here: b. A participant shall be deemed to have a severance from employment for purposes of eligibility for a distribution during any period of military service for more than 30 days. F Yes FX— No(Defaull) c A participant who dies or becomes Disabled(as defined in the Plan)while performing qualified military service shall receive Plan contributions as if the individual had resumed employment on the day preceding death or disability and then terminated employment on the actual date of death or disability. F Yes FX— No(Default) If yes is selected,this is effective for participants who died or became disabled while performing military service on or after January 1, 2007(or if later,the effective date of the Plan),unless another effective date is filled in here: (date cannot be prior to January 1,2007) XL SPOUSAL CONSENT(APPLIES ONLY TO COMMUNITY PROPERTY STATES). If your state is not a community property state, skip the remainder of section xi. Where spousal consent is required,it will apply to: 0 Only to persons who are married(Defaull) ❑ A person who is married, who is a domestic partner under state law,or who is a person in a civil union or other formally recognized personal partnership ❑ A person who is married or who is a domestic partner under state law 11 July 5, 2018 Regular Board Meeting Agenda Packet- Page 72 of 195 Page 8 of 10 ❑ A person who is married or is a person in a civil union or other formally recognized personal partnership Note: This election applies only for Plans in community property states requiring the consent of a spouse to name someone other than the spouse as a beneficiary, and only for determining who is treated as a"spouse"for this purpose and not for any other Plan purposes. X L SUMMARY OF CHANGES. If you are making changes to an existing plan,please summarize the changes along with the effective dates of the changes below and identify the applicable Optional Provisions Election Form section number.If you are establishing a new plan,please skip this section. a. III. Addition of Elected Board Members Effective Date: b. III. District Temps,Co-op&Seasonal in the 457 PTS Effective Date: c Effective Date: d Effective Date: MR EMPLOYER SIGNATURE By signing,the employer confirms he or she is authorized to make the elections specified on this form. Employer hereby appoints ICMA-RC as the non-discretionary Plan Administrator in accordance with the terms and conditions of the ICMA Retirement Corporation 457 Governmental Deferred Compensation Plan and Trust. 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. Employer acknowledges that applicable state law may or may not allow for the addition of an Automatic Enrollment Feature in their 457(b)plan administered by ICMA-RC, and Employer assumes full responsibility for the decision to add such a feature to their plan. Employer Signature: Date(mmlddlyyyy) 1 1 Name(Please Print): James A. Nejedly Title: President of the Board 925 228-9500 Preferred Phone Number: �} Email Address: Plan Number: 303896 l? July 5, 2018 Regular Board Meeting Agenda Packet- Page 73 of 195 Page 9 of 10 RESOLUTION NO. 2018- A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT TO AMEND AND RESTATE THE SECTION 457 DEFERRED COMPENSATION PLAN TO INCORPORATE UPDATES AND BROADEN ELIGIBILITY FOR PARTICIPATION WHEREAS, Central Contra Costa Sanitary District (the "Employer") has employees rendering valuable services; and WHEREAS, the Employer has established a Section 457 Deferred Compensation Plan #303896 (the "Plan") for such employees that serves the interest of the Employer by enabling it to provide reasonable retirement security for its employees and by assisting in the attraction and retention of competent personnel; and WHEREAS, the Employer has determined that incorporating an optional provision in the Plan to further specify eligibility requirements and allow Board Members the ability to benefit from the low-cost investment opportunities available through the Plan will serve these objectives; and WHEREAS, the service provider for the Plan periodically updates their plan documents and incorporates amendments for legislative and regulatory changes and the Employer has determined that adopting an updated Plan document will ensure that the District is operating the plan with the most current Internal Revenue Service provisions; and NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Central Contra Costa Sanitary District ("District") as follows: THAT the District hereby amends and restates the Section 457 Deferred Compensation Plan in the following respects: 1. To further specify eligibility requirements and allow Board Member the ability to benefit from the low-cost investment opportunities available through the Plan; and 2. To update the Plan document to incorporate amendments for legislative and regulatory changes; and THAT the above changes shall become effective July 5, 2018. PASSED AND ADOPTED this 5th day of July 2018, by the Board of Directors of the Central Contra Costa Sanitary District by the following vote: AYES: Members: NOES: Members: ABSENT: Members July 5, 2018 Regular Board Meeting Agenda Packet- Page 74 of 195 Page 10 of 10 Resolution No. 2018- Central Contra Costa Sanitary District Page 2 James A. Nejedly President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California COUNTERSIGNED: Katie Young 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 July 5, 2018 Regular Board Meeting Agenda Packet- Page 75 of 195