HomeMy WebLinkAboutResolution 2002-009 N.C.S. 01/07/2002 .Resolution No.2OO2-OO9N.C.S.
of the City of .Petaluma, California
AMENDMENT OF HARTFORD 457 DEFERRED COMPENSATION PLAN
PURSUANT TO THE ECONOMIC GROWTH AND TAX RELIEF
RECONCILIATION ACT OF 2001
WHEREAS, the City of Petaluma (hereinafter "Employer") heretofore established the
City of Petaluma 457 Deferred Compensation Plan (hereinafter "Plan"); and
WHEREAS, the Employer desires to amend the Plan to conform with changes in the
federal law brought about by the Economic Growth and Tax Relief Reconciliation Act of 2001
("EGTRRA"); and
WHEREAS, this amendment is intended as good faith compliance with the requirements
of EGTRRA and guidance issued thereunder; and
WHEREAS, this amendment shall supersede the provisions of the Plan to the extent
those provisions are inconsistent with the provisions of this amendment.
NOW THEREFORE, BE IT RESOLVED, that, effective January 1, 2002, the City of
Petaluma hereby amends the Plan and authorizes and directs the City Manager to sign said Plan
Amendment. A copy of this Resolution, the Agreement and any attachments shall be on file in
the Office of the City Clerk. The City of Petaluma amends the plan as follows: ~
Contribution Limit -The maximum amount a Participant may defer during a calendar
year to this and/or any other Eligible Deferred Compensation Plan shall not exceed the lesser of:
(i) the applicable dollar amount as set forth in Section 457(e)(15) of the Code; or (ii) 100°Io of the
Participant's Includible Compensation.
Pre-Retirement Catch-Up Contribution -The maximum amount a Participant may
defer under Section 457(b)(3) of the Code each calendar year to this or any other Eligible
Deferred Compensation Plan shall not exceed the lesser of: (1) twice the applicable dollar limit
as set forth in Section 457(e)(15) of the Code; or (2) the applicable dollar limit as set forth in
Section 457(e)(15) of the Code plus any Employer provided compensation eligible for deferral
that was not deferred for any prior taxable year which began after December 31, 1978.
Age 50+ Catch-Up Contribution -All Participants who have attained age 50 before the
close of the plan year shall be eligible to make catch-up contributions in accordance with, and
subject to the limitations of, Section 414(v) of the Code. Such contribution shall not, with
respect to the year in which the contribution is made, be subject to any otherwise applicable
limitation contained in Section 457 of the Code, or be taken into account in applying such
Resolution No. 2002-009 N.C.S.
limitations to other contributions or benefits under this Plan or any other plan. This provision
shall not apply for any yearin which Section 457(b)(3) of the Code applies.
Rollover Contribution - An Employee may contribute a Rollover Contribution to the
Plan. A Rollover Contribution is a Participant contribution or a direct rollover of an eligible
rollover distribution as defined under Section 402(c)(4) of the Code. The Plan Administrator
may require the Employee to certify, either in writing or in any other form permitted under rules
promulgated by the IRS, that the contribution qualifies as a Rollover Contribution under the
applicable provisions of the Code. If it is later determined that all or part of a Rollover
Contribution was ineligible to be contributed to the Plan, the Plan Administrator shall direct that
any ineligible amounts, plus earnings or losses attributable. thereto (determined in a uniform and
nondiscriminatory manner) be distributed from the Plan to the Employee as soon as
administratively feasible. Separate accounting shall be maintained by the Plan Administrator for
any Rollover Contribution not attributable to an Eligible Deferred Compensation Plan. Rollover
Contributions will be non-forfeitable at all times.
Distribution Eligibility -All references to "separation from service" contained in the
Plan are hereby replaced with "severance from employment."
Installment Payments -Upon becoming eligible for a distribution, a Participant may
elect to receive so much of his or her Participant Account in installment payments made at least
annually. A Participant may elect to vary the amount or frequency of any such payments at least
once each calendar quarter. However, at no time may the installment payment period exceed the
Participant's life expectancy.
Distribution On or After Age 70-1/2 or Severance From Employment -Upon
becoming eligible for a distribution, a Participant may elect to commence distribution of his or
her Participant Account in accordance with the payment options available under the Plan. A
Participant who wishes to receive a distribution must submit a request to the Plan Administrator.
Upon a valid request, distribution will commence as soon as administratively feasible.
Distribution On Account of the Participant's Death - In the event of the Participant's
death, if distribution has not commenced prior to the death of the Participant:
(a) Anon-spousal beneficiary must either;
(i) elect a distribution payable over a period not extending beyond the life
expectancy of the beneficiary, commencing no later than the end of the calendar
year following the calendar year in which the Participant died; or
(ii) elect asingle-sum payment to be made no later than the end of the calendar year
which contains the fifth anniversary of the date of death of the employee,
otherwise, such single-sum payment shall be made by the end of such calendar
year.
Res. No. 2002-009 NCS 2
(b) A spousal beneficiary may elect asingle-sum payment or a distribution payable over a
period not extending beyond the life expectancy of the spousal beneficiary. Distribution
to the spousal beneficiary must commence on or before the later of: (i) the calendar year
immediately following the calendar year in which the Participant died; or (ii) the year the
deceased Participant would have reached age 70-1/2.
Minimum Distribution Requirements -Notwithstanding anything in this plan to the
contrary, distribution from the Plan shall commence and be made in accordance with Section
401(a)(9) of the Code and, until the last calendar year beginning before the effective date of the
final regulations under section 401(a)(9) or such other date as may be published by the Internal
Revenue Service, the regulations under section 401(a)(9) that were proposed on January 17,
2001. Participants must commence distribution no later than April lst following the later of (i)
the calendar year in which the Participant attains age 70-1/2 or (ii) the calendar year in which the
Participant retires.
Domestic Relations Orders - No benefit or interest available hereunder will be subject
to assignment or alienation, either voluntarily or involuntarily pursuant to a domestic relations
order, unless such order is determined to be a qualified domestic relations order, as defined under
Section 414(p) of the Code.
Direct Rollovers - A distributee may elect to have all or any portion of an Eligible
Rollover Distribution paid directly to an Eligible Retirement Plan specified by the distributee.
For purposes of this section an Eligible Rollover Distribution means any distribution of all or any
portion of the balance to the credit of the distributee, except that an Eligible Rollover
Distribution does not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's
designated Beneficiary, or for a specified period of ten years or more; any distribution to the
extent such distribution is required under Section 401(a)(9) of the Code; or any amount that is
distributed on account of hardship.
For purposes of this section an Eligible Retirement Plan means an eligible retirement plan that is
an individual retirement account described in Section 408(a) of the Code, an individual
retirement annuity described in Section 408(b) of the Code, an eligible deferred compensation
plan described in Section 457(b) of the Code which is maintained by an eligible employer
described in Section 457(e)(1)(A) of the Code, an annuity plan described in Section 403(a) of the
Code, an annuity contract described in section 403(b) of the Code, or a qualified trust described
in Section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. The
definition of eligible retirement plan shall also apply in the case of a distribution to a surviving
spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic
relation order, as defined under section 414(p) of the Code.
For purposes of this section, a distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the Employee's or former
Res. No. 2002-009 NCS 3
Employee's spouse or former spouse who is the alternate payee under a qualified domestic
relations order, as defined under Section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
For purposes of this section a Direct Rollover is a payment by the Plan to the Eligible Retirement
Plan specified by the distributee.
Distribution for Certain Non-Participating Participants -Rollover Contributions are
excluded in determining whether the total amount of a Participant's Account under the Plan
exceeds the dollar limit under Section 411(a)(11)(A) of the Code.
Transfers In - If a transfer is associated with a distributable event and the Employee is
eligible to receive an eligible rollover distribution as defined under Section 402(c)(4) of the
Code, such transfer will be considered a Rollover Contribution.
Transfers Out - If a transfer is associated with a distributable event and the distribution
is an eligible rollover distribution as defined under Section 402(c)(4) of the Code, such transfer
will be considered a Direct Rollover.
Trustee to Trustee Transfers to Purchase Permissive Service Credit - A Participant
may elect to have all or a portion of a his/her Participant Account directly transferred to a
defined benefit governmental plan (as defined under Section 414(d) of the Code) if such transfer
is:
(a) for the purchase of permissive service credit (as defined under Section 415(n)(3)(A) of
the Code) under such plan; or
(b) a repayment to which Section 415 of the Code does not apply by reason of subsection
(k)(3) thereof."
Under the power and authority conferred upon this Council by the Charter of said City.
REFERENCE: I hereby certify the foregoing Resolution was introduced and adopted by the Approved as to
Council of the City of Petaluma at a (Regular) (Adjourned) (Special) meeting form
on the .........7xh............ day of .......Ianuary 20A2., by the
following vote:
Ci Attorney
AYES: Cader-Thompson, vice Mayor Healy, Maguire, Moynihan, O'Brien, Mayor Thompson, Torliatt
NOES: None
ABSENT: Non
ATTEST:
City Clerk ~C1~81'(P71 ~ Mayor
Council File
Res. No.......2002=OQ9.........N.C.S.
EXI=IIBIT A
• ADDITIONAL INFORIVIATION. REGARDING THE
AMENDMENT OF HARTFORD 457~DEFERRED COMPENSATIONPLAN
PURSUANT TO THE ECQNOMIC' GROWTH AND' TAX RELIEF
RECONCILIATION ACT QF 20Q1
Contribution. Limit
~I In 2002, tree standa~d;~i57 contribution limit will increase to $11,000,increasingby"$1,000each
year until 2006,and atljusted for cost-of-living thereafter. This amendmentisdesignecl to
address theincreaseto the standard contribution for 2002 and beyond.
(See Schedule on Hartford attachment.)
Pre-RefiremenY; Catch-Up Contribution
-
In 2002. the current rule permitti~~g a 51`~ 000 c<~tch-iip contribution in a p nticipant s last 2
j tax~~ble years before attaining normal ~etn~ement age is i~icrc"sed to t~icc that ai~~uunt that could
otherwise be contributed (e:g. $22,000 in 2002). This amendment addresses increases to the
pre-retirement catch-up,contribution limit for 2002 and beyond.
(See'Sehedule on Hartford attachment.),
Age 50+;Catch-Up Contribution
- _ - -
Sta~ling h~ 2Q02. a plan n~ allo.? participants age 50 and older to contribute an acditional
amount ~bo'e the stan~!ard limit in effect for the t ~ .ble year Participants will br ~~ble to
contribute an additional X1,000 rn 2002, increas~nq ~ 1,000 each year to $5,000 in 2006. This
amendment ~~Ilows plan porticiE~ants to take advantage of this ne~~ti_provlsion.
(See:Schedule on Hartford attachment.)
Rollover'Contribution
~ `St~+~ting in 2002, a plan r~~ay allo~? participants to rollo~er amounts eitherdirectlyor indirectly~fronr
40'i, ~03(b). 108 (IRAsj, and g~weieimental -~57 plans. Separate accountingof amountsnot
,attributable to an eligible deferred compensation plan will be required. This amendment allows
participants to tike advantage of this new provision,
Distribution: Eligibility .
- _
Under EGTRRA, the distribution eligibility provision for "separation from service".has been
changed to "severance'frorli employment" This change eliminates the °sau~e desk".restriction
under t'ne Internal RevenueCode, thus :Ilo~wing fnr distributions Foliow~ing certain employer
transactions. -This amendment modifies the plan's distribution eligibility requirementto take
advantage of.the change in the law.
Res: No. 2002-009 NCS. Page 5
Installment Payments - No supplemental information
Distribution On or After Age 70=1 /2 or Severance From = No supplemental information
Distribution On Account of the Participant's Death.
- - - - -
Starting in 2002, thedistrlbution rules are simplified by eliminating certain additional rules
currently in effect (e:q. distributions must be made in substantially nor-increasing amounts).
Plans no longer need to rec;uire participe,nts to make affirmative elecfions to defer receipt of
amou~~ts'distributable under the plan. In addition. plans need no longer need to require nc~n-
spousal beneficiaries to receive their benefit within 15 years. Consequently. anon-spousal
beneficiary nay elect a method of distribution over a period beyond 15 years but not exceeding
his or tier life expectancy. The above amendments modify the plan to reflect the new distribution
rules in effect for-2002 and bey~r~d.
Minimum Distribution
~In 200.1, the IRS published newly proposed regulations addressing the minimum required
` distribution runes: This amendment incorporates#hese new rulesaswell as addresses future IP,S
;guidance.
Domestic Relations- Orders
(Sting in 2~~02; the same ~DRO rules applic~?ble to r~ualified plans undFa Code Section 414j1~~j
willapply to 457 plan distributions. This a~r~endment reflects this change.. Please rote that,
under the new rules, where payment is made to the spouse or former spouse, the payment ~~:~ill be
taxable to such individual, not the participant.
Direct Rollovers
-
Starting in 202. plans must ailow participants the opportunity to elect to rollover amounts directly
to a 4U1, 403(b)„408 (IRAs), or another governmental 457 plan. This amendment, based in pert
on the IRS modeldirecfirollover text published in 1993', allows participants tv take advantage of
.this new provision.Please note, there is no withholding on direct rollovers. However; eligible ~ _
rollover distributions paid directly to a disfributee are subject to mandatory 20% withholding. In
addition, a special tax notice must be provided to distributees prior to any distribution informing
iher~ of the withholding reyu~rer»ents and them right to eiect a direct rollover."
Distribution for Certain Non-Participating Participants
- - - _ -
Under EGTRRA, rollovercontributions may be disregarded in determining whether a benefit may
be distributed. This amendment modifies the cash outprovision to al~gr~~ with the change in the
IaUr. Please note that thy, dollar limit under 5411(a')(11)(A) remains $5,000.
Res. No. 2002-009 NCS. Page 6
Transfers In -Transfers Out
St~rtin~in 2002, a<<~ounts rol{ed into an eligible plan will be afforded special treatment (e c~.
rollover contributions may be disregarded when determining whether a participant can be cashed
out under the $5,000 involuntary cash-out rule). This amendment provides 1:hat where such
amounts can beconsigered eligible rollover amounts, the plan "will treatthe transfer as rollovor.
Please note that the transfer in!out rules may still'~e used for circrtmst~nces wf~ere the rollover
rules are not available. For example, tivhere a governmental employer hires an individual that
participated in a d57(b) eligible deferred compensation plan sponsored by atax-exempt
.employer, the transfer provision would allow the individual to transfer hisor her benefit to the
_ 457(b} governmental plan.
Trustee to Trustee Transfers to Purchase, Permissive Service Credit
- - -
Starting iri 2002;~employees may be allowed to use funds from their X157 plans to purchase
service credits under a governmental defined benefit plan. This arT~endment allows participants
to takeadvantage of this new provision.
Res. No. 2002-009 NCS. Page 7