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HomeMy WebLinkAboutStaff Report 11/07/2011 3.E 0 i - .ItemVli#3 Ltt •: 185e' DATE: November 7, 2011 TO: Honorable Mayor and Members of the City Council FROM: John C. Brown, City Manag eittrf SUBJECT: Resolution Terminating the 401(a) Employer Discretionary Retirement Plan Administered by the Hartford Life Insurance Company and Removing Reliance Trust Company as Trustee of the Trust for the City of Petaluma 401(a) Employer Discretionary Retirement Plan and Naming City Manager as Successor Plan Termination Fiduciary for the Plan. RECOMMENDATION It is recommended the City Council adopt the attached Resolution Terminating the 401(a) Employer Discretionary Retirement Plan Administered by the Hartford Life Insurance Company: Removing Reliance Trust Company as Trustee of the Trust; Naming the City Manager as • Successor Plan Termination Fiduciary for the Plan; and, authorizing the City Manager to execute all necessary documents. BACKGROUND The City of Petaluma provides a 401 (a) Employer Discretionary Retirement Plan (the "Plan ") administered by the Hartford Life Insurance Company for Unit 8 Department Directors. That Plan was established January 1, 2000. At this time there are no plan participants and it appears that only one employee has used the Plan in the last nine years. The City makes no contributions to the program. There remain seven inactive plan participants and the total account balance for all seven participants is about $52,000. The administration for this 401(a) Plan is . a shared responsibility between the City and the Hartford. Life Insurance Company. There is City expense in maintaining the program in terms of staff time for administration and legal costs related to maintaining compliance. • All plan participants were contacted by letter on February 10, 2011 and advised by the City of its intention to terminate the Plan. They were asked to contact the City with any concerns they may have about the Plan's: termination. • No plan participantcontacted the City with any concerns. All plan participants will be offered rollover options and /or may elect distribution. Agenda Review: City Attorney Finance Director City Manat- ,r The City also provides a 401 (a) Government Money Purchase Plan and, Trust administered by the ICMA Retirement Corporation. The ICMA Retirement Corporation is responsible for the administration of the 401 (a) Plan and the City does not incur costs associated with the ICMA Plan administration, unlike the Plan administered by Hartford. DISCUSSION City staff recommends that that the 401 (a) Employer Discretionary Retirement Plan administered by the Hartford Insurance Company terminate effective January 3, 2012 to save money and staff time. The City offers eligible employees a 401(a) Plan administered by ICMA and one 401(a) Plan is sufficient. There are seven inactive plan participants who will be provided with rollover options. To terminate the Plan the City needs to adopt a resolution authorizing plan termination, removing Reliance Trust Company as the trustee of the Plan and naming the City Manager as the successor Plan Termination Fiduciary for the Plan. The City recommends a Plan termination date of January 3, 2012 to provide, the City enough time to notify plan participants and process documents to accomplish the Plan termination. FINANCIAL IMPACTS It is estimated that the City has spent approximately $3,000 to $5,000 in the last three years on Plan administration. Most of those costs have been related to legal, requirements for Plan compliance and IRS filings. The City would no longer incur any costs after Plan termination is processed. ATTACHMENTS 1. Resolution • Resolution No. _2011 -XXX N.C.S. of the City of Petaluma, California RESOLUTION TERMINATING THE 401(a) EMPLOYER DISCRETIONARY RETIREMENT PLAN ADMINISTERED BY THE HARTFORD LIFE INSURANCE COMPANY AND REMOVING RELIANCE TRUST COMPANY AS TRUSTEE OF THE TRUST FOR THE CITY OF PETALUMA 401 (a) EMPLOYER DISCRETIONARY RETIREMENT PLAN AND NAMING THE CITY MANAGER AS THE SUCCESSOR PLAN TERMINATION FIDUCIARY FOR THE PLAN WHEREAS, the City of Petaluma wishes to terminate the 401 (a) Employer Discretionary Retirement Plan (the "Plan ") administered by the. Hartford Life Insurance Company given limited City staff and others resources; there is, no active or planned employee participation in the . Plan, and the City offers a 401(a) Employer Discretionary Retirement Plan administered by ICMA; and WHEREAS, Reliance Trust Company ( "RTC ") currently serves as passive, nondiscretionary Trustee for the City of Petaluma's 401 (a) Employer Discretionary Retirement Plan; and WHEREAS, upon termination of the Plan the City of Petaluma will no longer provide these services to employees or former employees beyond January 3, 2012; and WHEREAS, as a result, it is desirable to remove RTC as passive, nondiscretionary Trustee of the trust for the Plan and to appoint the. City Manager as successor Plan Termination Fiduciary for the Plan; and NOW, THEREFORE, BE IT RESOLVED by the City council of the City of Petaluma that: 1. The City of Petaluma terminates the 401 (a) Employer. Discretionary Retirement Retirement Plan administered by the Hartford Life Insurance Company effective January 3, 2012; and 2. Reliance Trust Company is removed as passive, nondiscretionary Trustee of the trust for the Plan, and the City Manager is named as successor Plan Termination Fiduciary for the Plan effective January 3, 2012; and 3. The City Manager and /or his designee is hereby authorized, empowered, and directed to execute on behalf of the City of Petaluma, any and all documents required to effectuate the .Plan termination and removal of the Trustee and appointment of a successor Plan Termination Fiduciary, including but not limited to the Trustee Removal and Appointment document, and to take such actions as are necessary, appropriate or advisable to effectuate the foregoing resolution..