HomeMy WebLinkAbout19 DEFERRED COMP 09-07-99Inter-Com
NO. 19
9-7-99
DATE:
September 7, 1999
TO:
FROM'
SUBJECT:
William A. Huston, City Manager
Ronald A. Nault, Finance Director
ADOPTION OF THE CITY OF TUSTIN DEFERRED COMPENSATION
MATCHING PLAN AND TRUST
SUMMARY: In June 1990 the City Council approved a Management Compensation Program that
included a City contribution into employees' 457 Deferred Compensation accounts. In 1998 the
Internal Revenue Service expanded its Rules and Regulations under Section 401(a) of the IRS Code
to allow for governmental employers to make contributions to a Deferred Compensation Matching
Plan to encourage employees to save more for their retirement needs. The creation of the 401(a)
Plan will not add additional cost to the City and all ongoing administrative expenses will be borne by
the employees from the assets in their individual accounts.
RECOMMENDATION:
1. Adopt Resolution No. 99-71 creating the City of Tustin Deferred Compensation Matching
Plan and Trust.
2. Authorize the City Manager to sign the Deferred Compensation Matching Program
Administrative Agreement.
FISCAL IMPACT:
None.
DISCUSSION:
in June of 1990 the City Council approved a management compensation package that included a two
tiered City contribution to management employees' deferred compensation programs. The first tier is
a fixed contribution of two percent per each non-sworn management employee. The second tier was
up to two percent, since adjusted to three percent,, matching an equal amount deferred by the
employee.
In the last several years, Congress has been studying the Social Security System and has determined
that the system is at risk of being bankrupt by the year 2014. As a result of this study Congress has
taken the position that Americans all should be encouraged to save more for their retirement, so
several new tax deferred savings options were passed in the Small Business Job Protection Act of
1996. Significant changes important to municipal employees include the indexing of Section 457
deferrals, the provision for loans from deferred compensation assets, and the removal of certain
restrictions on defined contributions plans under Section 401(a) of the IRS Code.
The recommended action will shift the City's contributions from the Section 457 Plan to the new
401(a) Plan. No costs will accrue to the City to create or to administer the new plan. The creation of
the new plan will give each management employee an opportunity to maximize his or her deferrals
within the limits of the current IRS regulations.
Ronal
Finance Director
RAN:ts
Attachment
RAN:DeferredCompMat chingPlanAndTrustStaffReport.doc
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RESOLUTION NO. 99-71
A RESOLUTION OF THE CiTY COUNCIL OF THE CITY OF TUSTIN,
CALIFORNIA, ADOPTING A DEFERRED COMPENSATION
MATCHING PLAN FOR MANAGEMENT EMPLOYEES OF THE CiTY
WHEREAS, the City Council of the City of Tustin has adopted a Deferred
Compensation Plan which is available to all-eligible employees, pursuant to Section 457
of the Internal Revenue Code, as amended; and
WHEREAS, the City of Tustin wishes to provide an additional incentive to its
management employees to voluntarily set aside and invest portions of their current
income to meet their future financial requirements and supplement their existing
retirement program; and
WHEREAS, Nationwide Retirement Solutions, inc. (NRS) has been selected to
administer such a program and has provided the City with a specimen plan document,
attached as Exhibit A, titled "Nationwide Retirement Solutions, Inc. Governmental
Deferred Compensation Matching Plan and Trust";
NOW, THEREFORE, the City Council of the City of Tustin hereby adopts the
Nationwide Retirement Solutions, Inc. Governmental Deferred Compensation Matching
Plan and Trust and hereby establishes the City of Tustin Deferred Compensation
Matching Plan and Trust to provide additional benefits for all management participants in
the City of Tustin Deferred Compensation Plan and authorizes the City Manager to
execute an adoption agreement for said Plan; and
IT IS FURTHER RESOLVED that the Trustees for said Plan shall be the City
Manager, the City Treasurer and the City Finance Director; the Plan Administrator shall
be the City Finance Director; all management employees of the City covered under the
457 Deferred Compensation Plan shall be covered under this Plan; the Plan shall be
effective as of October 1, 1999; and the employer contribution shall be an amount equal
to two percent of employee compensation plus the employer will match employee
contributions to 457 Plan dollar for dollar up to three percent of employee compensation.
APPROVED AND ADOPTED by the City Council of the City of Tustin on
September 7, 1999.
ATTEST:
Tracy Wills Worley
Mayor
Pamela Stoker
City Clerk