HomeMy WebLinkAbout07 DEFERRED COMP 10-06-03AGENDA REPORT
Agenda Item
Reviewed:
City Manager
Finance Director
MEETING DATE:
TO:
FROM:
SUBJECT:
OCTOBER 6, 2003
WILLIAM A. HUSTON, CITY MANAGER
HUMAN RESOURCES DEPARTMENT
AMEND DEFERRED COMPENSATION PLAN DOCUMENTS TO ALLOW
LOANS TO PARTICIPANTS AND PERMIT AN ALTERNATE PAYEE
PURSUANT TO A DOMESTIC RELATIONS ORDER
SUMMARY:
This agenda item recommends amending the City's U.S. Conference of Mayors 457(b)
Deferred Compensation Plan (administered by Nationwide Retirement Solutions, Inc.),
to allow for loans to participants and to permit an alternate payee pursuant to a valid
domestic relations order.
RECOMMENDATION:
Adopt Resolution No. 03-115 amending the U.S. Conference of Mayors (USCM and
also known as PEBSCO and/or NRS, Nationwide Retirement Solutions) 457(b)
Deferred Compensation Plan to allow for participant loans and to permit an alternate
payee pursuant to a valid domestic relations order.
FISCAL IMPACT: NONE
BACKGROUND AND DISCUSSION:
LOANS: The City of Tustin adopted the original USCM deferred compensation plan in
November of 1984. Recently the Internal Revenue Code regulations governing 457 (b)
plans were amended and eligible public agencies may now allow participants to borrow
money from their own vested accounts for general loans, including home loans. Currently
our plan only allows for emergency withdrawals, which are limited and only apply in certain
cases.
Loans that would be made from a 457 plan are still severely restricted by law. In general,
any Plan participant may apply for a loan from the Plan. The participant is required to
complete and return to the administrator (NRS) a loan application and, before the loan is
made, the participant must enter into a legally enforceable loan agreement. The maximum
term of a loan is five (5) years or fifteen (15) years if the loan is for the purchase of a
participant's principal residence and, a participant may only have one plan loan
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City Council Agenda
October 6, 2003
Page 2
outstanding at any given time. The loan is secured by the participant providing a security
interest in their vested Plan balance and loans may not exceed the lesser of 50% of the
participant's vested account balance or $50,000.
COMPLIANCE WITH DOMESTIC RELATIONS ORDERS: Changes to the regulations
governing 457 (b) plans now enable eligible public agencies to amend their plans to
comply with a valid domestic relations order. Approving a Domestic Relation Amendment
to our Plan will provide our employees with a way to separate their vested account
balance according to a valid domestic relations order (judgment, decree, order, or approval
of marital property settlement) when a divorce occurs. This type of request has been
made in the past and we were unable to comply.
Adoption of the attached Resolution will amend our current USCM deferred compensation
plan documents (utilizing Nationwide Retirement Solutions, Inc. (NRS), as the third party
administrator) to enable our employees to take loans from their own vested accounts and,
enable those employees who need to separate funds in their account when a divorce
occurs to do so. Adoption of the Plan amendments further authorizes the City Manager, or
his designee, to take all steps necessary to implement the amendments to the Plan
documents.
The amendments to the Plan meet all of the various federal regulatory compliance
requirements. As a Plan Sponsor offering participant loans, we will be required to
communicate the loan program to participants, determine participant eligibility and monitor
loan activity/loan repayment. As related to the Domestic Relation Amendment we will be
required to determine the validity of a domestic relations order and communicate to the
Administrator (NRS) the pertinent information regarding the domestic relations order.
As indicated earlier, there is no cost to the City; all costs associated with Plan loans and/or
Domestic Relations Orders are paid by the applicant/employee.
Arlene Marks, SPHR
Director of Human Resources
Attachment: Resolution 03-115
Loans to Participants Amendment to Plan Document
Participant Loan Administrative Procedures
Domestic Relations Amendment to Plan Document
Domestic Relations Orders - Required Information
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RESOLUTION NO. 03-115
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TUSTIN, CALIFORNIA, TO APPROVE AMENDMENTS TO
THE U.S. CONFERENCE OF MAYORS 457 DEFFERED
COMPENSATION PLAN DOCUMENTS
WHEREAS, the City's U.S. Conference of Mayors 457 Deferred Compensation
Plan permits amendments to the plan documents to include loans to participants and
domestic relations orders; and
WHEREAS, Nationwide Retirement Solutions Inc. acts as third party
administrator of the United States Conference of Mayors Deferred Compensation
program and administers the City's Deferred Compensation Plan; and
WHEREAS, regulations under Internal Revenue code section 457 provide that
eligible governmental 457 (b) plans may permit loans to participants; and
WHEREAS, this would allow participant to borrow money from their vested
account balance for general loans, including home loans; and
WHEREAS, the Domestic Relation Orders amendment will provide for a means
of separating the vested account balance according to a valid domestic relations order
when divorce occurs;
NOW, THEREFORE, The City Council of the City of Tustin, California does
hereby resolve as follows:
The City Council hereby adopts the amendments to the U.S. Conference of
Mayors Deferred Compensation plan document to include loans to participants and
domestic relations orders.
Nationwide Retirement Solutions, Inc. is authorized to act as the third party
administrator for the deferred compensation plan.
The City Manager, or his designee, is authorized to act as the "Plan Sponsor"
representing the City, and to execute such agreements and contracts as are necessary
to implement the amendments to the plan documents.
Passed and adopted at a regular meeting of the Tustin City Council held on the
6th day of October 2003.
TRACY WILLS WORLEY
Mayor
PAMELA STOKER
City Clerk
STATE OF CALIFORNIA )
COUNTY OF ORANGE )
CITY OF TUSTIN )
SS
PAMELA STOKER, City Clerk and ex-officio Clerk of the City Council of the City of Tustin,
California, does hereby certify that the whole number of the members of the City Council of the
City of Tustin is 5; that the above and foregoing Resolution No. 03-115 was duly and regularly
introduced, passed, and adopted at a regular meeting of the Tustin City Council, held on the
6th day of October, 2003.
COUNCILMEMBER AYES:
COUNCILMEMBER NOES:
COUNCILMEMBER ABSTAINED:
COUNCILMEMBER ABSENT:
PAMELA STOKER
City Clerk
THE UNITED STATES CONFERENCE OF MAYORS
DEFERRED COMPENSATION PROGRAM
THE DEFERRED COMPENSATION PLAN FOR PUBLIC EMPLOYERS
LOANS TO PARTICIPANTS AMENDMENT TO PLAN DOCUMENT
WHEREAS, PLAN SPONSOR executed the above referenced Plan Document, as amended:
and
WHEREAS, effective October 6, 2003, PLAN SPONSOR now desires to further amend the plan
document.
The following Section 8.06 is hereby added:
8.06 Loans to PARTICIPANTS
(a)
PLAN SPONSOR has elected make loans available to PARTICIPANTS and has
delegated certain administrative duties regarding loans form the PLAN to the
A DM IN I STRATOR.
(b)
Any loan by the PLAN to a PARTICIPANT under this Sections shall be subject to
the loan administrative procedures established by the ADMINISTRATOR as well
as the following requirements:
(i)
Loan Eligibility. Any PARTICIPANT may apply for a loan from the PLAN. A
PARTICIPANT who has defaulted on a previous loan from the PLAN shall
not be eligible for another loan from the PLAN until all defaulted loans are
repaid in full, including accrued interest and fees.
(ii)
Loan Application and Loan Agreement. A PARTICIPANT must complete
and return to ADMINISTRATOR a loan application. A non-refundable
application fee established by ADMINISTRATOR will be deducted from the
PARTICIPANT'S ACCOUNT(s) at the time of loan origination. Before a loan
is issued, the PARTICIPANT must enter into a legally enforceable loan
agreement as provided for by the ADMINISTRATOR.
Loan Repayment. The PARTICIPANT receiving a loan shall be required to
furnish to ADMINISTRATOR any information and authorization necessary
to effectuate repayment of the loan prior to the commencement of a loan. In
the event that a payment cannot be processed because of lack of sufficient
funds, the ADMINISTRATOR shall assess an insufficient funds charge
which will be deducted from the PARTICIPANT'S ACCOUNT(s).
(iv)
Loan Term and Interest Rate. The maximum term over which a loan may
be repaid is five (5) years (fifteen (15) years if the PLAN SPONSOR permits
loans for the purchase of a PARTICIPANT's principal residence). Each loan
shall be amortized in substantially equal payments consisting of principal
and interest during the term of the loan, except that the amount of the final
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(v)
(vi)
(vii)
(viii)
(ix)
(x)
payment may be higher or lower. The ADMINISTRATOR shall establish the
interest rate for any loan.
Loan Frequency. Each Participant may have only one (1) PLAN loan
outstanding at any given time. A PLAN loan which is in default, even if the
defaulted loan was treated as a "deemed distribution" under federal
regulations, shall be treated as an outstanding loan until such
PARTICIPANT'S account balance is offset by the amount of principal and
accrued interest under the loan. A PARTICIPANT will be granted a loan no
more frequently than two (2) times in any twelve (12) month period.
Default. The PARTICIPANT must pay the full amount of each loan
payment (principal and interest) on the date that it is due. Failure to make
such a payment by the due date, or within any cure period established by
the ADMINISTRATOR, shall cause the PARTICIPANT to be in default for
the entire amount of the loan, including any accrued interest. A loan will
also be in default if the PARTICIPANT either refused to execute, revoke, or
rescind any agreement necessary to comply with the provisions of this
Section or the loan administrative procedures established by the
ADMINISTRATOR, commences or has commenced against PARTICIPANT
a bankruptcy case, or upon the death of the PARTICIPANT.
Loan Security. By accepting a loan, the PARTICIPANT is giving a security
interest in their vested PLAN balance as of the loan process date, together
with all additions thereof, to the PLAN that shall at all times be equal to
100% of the unpaid principal balance of the loan together with accrued
interest.
Loan Amount. The maximum amount of any loan permitted under the PLAN
is the lesser of (i) 50% of the participant's VESTED ACCOUNT BALANCE
LESS ANY OUTSTANDING LOAN BALANCES UNDER THE plan OR (11)
$50,000 LESS THE HIGHEST OUTSTANDING LOAN BALANCE DURING
THE PRECEDING ONE-YEAR PERIOD. The ADMINISTRATOR shall
establish the minimum loan amount. The PARTICIPANT and not the
ADMINISTRATOR shall at all time remain responsible for ensuring that any
loan received under the PLAN is in accordance with these limits with regard
to any other loans received by the PARTICIPANT under any other plans of
the PARTICIPANT's employer.
Loan Maintenance Fee. Until a loan is repaid in full, an annual loan
maintenance fee established by ADMINISTRATOR will be deducted from
the PARTICIPANT'S ACCOUNT(s).
Loan Default Fee. At the time when a default occurs, a loan default fee
established by ADMINISTRATOR will be deducted from the
PARTICIPANT'S ACCOUNT(s).
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Page 2 of 3
(c)
The ADMINISTRATOR shall fix such other terms and conditions necessary to the
administrative maintenance of the provisions of the Section and as necessary to
comply with the IRC and regulations there under.
IN WITNESS WHEREOF, the undersigned has executed this Amendment this
,2003.
day of
City of Tustin
By:
Arlene Marks, Director of Human Resources
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Page 3 of 3
THE UNITED STATES CONFERENCE OF MAYORS
DEFERRED COMPENSATION PROGRAM
PARTICIPANT LOAN ADMINISTRATIVE PROCEDURES
Nationwide Retirement Solutions, Inc. ("NRS"), as Third Party Administrator of the United States
Conference of Mayors Deferred Compensation Program, administers your Deferred Compensation
Plan for Public Employees ("Plan"). Recently issued proposed regulations under Internal Revenue
Code Section 457 provide that eligible governmental 457(b) plans may permit loans to Participants.
NRS recommends that you, as Plan Sponsor and/or Employer (hereinafter collectively referred to as
"Plan Sponsor"), consult with your own legal advisor in determining whether you wish to add this
optional feature to your Plan.
In the event that you decide to offer loans from your Plan to Participants, you will need to return to
NRS at Nationwide Retirement Solutions, PO Box 182797, Columbus, OH 43272-8450 Attn:
Loans Administrator a fully executed original of this document and a fully executed original of the
enclosed Plan Document Amendment. NRS cannot begin processing Participant loans from your
Plan until it receives fully executed originals of both of these documents.
NRS may need from time-to-time to make changes to the administrative procedures set forth herein
and in the Plan Document Amendment. in such a case, NRS will provide you with timely notice of
such changes as they become necessary.
The following administrative procedures shall govern the making of loans from your Plan:
1. Loan Administration. Plan Sponsor delegates to NRS certain administrative duties regarding
the administration of loans from the Plan, which are set forth herein and which may be modified by
NRS upon timely notice to Plan Sponsor.
2. Loan Eligibility. Any Participant in the Plan is eligible to receive a loan from the Plan. Each
Participant is entitled to one (1) loan at any time. In addition, a Participant who has defaulted on a
previous loan shall not be eligible for another loan from the Plan until all defaulted loans are repaid in
full, including accrued interest and fees.
3. Loan Application and Loan Agreement. In order to receive a loan from the Plan, an eligible
Participant must complete a loan application and return it to NRS. A loan application fee of $50.00*
will be deducted from the Participant's account(s). Before a loan is issued, the Participant must enter
into a legally enforceable loan agreement as provided by NRS. If the Plan Sponsor permits loans for
the purchase of the Participant's principal residence, the Participant will be required to sign a Primary
Residence Certificate form and provide NRS with a copy of the contract or other documents relating to
the acquisition of the dwelling unit. If the source for a single loan includes both the Participant's
Deferred Compensation and Eligible Rollover Accounts, the Participant will be required to complete a
loan application and loan agreement for each account which will be treated as separate and distinct
for all purposes herein except that they will be considered a single loan for purposes of Sections 2, 6
and 10 herein.
*These fees, rates, and minimums are subject to change by NRS upon reasonable notice to Plan Sponsor. Loan fees will appear as
administrative charges on Participant Statements.
S:\Deferred Comp 457\Tustin Loans-USCM Administrative Procedures ACH 03.doc
4. Loan Repayment/Maximum Loan Term. Repayment of any loan made to a Participant shall
be made in a manner and pursuant to the terms set forth in the loan agreement. The Participant
receiving a loan shall be required to furnish the information and authorization necessary to effectuate
the foregoing payments prior to the commencement of a loan. The maximum term over which a loan
may be repaid is five (5) years (fifteen (15) years if the Plan Sponsor permits loans for the pumhase of
the Participant's principal residence).
In the event that a Participant elects to receive a distribution from the Plan (other than a distribution
due to an unforeseeable emergency or other in-service withdrawal) at a time when such person has a
Plan loan outstanding, the principal and any accrued interest with respect to such loan shall be
taxable.
5. Loan Amortization. Each loan shall be amortized in substantially equal payments consisting
of principal and interest during the term of the loan. Payments of principal and interest shall be made
in a manner and pursuant to the terms set forth in the loan agreement on a monthly basis in equal
amounts, except that the amount of the final payment may be higher or lower. Before the loan is
made, the Participant will be notified of the date on which the first payment will be deducted and the
dates on which subsequent payments are due.
6. Loan Frequency/Renegotiations. Each Participant may have only one (1) Plan loan
outstanding at any given time. A Plan loan which is in default, even if the defaulted loan was treated
as a "deemed distribution" under federal regulations, shall be treated as an outstanding loan until
such Participant's account balance is offset by the amount of principal and accrued interest under the
loan. A Participant will be granted a loan no more frequently than two (2) times in any twelve (12)
month period. Under no cimumstances may loan terms be renegotiated. A new loan shall not be
granted prior to the repayment of an outstanding loan.
7. Default. The Participant must pay the full amount of each payment (principal and interest) on
the date that it is due by having sufficient funds in the account designated for loan payments through
the ACH process. If NRS is unable to process a payment on the date due because the Participant
fails to have sufficient funds in the account on that date, NRS will assess a fee of $25.00 that will be
deducted from Participant account(s) and will send written notification to the Participant. The
Participant shall be in default for the entire amount of the loan UNLESS the Participant does each of
the following: 1) contacts NRS at the Deferred Compensation Service Center, 2) mutually agrees with
NRS on a date, which is within 30 days of the missed payment on which funds sufficient to cover the
missed payment will be in the account and; 3) actually pays the missed payments. Failure to make
such a payment through mutually agreeable terms shall cause the Participant to be in default for the
entire amount of the loan. The loan also shall be defaulted upon the death of the Participant or if the
Participant commences or has commenced against Participant a bankruptcy case. No additional
loans shall be made to a Participant who has defaulted on a Plan loan and who has not repaid all
defaulted loans in full, including accrued interest and fees.
8. Loan Prepayment. The entire amount of a loan, including outstanding principal and any
accrued interest, may be paid without penalty prior to the end of the term of the loan in the manner
prescribed by NRS. However, payments made that are less than the remaining principal amount of
the loan and any accrued interest with respect to the loan, or which are not paid in the form prescribed
by NRS, are not permitted.
*These fees, rates, and minimums are subject to change by NRS upon reasonable notice to Plan Sponsor. Loan fees will appear as
administrative charges on Participant Statements.
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9. Loan Security. By accepting a loan, the Participant is giving a security interest in his or her
vested Plan balance as of the date of the Loan Process Date, together with all additions thereof, to
the Plan that shall at all times be equal to 100% of the unpaid principal balance of the loan together
with accrued interest.
10. Maximum/Minimum Loan Amount. The maximum amount of any loan permitted under the
Plan is the lesser of (i) 50% of the Participant's vested account balance (not including any value
attributable to applicable life insurance or deemed IRA account) less any outstanding loan balances
under the Plan or (ii) $50,000 less the highest outstanding loan balance during the preceding one-year
period. The minimum loan amount permitted is $1,000.00'. Loans shall be made in accordance with
these limits and those limits imposed under federal regulations without regard to any other loans
received by the Participant from any other investment provider under the Plan or any other plans of the
employer. The Participant and not NRS shall remain at all times responsible for ensuring that any loan
received under the Plan is in accordance with these limits with regard to any other loans received by
the Participant under any other plans of the Participant's employer. Any tax reporting required as a
result of the receipt by a Participant of a loan that exceeds the limits imposed by federal regulations
shall not be the responsibility of NRS, unless it is determined that such limits were exceeded solely as a
result of a loan made through NRS as service provider. Consequently, NRS shall not be required to
account for loans made pursuant to a plan other than this Plan or loans made under this Plan that are
made by an investment provider other than Nationwide Life Insurance Company.
11. Suspension of Loan Payments. NRS may suspend a Participant's obligation to repay any
loan under the Plan during the period in which the Participant is performing service in the uniformed
services as may be required by law. At the expiration of any suspension of loan payments period, the
outstanding loan balance, including any accrued interest and fees, will be re-amortized and the
Participant will be required to execute an amended Loan Agreement.
12. Loan Interest Rate. The interest rate for any loan shall be established by NRS. These
interest rates shall commensurate with interest rates being charged by entities in the business of
lending money under similar circumstances. Generally, the rate assumed will be Prime Rate +
1.00%*. The Prime Rate shall be the prime rate published by the Wall Street Journal two weeks prior
to the end of the most recent calendar-year quarter. NRS may adjust the loan interest rate for loans to
Participants entering active duty in the military services as may be required by law.
13. Annual Loan Maintenance and Asset Fees. An annual loan maintenance fee of $50.00* will
also be deducted from the Participant's account until the loan is repaid in full. The amount of the
outstanding loan balance will be subject to the maximum Variable Account Annual Expense Fee
applicable under the Plan at the time the loan is issued.
14. Loan Default Fee. At the time when a default occurs, a $50.00' loan default fee will be
deducted from the Participant's account. This charge will only affect Participants who fail to make a
required loan payment.
15. Loans for the Purchase of a Principal Residence. All loans issued by the Plan will be
general loans to be repaid in five (5) years unless the Plan Sponsor affirmatively elects to offer loans
for the purchase of the Participant's principal residence, which may be repaid in fifteen (15) years.
*These fees, rates, and minimums are subject to change by NRS upon reasonable notice to Plan Sponsor. Loan fees will appear as
administrative charges on Participant Statements.
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Such loans shall be solely secured by the Participant's vested account balance. All administrative
procedures set forth herein shall apply to such loans.
If the Plan Sponsor elects to permit loans for the purchase of the Participant's principal
residence, please check this box. r~
The undersigned Plan Sponsor hereby adopts these Participant Loan Administrative Procedures,
effective for loans issued on or after the effective date set forth in the Loans to Participants
Amendment to Plan Document, and instructs NRS to administer loans made to Plan Participants in
accordance with these terms.
The Plan Sponsor acknowledges the following: (i) that the Plan Sponsor has decided to offer loans
under the Plan and is instructing NRS to administers loans under the Plan; (ii) that it understands that,
as a result of offering loans under the Plan, the Plan Sponsor, its Participants, and/or the Plan could
be subject to adverse tax consequences; (iii) that the Plan Sponsor has independently weighed this
risk and has determined that offering loans under the Plan is in the best interest of the Plan Sponsor,
its Participants, and the Plan; and (iv) NRS shall not be liable for any adverse tax consequences
described in (ii), except as specifically stated under paragraph 10 herein, resulting from the Plan
Sponsor's decision to offer loans under the Plan.
*These fees, rates, and minimums are subject to change by NRS upon reasonable notice to Plan Sponsor. Loan fees will appear as
administrative charges on Participant Statements.
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Plan Sponsor
or Employer: City of Tustin
Street Address: 300 Centennial Way
City, State, Zip Code: Tustin, CA 92780
Plan Name: City of Tustin - Deferred Compensation Plan
Entity No.: 0506
By:
Its:
Director of Human Resources
E-mail Address: amarks@tustinca.orq
Date:
*These fees, rates, and minimums are subject to change by NRS upon reasonable notice to Plan Sponsor. Loan fees will appear as
administrative charges on Participant Statements.
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THE UNITED STATES CONFERENCE OF MAYORS
DEFERRED COMPENSATION PROGRAM
THE DEFERRED COMPENSATION PLAN FOR PUBLIC EMPLOYERS
DOMESTIC RELATIONS AMENDMENT TO PLAN DOCUMENT
WHEREAS, EMPLOYER executed the above referenced Plan Document, as amended: and
WHEREAS, effective October 6, 2003, EMPLOYER now desires to further amend the plan document.
1. The following Article Xlll is hereby added:
ARTICLE Xlll
1301
When the PLAN received a judgment, decree or order entered or enforceable pursuant to
local domestic relations marital property law ("domestic relations order"), and relating to the
property rights of a PARTICIPANT's present or former spouse, child or other dependent
("ALTERNATE PAYEE"), then:
(a)
The ADMINISTRATOR shall promptly notify the PARTICIPANT and ALTERNATE PAYEE of
the receipt of such order, and
(b)
The EMPLOYER, within a reasonable time, shall determine the validity of the domestic
relations order as set forth in the Article. Once a determination as to the validity of the
domestic relation order is made, the ADMINISTRATOR shall notify the PARTICIPANT and
ALTERNATE PAYEE of such determination.
13.02
A valid domestic relations order must be a judgment, decree, order, or approval of marital
property settlement relating to: (1) the property rights of the ALTERNATE PAYEE; and (2) is
an order made pursuant to state domestic relations law (including community property law),
which relates to the property rights of the ALTERNATE PAYEE. In addition, the domestic
relations order must:
(a)
Create or recognize the existence of, or assign to an ALTERNATE PAYEE a claim for a
portion of any benefits that actually become payable to a PARTICIPANT under the PLAN.
(b) Clearly specify the following information:
(i) The name, social security number, and last known mailing address of the
PARTICIPANT and ALTERNATE PAYEE covered by the domestic relations order;
(ii)
The amount or percentage, or the manner to be used in determining the amount or
percentage, of the PARTICIPANT's benefit to be paid by the PLAN to the
ALTERNATE PAYEE;
(111) The number of payments or period to which the order applies; and
(iv) The applicability of the order to the PLAN.
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13.03
When the EMPLOYER has determined that a valid domestic relations order applies to a
PARTICIPANT's account, the EMPLOYER shall notify the ADMINISTRATOR and provide
the ADMINISTRATOR with all pertinent information regarding the domestic relations order,
including the information set forth in Section 13.02. The EMPLOYER shall direct the
ADMINISTRATOR to comply with the domestic relations order and specify the value or
benefit of the PARTICIPANT's account to which the ALTERNATE PAYEE is entitled. Once
the ADMINISTRATOR has received from the EMPLOYER the required information and
direction, the ADMINISTRATOR shall establish a separate account for the ALTERNATE
PAYEE and place the value or benefit of the PARTICIPANT's account in the ALTERNATE
PAYEE's account as requested by the EMPLOYER.
3.04
The ALTERNATE PAYEE is entitled to receive distributions immediately upon the
establishment of his or her account under Section 13.03, and commencement of distributions
must begin no later that April 1 following the year in which the ALTERNATE PAYEE attains
age 70 ~, in accordance with the terms of Section 8.02. Distributions made to an
ALTERNATE PAYEE are reported as taxable income to the ALTERNATE PAYEE. State
taxes, if applicable, and Federal taxes will be withheld from any distribution on the
ALTERNATE PAYEE's account based upon the tax withholding elections of the
ALTERNATE PAYEE. The ALTERNATE PAYEE may not make any contributions to an
account established under Section 13.03. The ALTERNATE PAYEE is permitted to name
beneficiaries to his or her account and exercise exchanges among the funding options as
permitted by the PLAN and the investment providers under the PLAN.
IN WITNESS WHEREOF, the undersigned has executed this Amendment this
,2003.
__day of
City of Tustin
By:
Arlene Marks, Director of Human Resources
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DOMESTIC RELATIONS ORDERS
REQUIRED INFORMATION
This is not intended to be legal or tax advice, and should not be relied upon as such. Instead, this is
in response to your request for information regarding domestic relations orders.
The Internal Revenue Code does not require eligible deferred compensation plans established
pursuant to Code Section 457 to accommodate domestic relations orders. However, some plans
accommodate such orders. Whether a particular plan accommodates such orders is determined by
the plan document.
A domestic relations order is a judgment, decree, or order made pursuant to state domestic relations
law (including community property law), relating to the property dghts of the Alternate Payee. A
certified copy of such a judgment, decree, or order is required. In addition, the domestic relations
order should:
· Be directed to the deferred compensation plan and not directed to the administrator of the plan;
· Create or recognize the existence of the right of an Alternate Payee to all or a portion of the
benefits payable with respect to a Participant under the Plan;
· Clearly specify the names, last known addresses, and social security numbers of the Participant
and Alternate Payee;
· Clearly specify the amount or percentage of the Participant's benefits which are to be segregated
for the Altemate Payee with a specific "as of" date for the segregation;
· If applicable, clearly specify the rate of accrual of interest or earnings on the Alternate Payee's
benefits from the "as of" date to the actual date of segregation. (The administrator will not perform
hypothetical calculations to adjust for market fluctuations);
· Not provide for any actions to be taken by the Plan which are inconsistent with the Plan document;
· Not provide for any form of payment to the Alternate Payee that is not permitted by the Plan; and
· Not require the payment of benefits to an Alternate Payee, which is required by a prior domestic
relations order to be paid to another Alternate Payee.
The following items also should be considered:
· Distributions made to an Alternate Payee are reported as taxable income to the Alternate Payee.
Taxes will be withheld from any distributions to the Alternate Payee's account based upon the tax
withholding elections of the Alternate Payee.
· The Alternate Payee may not make any contributions to the separate account.
· The Altemate Payee is permitted to designate beneficiaries for his or her account and to exercise
exchanges among the funding options as permitted by the Plan and the investment providers
under the plan. The Alternate Payee will receive quarterly statements on his or her account which
will be sent to their address.
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