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HomeMy WebLinkAbout11-139 Resolution No. 11-139 RESOLUTION AUTHORIZING EXECUTION OF A PLAN SPONSOR SIGNATURE PAGE FOR THE NATIONWIDE RETIREMENT SOLUTIONS 2011 RESTATED PLAN DOCUMENT INITIATIVE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS,that Sean R. Stegall, City Manager,be and is hereby authorized and directed to execute a Plan Sponsor Signature Page on behalf of the City of Elgin to Nationwide Retirement Solutions for the 2011 Restated Plan Document Initiative, 457 Governmental Plan & Trust Explanation of Selected Substantive Changes, a copy of which is attached hereto and made a part hereof by reference. s/ David J. Kaptain David J. Kaptain, Mayor Presented: August 10, 2011 Adopted: August 10, 2011 Omnibus Vote: Yeas: 7 Nays: 0 Attest: s/Kimberly Dewis Kimberly Dewis, City Clerk 2011 Restated Plan Document Initiative 457 Governmental Plan &Trust Explanation of Selected Substantive Changes ARTICLE I Definitions Compensation (Section 1.07):Revised compensation definition to address final regulations issued under Section 415 of the Internal Revenue Code(the "I.R.C.").. Additionally, incorporated differential wage payments under the definition,which is consistent with the Heroes Earnings Assistance and Relief Tax Act of 2008 (the"HEART Act"). Distributions to Individuals in the Uniformed Services: Made changes consistent with the HEART Act,which allow distributions to certain individuals during periods of uniformed service. (Section 1.28(c)(3)). ARTICLE III Deferral Contributions/Limitations Deferrals After Severance from Employment,Including Sick,Vacation,and Back Pay Under an Eligible Plan: Revisions incorporated to extend the time period during which deferrals may occur after severance from employment under the final regulations issued under Section 415 of the I.R.C. (Section 3.02(c)). ARTICLE IV Time and Method of Payment Benefits Emergency Tax Relief Distributions: New section added which is designed to serve as a catchall provision allowing distributions from the plan if legislation is enacted following emergency or catastrophic events (e.g.,hurricanes, floods).Administrator can also establish procedures related to these distributions. (Section 4.01). Required Minimum Distributions: A plan provision was added to reflect the 2009 waiver period of RMDs under the Worker,Retiree, and Employer Recovery Act of 2008 ("WRERA"). (Section 4.03(0(1)). Eligible Rollover Distributions by a Non-Spousal Beneficiary: A provision was added to the plan reflecting Section 829 of the Pension Protection Act of 2006("PPA"),which requires plans to permit direct rollovers by non-spousal beneficiaries to inherited IRAs undev certain conditions. (Section 4.07(c)). Eligible Rollover Distributions to a Roth IRA: Language added to reflect the ability of participants to direct rollovers to a Roth IRA under PPA Section 824. (Section 4.07(d)(2)). NRG-0133A0 FOR PLAN SPONSORS ONLY UPDATED:02/22/2011 Page 1 Mandatory Distributions for Small Accounts. A provision has been added to make mandatory distributions of inactive accounts with Iess than$1,000. (Section 4.07(d)(4)). Distribution for Qualified Heath Insurance Premiums: New section added pursuant to PPA Section 845 and IRC 402(1), which allows a distribution of$3,000 per year to"eligible retired public safety officers"to pay for"qualified health insurance premiums"if certain conditions are met. This provision reflects the regulatory requirement that the plan make distributions directly to the qualified health insurance premium coverage provider to qualify. (Section 4.08(a)). ARTICLE V Administrative Services Provider Duties Loans: Loan provisions are incorporated into the plan document,and is no longer a stand alone amendment to the plan. Including this provision does not require plans to offer loans. Plan sponsors wanting to offer loans must complete an administrative procedures document before Nationwide will begin administering loans. This document is available upon request. Plan sponsors who have already completed this step are not required to take any additional action at this time. (Section 5.03). Procedure When Location of Participant or Beneficiary Unknown:New language added to Plan Document providing distribution procedures when the location of a participant or beneficiary is unknown. (Section 5.12(a)(b)). ARTICLE VI Participant Administrative Provisions Automatic Revocation of Spousal Beneficiary Designation: New section,which automatically revokes designations in favor of a former spouse as beneficiary upon a divorce or dissolution of marriage. Many states already have laws which takes this action with former spouses. (Section 6.01). ARTICLE VII Miscellaneous Use of Plan Assets that Are Not Attributable to an Account: New section,which provides that Plan Sponsor shall direct the Administrator how to use money received by the Plan that is not related to an Account Balance. This would include any settlement money,fee reimbursements, and litigation awards received by the Plan. (Section 7.09) Retirement Specialists are Registered Representatives of Nationwide Investment Services Corporation,member FINRA NRG-0133A0 FOR PLAN SPONSORS ONLY UPDATED:02/22/2011 Page 2 Pension Protection Act of 2006 The Act makes permanent the retirement-plan and IRA provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001(EGTRRA),most of which were due to sunset after 2010. Also,the Act makes sweeping changes to the private sector defined benefit system by: • Imposing tougher funding requirements for well-funded and under-funded plans • Limiting future benefit increases for poorly funded plans • Providing benefit accrual safeguards for older participants in cash balance conversions • Legitimizing cash balance and hybrid defined benefit as viable plan designs going forward. HEART-Heroes Earnings Assistance and Relief Tax(HEART)Act of 2008 Provides additional benefits to active duty military personnel and their families • Inclusion of Differential Pay For Retirement Plan Purposes.Differential pay is subject to federal income tax withholding. • Withdrawal of Elective Deferrals and the 10%Early Distribution Tax • Plan Death Benefit Requirements • Increased Benefits • Rollover of Military Death Gratuities Worker,Retiree and Employer Recovery Act of 2008 • Waiver of any required minimum distribution(RMD)for 2009 • Retirement Specialists are Registered Representatives of Nationwide Investment Services Corporation,member FINRA NRG-0134A0 FOR PLAN SPONSORS ONLY 2/16/2011 � Tic'e,-,.:' d ..* -se -,"... , .✓p�f�'r y ,,,,s�r?' �Z r rr" t.: i .2= v a r hx 1,-`:=:44.6,',,;:-4',;-Pr' z ,.S "s$''z*-,,s ,c , :,,.. ,:i•,; ;,,.:4--,4,z y,,,. ` &; xa+� r we. e s `,,0,.,. G} ,, �.-tg ;:-.' t4 - 5r ,A , �.r r i--1 v.`w. df �.x �� � '<:..._ 9,r x fr��`4:xt i .S- ,5u1,�Y;>¢-sr��:. >,: '�,rrr ,�?�� ..<. .r._�,.C.d row' b.� fF�.,,fir t� �,7..`�?4,.> 4 .._.,.- 's- 0.= III Nationwide' Nationwide Retirement Solutions a Nationwide Financial'company Plan Sponsor Signature Page My signature below represents that I have the authority of my Employer to act on behalf of the plan. I acknowledge receipt of a copy of the Certificate of Participation and Disclosure Document (Certificate). I understand that the Certificate replaces prior versions. I have read and understand the Certificate and wi}I contact my Nationwide representative if I have any questions or concerns. In addition, my Employer's plan makes the following selections: 1. Plan Document — My Employer's plan has formally adopted the Plan Document, effective January ],,2011, and directs Nationwide to administer in accordance with its terms. I understand that the Plan Document provides that Nationwide may propose future amendments to this plan and outlines a process by which my Employer may file objections. I acknowledge that any future amendments to this Plan Document, to which my Employer has not objected, will be deemed adopted with my consent and at my direction. I certify that the signature will apply to all plan(s) listed below. If your Employer does not wish to adopt the Plan Document, please check the box below. A Nationwide representative will contact you to obtain additional information regarding the plan document applicable to your Employer's plan. 0 I do NOT wish to adopt the Plan Document. 2. Nationwide ProAccount — My Employer agrees to the terms of the Nationwide ProAccount Plan Sponsor Agreement, and the ProAccount service will continue to be made available to plan participants. if your Employer wishes to terminate the ProAccount service, please check the box' below and contact Nationwide at 877-496-1630 to provide additional instructions regarding the effective date of termination for plan participants currently enrolled in ProAccount. 0 I wish • TERMINATE Pro . count. ,,� , a �� .0.- _..- August 10Z 2011 Name of,rt,srized'signer dr Date Sean R. Stegall, City Manager Printed Horne of signer City of Elgin — 1304 Entity Name Entity;r RETURN THIS PAGE VIA FAX WITH YOUR SIGNATURE TO NATIONWIDE AT 1-877-677-4329. Or, please send this self-addressed signature page via mail, NRM-83C2.aC)(,2,1i) CPORf1IOMYOR F 1' t BEFCOF CITY =:.i UN :IL E LG I N THE CITY IN THE SUBURBS AGENDA ITEM: D MEETING DATE: July 27, 2011 ITEM: New Plan Document for Nationwide Retirement Systems (No Cost to the City) OBJECTIVE: Provide information regarding pro forma amendments to the Nationwide Retirement Systems 457 plan. RECOMMENDATION: It is recommended that the city council authorize the city manager to execute ministerial changes to the plan document for the Nationwide Retirement Systems 457 plan. BACKGROUND (so` In 1979, the city entered into an agreement with Nationwide Retirement Systems, then PEBS- CO, to administer a 457 plan through which employees could save for retirement on a tax- deferred basis. The 457 plan was established by federal law primarily for the benefit of public sector employees. Employees may defer taxation on income by depositing it directly into an account with the plan administrator. The plan administrator then provides options to the em- ployee regarding how to invest funds in the account. Because the plan is regulated by the In- ternal Revenue Service and federal law, plan documents provided by the administrator must be updated periodically to comply with recent changes. OPERATIONAL ANALYSIS As the sponsor of a 457 plan, the city must ensure that plan documents issued by the adminis- trator incorporate recent legislative and regulatory changes. The more significant changes are summarized in Attachment A, 2011 Restated Plan Document Initiative. The legal department has reviewed the proposed plan document and concluded that the proposed changes appear to be beneficial or neutral. The city council is being asked to give the city manager authority to sign the Plan Sponsor Signa- ture page (Attachment B). If the city council chooses not to accept the new plan document, the "° 457 plan will terminate on December 31, 2011. INTERESTED PERSONS CONTACTED None. FINANCIAL ANALYSIS There is no cost to the city to execute the changes to the plan document. BUDGET IMPACT FUND(S) ACCOUNT(S) PROJECT#(S) AMOUNT AMOUNT BUDGETED AVAILABLE N/A N/A N/A N/A N/A LEGAL IMPACT None. ALTERNATIVES If the city council chooses not to accept the new plan document, the 457 plan administered by Nationwide will terminate on December 31, 2011. Employees with current accounts at Nation- wide will be forced to relocate their funds in other retirement plans, or with the city's other plan administrator, ICMA. In addition, employees who desire 457 accounts will be limited to the investment options provided by ICMA. NEXT STEPS Authorize the city manager to sign the Plan Sponsor Signature Page. Originator: Gail Cohen, Human Resources Director Final Review: Colleen Lavery, Chief Financial Officer William A. Cogley, Corporation Counsel/Chief Development Officer Richard G. Kozal, Assistant City Manager/Chief Operating Officer Sean R. Stegall, City Manager ATTACHMENTS A. 2011 Restated Plan Document Initiative B. Plan Sponsor Signature Page )1112 2011 Restated Plan Document Initiative 457 Governmental Plan &Trust Explanation of Selected Substantive Changes ARTICLE I Definitions Compensation (Section 1.07):Revised compensation definition to address final regulations issued under Section 415 of the Internal Revenue Code(the"I.R.C.").. Additionally, incorporated differential wage payments under the definition, which is consistent with the Heroes Earnings Assistance and Relief Tax Act of 2008 (the"HEART Act"). Distributions to Individuals in the Uniformed Services: Made changes consistent with the HEART Act,which allow distributions to certain individuals during periods of uniformed service. (Section 1.28(c)(3)). ARTICLE HI Deferral Contributions/Limitations Deferrals After Severance from Employment,Including Sick,Vacation,and Back Pay Under an Eligible Plan: Revisions incorporated to extend the time period during which deferrals may occur after severance from employment under the final regulations issued under Section 415 of the I.R.C. (Section 3.02(c)). ARTICLE IV Time and Method of Payment Benefits Emergency Tax Relief Distributions: New section added which is designed to serve as a catchall provision allowing distributions from the plan if legislation is enacted following emergency or catastrophic events (e.g.,hurricanes, floods).Administrator can also establish procedures related to these distributions. (Section 4.01). Required Minimum Distributions: A plan provision was added to reflect the 2009 waiver period of RM1Ds under the Worker,Retiree, and Employer Recovery Act of 2008 ("WRERA"). (Section 4.03(0(1)). Eligible Rollover Distributions by a Non-Spousal Beneficiary: A provision was added to the plan reflecting Section 829 of the Pension Protection Act of 2006("PPA"),which requires plans to permit direct rollovers by non-spousal beneficiaries to inherited IRAs under certain conditions. (Section 4.07(c)). Eligible Rollover Distributions to a Roth IRA: Language added to reflect the ability of participants to direct rollovers to a Roth IRA under PPA Section 824. (Section 4.07(d)(2)). NRG-0133A0 FOR PLAN SPONSORS ONLY UPDATED:02/22/2011 Page 1 4111) Mandatory Distributions for Small Accounts. AP rovision has been added to make mandatory distributions of inactive accounts with less than$1,000. (Section 4.07(d)(4)). Distribution for Qualified Heath Insurance Premiums: New section added pursuant to PPA Section 845 and IRC 402(1),which allows a distribution of$3,000 per year to"eligible retired public safety officers"to pay for"qualified health insurance premiums" if certain conditions are met. This provision reflects the regulatory requirement that the plan make distributions directly to the qualified health insurance premium coverage provider to qualify. (Section 4.08(a)). ARTICLE V Administrative Services Provider Duties Loans: Loan provisions are incorporated into the plan document,and is no longer a stand alone amendment to the plan. Including this provision does not require plans to offer loans. Plan sponsors wanting to offer loans must complete an administrative procedures document before Nationwide will begin administering loans. This document is available upon request. Plan sponsors who have already completed this step are not required to take any additional action at this time. (Section 5.03). Procedure When Location of Participant or Beneficiary Unknown:New language added to Plan Document providing distribution procedures when the location of a participant or beneficiary is unknown. (Section 5.12(a)(b)). 4411) ARTICLE VI Participant Administrative Provisions Automatic Revocation of Spousal Beneficiary Designation: New section, which automatically revokes designations in favor of a former spouse as beneficiary upon a divorce or dissolution of marriage. Many states already have laws which takes this action with former spouses. (Section 6.01). ARTICLE VII Miscellaneous Use of Plan Assets that Are Not Attributable to an Account: New section,which provides that Plan Sponsor shall direct the Administrator how to use money received by the Plan that is not related to an Account Balance. This would include any settlement money, fee reimbursements, and litigation awards received by the Plan. (Section 7.09) Retirement Specialists are Registered Representatives of Nationwide Investment Services Corporation,member FINRA NRG-0133A0 FOR PLAN SPONSORS ONLY #11) UPDATED:02/22/2011 Page 2 Pension Protection Act of 2006 The Act makes permanent the retirement-plan and IRA provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001(EGTRRA), most of which were due to sunset after 2010. Also,the Act makes sweeping changes to the private sector defined benefit system by: • Imposing tougher funding requirements for well-funded and under-funded plans • Limiting future benefit increases for poorly funded plans • Providing benefit accrual safeguards for older participants in cash balance conversions • Legitimizing cash balance and hybrid defined benefit as viable plan designs going forward. HEART-Heroes Earnings Assistance and Relief Tax(HEART)Act of 2008 Provides additional benefits to active duty military personnel and their families • Inclusion of Differential Pay For Retirement Plan Purposes. Differential pay is subject to federal income tax withholding. • Withdrawal of Elective Deferrals and the 10%Early Distribution Tax • Plan Death Benefit Requirements • Increased Benefits • Rollover of Military Death Gratuities Worker,Retiree and Employer Recovery Act of 2008 • Waiver of any required minimum distribution (RMD)for 2009 • Retirement Specialists are Registered Representatives of Nationwide Investment Services Corporation, member FINRA NRG-0134A0 FOR PLAN SPONSORS ONLY 2/16/2011 • +x r��'fi,�� �-���... y., ���� •'-�s-5..t � � ..i i-•. _ rte`f -�• r mac.`�'%� -i''`c,�� ..5,��"'-an�wV1 ' II Nationwide® NatianYwg Retirement Solutions a Nationwide Financial°company Plan Sponsor Signature Page My signature below represents that I have the authority of my Employer to act on behalf of the plan. I acknowledge receipt of a copy of the Certificate of Participation and Disclosure Document (Certificate). I understand that the Certificate replaces prior versions. I have read and understand the Certificate and will contact my Nationwide representative if I have any questions or concerns. In addition, my Employer's plan makes the following selections: 1. Plan Document — My Employer's plan has formally adopted the Plan Document, effective January 1.,2011, and directs Nationwide to administer in accordance with its terms. I understand that the Plan Document provides that Nationwide may propose future amendments to this plan and outlines a process by which my Employer may file objections. I acknowledge that any future amendments to this Plan Document,to which my Employer has not objected, will be deemed adopted with my consent and at my direction. I certify that the signature will apply to all plan(s) listed below. If your Employer does not wish to adopt the Plan Document, please check the box below. A Nationwide representative will contact you to obtain additional information regarding the plan document applicable to your Employer's plan. ❑ I do NOT wish to adopt the Plan Document, 2. Nationwide ProAccount — My Employer agrees to the terms of the Nationwide ProAccount Plan Sponsor Agreement, and the ProAccount service will continue to be made available to plan participants. If your Employer wishes to terminate the ProAccount service, please check the box below and contact Nationwide at 877-496-1630 to provide additional instructions regarding the effective date of termination for plan participants currently enrolled in ProAccount. ❑ I wish to TERMINATE ProAccount. NNlrlc-:of J`r, rL'ed signer fare ?rimed:.',mo'. :I,-jr,, --------------------------- Cnnt'; tLUty RETURN THIS PAGE VIA FAX WITH YOUR SIGNATURE TO NATIONWIDE AT 1-877-677-4329. Or, please send this self-addressed signature page via mail. iYr':"-8302�•O�..2:'i I