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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 01/15/2008 - RESOLUTION 2008-007 ADOPTING THE SIXTH AMENDMENT T ITEM NUMBER: 23 AGENDA ITEM SUMMARY DATE: January 15, 2008 FORT COLLINS CITY COUNCIL STAFF: Chuck Seest SUBJECT Resolution 2008-007 Adopting the Sixth Amendment to the City for Fort Collins General Employees' Retirement Plan as Amended and Restated December 31, 2001. RECOMMENDATION Staff and the General Employees' Retirement Committee recommend adoption of the Resolution. EXECUTIVE SUMMARY The City of Fort Collins General Employees'Retirement Plan(the Plan)provides retirement benefits for approximately 143 retirees and beneficiaries and covers approximately 2 74 active employees and approximately 124 vested former employees as of the last valuation report. Recent changes in federal legislation and Internal Revenue Service regulations have required changes to the Plan. Also,clarification changes have been recommended. Outside legal counsel and the City Attorney's Office have prepared changes to the plan to comply with these changes. None of the changes will result in an increased cost to the City or the Plan. BACKGROUND Summary of Changes: • Section 1: Minor wording changes to clarify when required distributions must occur based on IRS regulations. • Section 2: Changes minimum lump sum distribution from S5,000 to $1,000 in accordance with federal legislation and IRS regulations. • Section 3: Minor wording changes on distributions to comply with IRS Code Section 401(a)(9). • Section 4: Changes minimum lump sum distribution from $5,000 to $1,000 in accordance with federal legislation and IRS regulations. January 15, 2008 -2- Item No. 23 • Section 5: Minor wording changes to clarify definition of"Distributee" and to expand definition to include beneficiaries other than the Member's spouse pursuant to federal law. • Section 6: Expands definition of`Eligible Retirement Plan"to include Roth IRS so that distributions may be made directly to those plans per federal law. • Section 7: Adds the defined benefit dollar limitation as required by federal law. And adds clarifying language on when payments must begin. RESOLUTION 2008-007 OF THE COUNCIL OF THE CITY OF FORT COLLINS ADOPTING THE SIXTH AMENDMENT TO THE CITY OF FORT COLLINS GENERAL EMPLOYEES ' RETIREMENT PLAN AS AMENDED AND RESTATED DECEMBER 31 , 2001 WHEREAS , the City of Fort Collins adopted, effective January 1 , 1971 , a qualified defined benefit pension plan known as the City of Fort Collins Employees ' Retirement Plan (the "Plan"), for the purpose of providing retirement benefits for certain of its employees; and WHEREAS , the City of Fort Collins has amended the Plan from time to time and restated the Plan to incorporate all prior amendments and other changes required by law effective December 31 , 2001 ; and WHEREAS , the City Council adopted the first amendment to the 2001 Restated Plan effective January 1 , 2002, via the adoption of Section 2 of Resolution 2001 - 157, the second amendment to the 2001 Restated Plan effective January 1 , 2002, via the adoption of Resolution 2002- 103 , the third amendment to the 2001 Restated Plan effective July 1 , 2003 , via the adoption of Resolution 2003 -078 , the fourth amendment to the 2001 Restated Plan effective April 10, 2006, via the adoption of Resolution 2006-029 , and the fifth amendment to the 2001 Restated Plan effective March 20, 2007, via the adoption of Resolution 2007-029 ; and WHEREAS , the Retirement Committee ("the Committee") has recommended to City Council a sixth amendment to the 2001 Restated Plan to incorporate technical tax law changes from the federal Pension Protection Act of 2006, as well as other changes required by applicable laws and regulations ; and WHEREAS , the City Council wishes to adopt the recommendation of the Committee; and WHEREAS , Article XV, Modification or Termination of Plan, Section 2 of the 2001 Restated Plan, authorizes the City Council to amend the terms of the 2001 Restated Plan. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows : Section 1 . That effective January 1 , 2008 , Section 3 of Article VII of the City of Fort Collins General Employees ' Retirement Plan is amended to read as follows : Section 3 . Delayed Retirement. A Member may continue in the employment of the City after their Normal Retirement Date . If the retirement of a Member is delayed under this Section, their "Delayed Retirement Date" shall be the first of the month coincident with or following the Member's retirement. Notwithstanding the foregoing paragraph, after a Member reaches his or her Required Beginning Date, required minimum distributions may choose to hwve their life expectancy, which is used in defermining the amounf of such distributions, calculated using the proposed jann 200 fmust be made to the Member in accordance with IRS Code Section 401 (a)(9) regulations , notwithstanding any provision of the Plan to the contrary, as may bV2� as further set forth in Section 1 of Article X of the Plan. Section 2 . That effective March 28 , 2005 , Section 4 of Article VIII of the City of Fort Collins General Employees' Retirement Plan is amended to read as follows : Section 4. Payment of Benefits. The basic monthly Retirement Benefit, computed as set forth above, shall be paid in equal monthly payments commencing on the last day of the month of their Retirement Date, and continuing at monthly intervals for the Retired Member's lifetime thereafter. If a Retired Member or Beneficiary should die during a monthly interval, a partial monthly payment shall be paid. Notwithstanding the above, if the value of a terminated Member's vested Accrued Benefit derived does not exceed $5,000, 1 ,000, the entire vested benefit shall be paid to such Member in a single lump sum, regardless of when the Member terminated Covered Employment. Section 3 . That effective January 1 , 2008 , Section 1 of Article X of the City of Fort Collins General Employees ' Retirement Plan is amended to read as follows : Section 1 . General. Subject to such uniform rules and regulations as the Retirement Committee may prescribe and the spousal consent as required in this Article X, Section 6, a Member or Vested Member may, in lieu of the basic Retirement Benefits provided in Article VIII, elect one of the following forms of Retirement Benefits which shall be the Actuarial Equivalent of the benefit to which they would otherwise be entitled. The Member or Vested Member must make any election of an optional form of benefit in writing, and such election must be filed with the Retirement Committee at least 30 days prior to the due date of the first payment of their Retirement Benefits under this Plan. The election of an optional form of benefit may be changed at any time prior to 30 days preceding the due date of the first payment of Retirement Benefits under the Plan. However, Notwithstanding any provision of this Plan to the contrary, any payment under the Plan pursuant to an optional form of benefit payments shall be made in complianeeaccordance with IRS Code Section 401 (a)(9) and the regulations established thereunder, as they are amended, including the following rules : a. To the extent required by IRS Code Section 401 (a)(9) and the regulations promulgated thereunder, payment of the benefits of a Member shall begin not later than the Required Beginning Date. -2- b . No payment option maybe selected by a Member unless the amounts payable to the Member are expected to be at least equal to the minimum distribution required under IRS Code Section 401 (a)(9) . c . The amounts payable must satisfy the minimum distribution incidental benefit requirements of IRS Code Section 40 1 (a)(9)(G) . d. Distributions in the event of a Member's death are subject to the minimum distribution rules of IRS Code Section 401 (a)(9) and the regulations thereunder. Section 4 . That effective March 28 , 2005 , Section 3 of Article XII of the City of Fort Collins General Employees' Retirement Plan is amended to read as follows : Section 3. Single Lump Sum Benefit. Following termination of employment with the City of Fort Collins and in lieu of receiving a monthly Retirement Benefit upon their Normal or Early Retirement Date, a Vested Member has the option of receiving a single lump sum benefit equal to the Actuarial Equivalent of the Member' s deferred Retirement Benefit as defined by Article II, Section 2, Subsections b(2)(b) and b(3 ) of this Plan. To receive this lump sum benefit, the Vested Member must make a written request for this benefit at or after the time of termination of employment but not less than 30 days prior to the due date of the first payment of the Normal or Early Retirement Benefit. If so requested, this lump sum benefit shall be paid within 90 days of the receipt of the written request. If the value of a terminated Vested Member's derived Accrued Benefit does not exceed $5906t1 ,000, the entire vested benefit shall be paid to such Member in a single lump sum, regardless of when the Member terminated employment with the City of Fort Collins . If the deferred Retirement Benefit to which a Vested Member will be entitled at their Normal Retirement Date is less than $ 100. 00 per month, the Vested Member shall not have the election set forth in the previous paragraph and they shall be paid, within 90 days of termination of employment with the City of Fort Collins, a single- sum equal to the Actuarial Equivalent of such deferred Retirement Benefit, in lieu of all other benefits due to such Vested Member under this Plan. For Vested Members who commenced Covered Employment prior to June 1 , 1998 , said Actuarial Equivalent specified in this paragraph shall be as defined by Article II, Section 2 , Subsections b(2)(a) and b(3) of this Plan. For Vested Members who commenced Covered Employment on or after June 1 , 1998 , said Actuarial Equivalent specified in this paragraph shall be as defined by Article II, Section 2, Subsections b(2)(b) and b(3 ) of this Plan. Section 5 . That effective January 1 , 2008, Section 2 .b . of Article XIII of the City of Fort Collins General Employees' Retirement Plan is amended to read as follows : -3 - b. "Distributee" means an Employee or former Employeea Member or Retired Member. In addition the Employeea Member' s or former EmployeeRetired Member' s surviving spouse and the EmployeeMember ' s or former EmployeeRetired Member' s spouse or former spouse who is the alternate payee under a ,Qualified Domestic Tn s Relations Order as defined inaeArtic e II, Section 2 .v, are Distributees with regard to the interest of the spouse or former spouse. Further, a Member' s or Retired Member' s Beneficiary that is a person other than a spouse or former spouse is a Distributee with respect to the Beneficiary ' s interest in the Plan. Section 6 . That effective January 1 , 2008 , Section 2 .c . of Article XIII of the City of Fort Collins General Employees' Retirement Plan is amended to read as follows : c. "Eligible Retirement Plan" means an individual retirement account described in IRS Code Section 408(a), an individual retirement annuity described in IRS Code Section 408 (b), a Roth IRA described in IRS Code Section 408A (subject to applicable income tax requirements) , an annuity described in IRS Code Section 403 (a), an annuity described in IRS Code Section 403 (b), an eligible plan under IRS Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan, or a qualified trust described in IRS Code Section 401 (a), that accepts the Distributee's Eligible Rollover Distribution. The definition of Eligible Retirement Plan shall also apply to the case of a distribution to a surviving spouse of a Member or Retired Member, or to a spouse or former spouse of a Member or Retired Member who is the alternate payee under a Qualified Domestic Relations Order as defined in Article 11, Section 2 .v. In the case of a distribution to a Beneficiary other than a spouse or former spouse of a Member or Retired Member, an Eligible Retirement Plan shall only be an individual retirement account described in IRS Code Section 408(a) or an individual retirement annuity described in IRS Code Section 408(b) that is treated as an inherited IRA in accordance with the provisions of IRS Code Section 402(c)( 11 ) . Section 7 . That effective January 1 , 2008 , Section I of Article XVI of the City of Fort Collins General Employees ' Retirement Plan is amended to read as follows : Section 1 . Limitation of Benefits. Notwithstanding any other provision contained herein to the contrary, the benefits payable to an Employeea Member from this Plan provided by City contributions shall be subject to the limitations of IRS Code Section 415 in accordance with (+)a. and (2)b . below: a, Defined Benefit Plan Only. a. Any annual Pension payable to an Employcea Member hereunder shall not exceed- -4- $ 9010 > adjusted for increases in the cost-of--fiving, prescribed by the Secretary of the Treasury or their delegate, or occasione by legislation effective jantiary f of each calendar year, > if greater, amount of straight life or qualificd j oint and slarvivor antmity accrued by the with respect to any Nictither whosc annual Pension under this Plart is less that plan maintained by the eity. in the event that a Member has been credited with less than ten years of participation service, the maxinitim annual Pension allowable unde participation service and the denominator of which is ten. the "defined benefit dollar limitation" under IRS Code Section 415 (b) , which is $ 160,000, as adjusted under IRS Code Section 415 (d) in such manner as the Treasury Secretary shall prescribe, and payable in the form of a straight life annuity. The maximum annual Pension shall be adjusted when required, as provided in paragraph 1 . below, and if applicable, 2 . or 3 . below. The preceding sentence shall, to the extent required by the Secretary of the Treastiry, be applied separately to each change in benefit accrual rate heretnider. ft the event that a McHbcr has bccrt crcditcd with less 1 . Fewer Than Ten ( 10) Years of Participation. If the Member has fewer than ten ( 10) years of participation service, the dollar amoun officrwise applicaHe mider thc first sciitctice of this paragraph shall bc in the Plan, the defined benefit dollar limitation shall be multiplied by a fraction, the numerator of which is the number of snch ' years of participation service (or part thereof) , but never less tip-f1, of participation in the Plan and the denominator of which is ten ( 10) . The limitations of this Section apply to a straight life antittity wit! before age 62 , the foregoing limitations shall be redticed so that they are7kettiariall Equivalent to stich a benefit commencing at age 6-2 . However, the reduction of tilis > > payment commences before age 55 . if payment commences after age 65 , the limitation shall be theActtiarial Equivalent of a S90,000 annual benefit cot at age 65 . The intcrcst assumption for purposes of detcniming Actuarial Equivalency undcr this paragraph shall be the intcrcst rate othcrwise ttscd fo purposes of computing optional forms of income payable tinder the Plan� but the rate - 5 - shall not be less than 5 %b antmally if benefits commence before age 6-2 and shall not, exeeed 5 % antmally if benefits commence after age 65 . 2 . Payment Beginning before Age 62 . If payment to a Member commences before the Member attains age sixty-two (62), the defined benefit dollar limitation applicable to the Member at such earlier age is an annual benefit payable in the form of a straight life annuity beginning at the earlier age that is the Actuarial Equivalent of the defined benefit dollar limitation applicable to the Member at age sixty-two (62) (adjusted under paragraph 1 . above, if required) . The defined benefit dollar limitation applicable at an age before age sixty-two (62) is determined as the lesser of (i) the Actuarial Equivalent (at such age) of the defined benefit dollar limitation computed using the interest rate and mortality table specified in Section b . of Article II of the Plan, and (ii) the Actuarial Equivalent (at such age) of the defined benefit dollar limitation computed using a 5 % interest rate and the mortality table specified in Section b . (3 ) of Article 11 of the Plan. 3 . Payment Beginning After Age 65 . If payment to a Member commences after the Member attains age sixty-five (65), the defined benefit dollar limitation applicable to the Member at the later age is the annual benefit payable in the form of a straight life annuity beginning at the later age that is the Actuarial Equivalent of the defined benefit dollar limitation applicable to the Member at age sixty-five (65 ) (adjusted under paragraph 1 . above, if required) . The Actuarial Equivalent of the defined benefit dollar limitation applicable at an age after age sixty-five (65) is determined as the lesser of (i) the Actuarial Equivalent (at such age) of the defined benefit dollar limitation computed using the interest rate and mortality table specified in Section b . of Article II of the Plan, and (ii) the Actuarial Equivalent (at such age) of the defined benefit dollar limitation computed using a 5 % interest rate and the mortality table specified in Section b . (3) of Article II of the Plan. In no event shall a Member ' s maximum annual Pension allowable under this Section be less than the annual amount of Pension (including Early Retirement Benefits and qualified joint survivor annuity amounts) duly accrued by such Member under IRS Code Section 415 limitations then in effect as of December 31 , 1982 (disregarding any plan changes or cost-of-living adjustments occurring after July 1 , 1982, as to the 1982 accrued amount) . ( f ) fn applying the limits of this Article Xlv'f, Section -2 , the benefits an contributions to all other Retirement Plans sponsored by the Employer shall be take! - 6 - b . Aggregation of Employer Plans . In applying the limits of this Article XVI, Section 1 , all defined benefit plans sponsored by the Employer are treated as a single plan. Benefits payable under any other plan with respect to a Member shall be reduced to the extent possible before any reduction will be made in such Member' s benefits under this Plan, if necessary to observe these limits . ff, for Hinitation Years bcgimfing before -2000 , a Member also participates ill 011%, 01 More defined contribution plans maintained by the eity, then for sue limitation year, the stim of the defined benefit plan fraetion and defined eontributio plan fraetion (as described below) for such fitnitation year shall not exceed one . fl=a Defined Benefit ftaction for any finfitation year shall mean a ftaction (a) the rmmerator of which is the projected annual benefit of the Member under the Pla (determined as of the elose of the fitnitation year) , and (b) the denominator of whic year of determination (taking into account the effeet of Seetion -235 (g)(4) of the Tax- any fimitation year shaff nican a ftaction (a) the tinnicrator of which is the Sum of the accounts under all defined eontribution plans maintained by the eity as of the elos�- of the fitnitation year (subjeet to reduetion to the extent permitted under the transitio rule in Seetion -235 (g)(3 ) of the Tax Equity and Fiscal Responsibility Aet of f 98-2), and (b) the denominator of which is the smn of thc fcsser of 1 -250/-a of the dollar under fRs eode Section 415 (e)( f )(B) for sueh fitnitation year and for all prior limitation years during whieh the Employee was employed by tfie eity (provided, using (for limitation years ending prior to jarmary f , 1983 ) , an amotint equal to the denominator in effeet for the fitnitation year ending in 1982 , multiplied by the ffi, for limitation years beginning before -2000, the stim of the defined benefi plan ftaetion and the defined eontribution plan ftaction for a Nf ember would exeee one without adjustment of the aniount of flie maximuni annual Pension tilat can be paid to stich McnTher under paragraph ( 1 ) of this Secfion5 then thc amomit of tile maxitymm annual Pension that can be paid to such Member under paragraph ( f ) o this Sectiom shall be redueed to the extent neeessary to reduce the sum of fille defined benefit plan ftaetion for stich Member to one, or the eommittee may take such othe For purposes of this Seetion, the limitation year shall be the ealendar year. Section 8 . That all other terms and provisions of the Plan, as amended, shall remain unchanged and in full force and effect. - 7 - Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 15th day of January A.D . 2008 . Mayor ATTEST : City Clerk -8-