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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 02/05/2013 - RESOLUTION 2013-005 ADOPTING THE SECOND AMENDMENTDATE: February 5, 2013 STAFF: John Voss AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 24 SUBJECT Resolution 2013-005 Adopting the Second Amendment to the City of Fort Collins General Employees' Retirement Plan as Amended and Restated Effective January 1, 2012, to Incorporate Technical Changes Related to Military Service of Plan Members. EXECUTIVE SUMMARY This Resolution will amend the current General Employees’ Retirement Plan to include the Heroes Earnings Assistance and Relief Tax Act of 2008, as amended (Heart Act). This provision clarifies the qualified military service Plan member’s compensation, vesting accruals, and beneficiary death benefit. BACKGROUND / DISCUSSION The Heart Act provision adds a new tax qualification requirement for retirement plans that are qualified under section 401(a) of the IRS tax code. This provision clarifies the qualified military service Plan member’s compensation, vesting accruals, and beneficiary death benefit. The current Plan definition for “Qualified Military Service” needs to be updated to include the Heart Act. Inclusion of this provision is an IRS requirement in order for the Plan to continue to be qualified under IRS regulations for retirement plans. FINANCIAL / ECONOMIC IMPACTS The Plan’s actuary (Milliman) has stated that the proposed technical changes will have no effect upon the funding needs of the Plan. STAFF RECOMMENDATION Staff recommends adoption of the Resolution. BOARD / COMMISSION RECOMMENDATION At its January 10, 2013 meeting, the General Employees’ Retirement Committee recommended adoption of the amendment. ATTACHMENTS 1. General Employees’ Retirement Committee minutes, January 10, 2013 GENERAL EMPLOYEES’ RETIREMENT COMMITTEE MINUTES JANUARY 10, 2013 Approval of the 2012 Annual Report Angelina Sanchez-Sprague asked if there were any further changes to the 2012 Annual Report. No amendments being offered, Jim Lathrop moved to approve the 2012 Annual Report. Rodney Albers seconded the motion, and the Report was approved unanimously. Lacomis/Temple request for plan amendment (regarding qualified military members and the HEART act) Assistant City Attorney Greg Tempel stated that the Plan needed to be amended to comply with the federal HEART act. He has drafted a resolution to the plan for City Council consideration that will make the plan IRS compliant. In the opinion of outside council Dan Lacomis, the proposed changes will have no impact on the funding needs of the Plan. Joel Stewart agreed with Lacomis’ assessment. Janie Appleton asserted that no current members will be affected by the changes. Greg Tempel stated that after the committee recommends making the necessary changes, the Finance Department will present the Resolution to City Council for consideration. Jim Lathrop moved to recommend approval of the Resolution to City Council. Dee Toplyn seconded the motion. Motion passed unanimously. 120 Certain & Life Benefit Plan Interpretation Greg Tempel presented an issue that has come up with interpreting the Plan. One plan member who chose a 120 Certain Plan, a plan that guarantees 120 months of benefit payments, died, leaving the remaining benefits to a beneficiary. The said beneficiary died with approximately two years of benefits left to be paid. Though the plan offers some provisions in the case of the member’s death, none of the provisions are clearly applicable to this situation. Greg suggested that the Committee ask Lacomis the following two questions:  Are the monthly benefits still payable?  If so, to whom are they payable? The Committee discussed different options for amending the Plan to avoid future issues. Janie noted that, while the current Plan only asks for one beneficiary, it could ask for a list of beneficiaries. Greg stated that the Committee will have several options once it receives Lacomis’ opinion, including the possibility of an interpleader action with the court if it remains unclear who is to be paid and the possible payees do not agree. Involving the court ATTACHMENT 1 RESOLUTION 2013-005 OF THE COUNCIL OF THE CITY OF FORT COLLINS ADOPTING THE SECOND AMENDMENT TO THE CITY OF FORT COLLINS GENERAL EMPLOYEES' RETIREMENT PLAN AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2012, TO INCORPORATE TECHNICAL CHANGES RELATED TO MILITARY SERVICE OF PLAN MEMBERS WHEREAS, the City 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 has amended the Plan from time to time and restated the Plan to incorporate all prior amendments and other changes required by law, effective January 1, 2012; and WHEREAS, the Retirement Committee ("the Committee") has recommended to City Council a Second Amendment to the 2012 Restated Plan to incorporate provisions of the federal Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act), effective as of the dates set forth herein; and WHEREAS, the City Council wishes to adopt the recommendation of the Committee; and WHEREAS, Article XIV, Section 2 of the 2012 Restated Plan, authorizes the City Council to amend the terms of the 2012 Restated Plan. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS, COLORADO, as follows: Section 1. That Paragraph g. of Section 2 of Article II of the City of Fort Collins General Employees' Retirement Plan is hereby amended to read as follows: g. "Compensation" means the total cash remuneration paid to an Employee for a calendar year by the City for personal services including performance pay as reported on the Employee’s income tax withholding statement or statements (Form W-2, or its subsequent equivalent), excluding bonuses, compensatory time recorded as additional hours, overtime pay, lump-sum payments for accrued vacation time, worker’s compensation, taxable fringe benefits including life insurance in excess of $50,000 and any contribution by the City under this or any other qualified Plan, but including any pre-tax Employee contributions to qualified retirement plans of the City and any amounts contributed by the City pursuant to a salary reduction agreement which were excludable from the Employee's gross income under Code Section 125, Code Section 132(f)(4), Code Section 402(a)(8), Code Section 403(b), Code Section 402(h), or Code Section 457. However, for Plan Years beginning before January 1, 1998, such amounts contributed by the City pursuant to a salary reduction agreement which were excludable from the Employee's gross income shall not be included in Compensation for the purpose of applying the limitations on allocations and benefits under Code Section 415. Solely for the purpose of applying the limitations on allocations and benefits under Code Section 415, for Plan Years beginning on or after January 1, 2009, any “differential wage payments” made by the Employer to an Employee, as defined in Code Section 3401(h)(2), shall be included in the Employee’s Compensation. The amount of Compensation for purposes of the Plan during any Plan Year shall not exceed $200,000, subject to the cost-of-living adjustments in accordance with IRS Code Section 415(d), as amended and then in effect. Section 2. That Paragraph x of Section 2 of Article II of the City of Fort Collins General Employees' Retirement Plan is amended to read as follows: x. "Qualified Military Service" isshall have the meaning set forth in IRS Code Section 414(u), as amended. nNotwithstanding any provision to the contrary, contributions, benefits and vesting service credit with respect to Qualified Military Service will be provided in accordance with the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended (USERRA), the Heroes Earnings Assistance and Relief Tax Act of 2008, as amended (HEART Act), and IRS Code Section 414(u) for with respect to Members who return to Covered Employment from who perform Qualified Military Service on or after December 12, 1994. Military service will be counted for purposes of contributions, benefits and vesting service credit, provided all of the following conditions are satisfied: (1) A Member must have reemployment rights under USERRA in order for periods of Qualified Military Service to be recognized. (2) A Member must have worked at least one thousand (1,000) hours in Covered Employment before entering Qualified Military Service. (3) A Member must have earned at least forty (40) Hours of Service in the three (3) months prior to the first day of Qualified Military Service. No more than five (5) years of Qualified Military Service may be recognized for any purpose, except as required by law. Section 3. That a new Section 5 be added to Article XI of the City of Fort Collins General Employees' Retirement Plan, to read as follows: Section 5. Death During Qualified Military Service. If a Member’s death occurs on or after January 1, 2007 while the Member is performing Qualified Military Service, the Member's Beneficiary is entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under the Plan as if the Member had resumed employment and then terminated employment -2- on account of death. Moreover, the Plan will credit the Member's Qualified Military Service as service for vesting purposes, as though the Member had resumed employment under USERRA immediately prior to the Member's death. Section 4. All other terms and provisions of the Plan shall remain unchanged and in full force and effect. Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 5th day of February A.D. 2013. Mayor ATTEST: City Clerk -3-