CC 2018-04-10_09b Amended and Restated 457 Plan
MEMORANDUM
TO: CITY COUNCIL
FROM: DEBBIE MALICOAT, DIRECTOR OF ADMINISTRATIVE SERVICES
BY: LISA CHRISTENSEN, HUMAN RESOURCES MANAGER
SUBJECT: CONSIDERATION OF A RESOLUTION ADOPTING THE AMENDED
AND RESTATED 457 DEFERRED COMPENSATION PLAN AND
TRUST DOCUMENT AND INCLUDING OPTIONAL PROVISIONS
DATE: APRIL 10, 2018
SUMMARY OF ACTION:
Adopting the Amended and Restated 457 Deferred Compensation Plan and Trust
Document and the Optional Provision for Roth Contributions will allow part-time
employees to participate in the Plan and will expand retirement savings options
provided to employees.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
There is no financial impact to the City; all costs are paid by Plan participants. No or
minimal future staff time is projected.
RECOMMENDATION:
It is recommended the City Council: Adopt a Resolution adopting the Amended and
Restated 457 Deferred Compensation Plan and Trust Document, adding the Optional
Provision for Roth Contributions and allowing part-time employees to participate in the
Plan.
BACKGROUND:
The City established a deferred compensation plan to be administered by the ICMA
Retirement Corporation in 1986, which is governed by tax code section 457; therefore
these plans are often referred to as “457 plans”. Over the years there have been
updates due to changes in law and favorable private letter rulings from the Internal
Revenue Service (IRS). In 2011, Roth Contributions were made available to 457 plans
and, in 2017 ICMA’s model 457 Deferred Compensation Plan & Trust document
received another favorable private letter ruling from the IRS.
Item 9.b. - Page 1
CITY COUNCIL
CONSIDERATION OF A RESOLUTION ADOPTING THE AMENDED AND RESTATED
457 DEFERRED COMPENSATION PLAN AND TRUST DOCUMENT AND INCLUDING
OPTIONAL PROVISIONS
APRIL 10, 2018
PAGE 2
ANALYSIS OF ISSUES:
Usually the Plan revisions are automatically adopted as they do not materially change
the administration of the Plan or any optional provisions previously elected. Staff is
bringing this revision to Council for approval to add the optional provision for Roth
Contributions and to allow part-time employees to participate in the plan. Adding the
Roth Contribution provision will allow employees to save for retirement using after-tax
earnings, which earn tax-free interest. Contributing to Roth-style accounts has been
available in the marketplace for a number of years; however the City’s Plan documents
must be amended in order to allow employees to have access to this mechanism.
Allowing part-time employees to participate in the 457 Plan provides an optional
retirement savings mechanism to these employees. Both provisions enhance the
current employee benefit without a cost to the City, as all costs are paid by Plan
participants.
ALTERNATIVES:
The following alternatives are provided for the Council’s consideration:
1. Approve staff’s recommendation by adopting the Resolution;
2. Do not approve staff’s recommendations; or
3. Provide direction to staff.
ADVANTAGES:
The Amended and Restated 457 Deferred Compensation Plan and Trust ensures the
City is operating with a plan with the most up to date provisions. Including a Roth
Option and allowing part-time employees access to the 457 Plan provides employees
with another benefit option for retirement savings.
DISADVANTAGES:
There are no disadvantages to adopting the Amended and Restated Plan and Trust
Document.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
Item 9.b. - Page 2
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
ARROYO GRANDE TO ADOPT THE AMENDED AND
RESTATED 457 DEFERRED COMPENSATION PLAN AND
TRUST DOCUMENT AND INCLUDING OPTIONAL
PROVISIONS
WHEREAS, the City of Arroyo Grande has employees rendering valuable services; and
WHEREAS, the City has established a deferred compensation plan for such employees that
serves the interest of the City by enabling it to provide reasonable retirement security for its
employees, by providing increased flexibility in its personnel management system, and by
assisting in the attraction and retention of competent personnel; and
WHEREAS, the City has determined that the continuance of the deferred compensation
plan will serve this objectives; and
WHEREAS, amendments to the Internal Revenue Code have been enacted that require
changes to the structure of and allow enhancements of the benefits of the deferred
compensation plan; and
WHEREAS, the City desires to enhance the Plan by adopting the optional Roth Contribution
Provision as reflected in Article X of Exhibit A, attached herein, and allowing part time
employees to participate in the Plan.
NOW, THEREFORE BE IT RESOLVED that the City Council of the City of Arroyo Grande
does hereby amend and restate the ICMA Retirement Corporation Deferred Compensation
Plan and Trust as reflected in Exhibit A, attached herein.
BE IT FURTHER RESOLVED that the assets of the ICMA Plan shall be held in trust, with
the City serving as trustee (“Trustee”), for the exclusive benefit of the Plan participants and
their beneficiaries, and the assets shall not be diverted to any other purpose. The Trustee’s
beneficial ownership of the Plan assets held in VantageTrust shall be held for the further
exclusive benefit of the Plan participants and their beneficiaries.
BE IT FURTHER RESOLVED that the Plan will not permit loans.
BE IT FURTHER RESOLVED that the City hereby agrees to serve as Trustee under the
Plan.
On motion of Council Member , seconded by Council Member
, and on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 10th day of April, 2018.
Item 9.b. - Page 3
RESOLUTION NO.
PAGE 2
JIM HILL, MAYOR
ATTEST:
KELLY WETMORE, CITY CLERK
APPROVED AS TO CONTENT:
JAMES A. BERGMAN, CITY MANAGER
APPROVED AS TO FORM:
HEATHER K. WHITHAM, CITY ATTORNEY
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EXHIBIT A
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