HomeMy WebLinkAboutResolution 6338 - Approves Participation in Public Agency Re CITY OF HUNTINGTON BEACH R E CE1
INTERDEPARTMENTAL COMMUNIC gTIO 3 APR -6 PM 3: 30
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CONE'IDEN-MA,L LAWITR-CLIENT COMMUNICATION CITY C L SH K
CITY 0'
IjuNTINGTON HACP
TO: JOAN FLYNN, City Clerk
FROM: SCOTT FIELD, Assistant City Attorney
DATE: April 6, 2015
SUBJECT: PARS Retirement System
In 1991, the Cite adopted the PARS Retirement System as an alternative retirement plan to
Social Security for recurrent, hourly and temporary employees. The City Council approved the
Plan pursuant to Resolution No. 6338, and authorized the Deputy City Administrator to sign the
Plan. The Plan has been amended periodically since then, and on April 2, 2015, Assistant City
Manager Ken Domer signed the latest version of the Plan. I am enclosing a signed original for
your records.
c: Michele Warren
Enclosure: The City of Huntington Beach Public Agency Retirement System Alternate
Retirement System (PARS-ARS) Amended and Restated, Effective January 1,
2007
119505.doc
THE CITY OF HUNTINGTON BEACH
PUBLIC AGENCY RETIREMENT SYSTEM
ALTERNATE RETIREMENT SYSTEM
(PARS-ARS)
AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 2007
TABLE OF CONTENTS
Page
INTRODUCTION............................................................................................................................2
DEFINITIONS.................................................................................................................................3
ELIGIBILITY REQUIREMENTS FOR PARTICIPATION...........................................................7
2.1 Time of Participation............................................................................................................7
2.2 Termination of Participation ................................................................................................ 7
2.3 Effect of Transfer to Ineligible Employment.......................................................................7
2.4 In Service Distributions........................................................................................................7
CONTRIBUTIONS.......................................................................................................................... 8
3.1 Amount of Employer Contributions..................................................................................... 8
3.2 Amount of Employee Contributions .................................................................................... 8
3.3 Administrative Expenses...................................................................................................... 8
3.4 Allocation of Administrative Expenses................................................................................8
3.5 Limits on Annual Additions................................................................................................. 8
3.6 Vesting..................................................................................................................................9
3.7 Investment in Accordance With Act....................................................................................9
3.8 Reversions............................................................................................................................9
FUNDING AND VALUATION.................................................................................................... 10
4.1 Funding............................................................................................................................... 10
4.2 Valuation............................................................................................................................ 10
4.3 Type and Nature of Plan and Trust..................................................................................... 10
VESTING ...................................................................................................................................... 11
5.1 Vesting in Employer Contribution Account....................................................................... 11
5.2 Vesting in Employee Contribution Account...................................................................... 11
5.3 Full or Partial Termination................................................................................................. 11
DISTRIBUTION OF BENEFITS .................................................................................................. 12
6.1 Incidental Death Benefits................................................................................................... 12
6.2 Amount of Distribution...................................................................................................... 12
6.3 Lump Sum Distributions.................................................................................................... 12
6.4 Time of Distribution........................................................................................................... 12
6.5 Participant's Rights Not Subject To Execution.................................................................. 13
OMM_US:4790870.4 _i_
TABLE OF CONTENTS
(continued)
Page
6.6 Unclaimed Benefits............................................................................................................ 13
6.7 Direct Rollovers ................................................................................................................. 13
6.8 Military Service.................................................................................................................. 15
DEATHBENEFITS....................................................................................................................... 16
7.1 Designation of Beneficiary................................................................................................. 16
7.2 Married Participant............................................................................................................. 16
7.3 Spouse's Signature.............................................................................................................. 16
7.4 Default Beneficiary ............................................................................................................ 16
7.5 Domestic Partners............................................................................................................... 16
ADMINISTRATION AND AMENDMENT OF PLAN............................................................... 18
8.1 Designation of Plan Administrator..................................................................................... 18
8.2 Rules and Regulations........................................................................................................ 18
8.3 Amendment and Termination............................................................................................. 18
ANNUAL ADDITION LIMITS .................................................................................................... 19
9.1 Construction. ...................................................................................................................... 19
9.2 Definitions.......................................................................................................................... 19
9.3 Annual Addition Limitations..............................................................................................20
OMM_US:4790870.4 -ii-
INTRODUCTION
The City of Huntington Beach (the "Employer") has adopted this tax qualified
governmental profit sharing plan for the benefit of its Eligible Employees. This document is
a full and complete amendment and restatement of the City of Huntington Beach PARS
Alternate Retirement System.
It is intended that this Plan and the Trust established to hold the assets of the Plan
shall be qualified under Section 401(a) and tax-exempt under Section 501(a) of the Internal
Revenue Code of 1986, together with any amendments thereto ("Code"). It is also intended
that this Plan and the Trust established hereunder shall meet the requirements of a
governmental plan under Section 414(d) of the Internal Revenue Code and of a pension trust
under California Government Code Sections 53215 - 53224, or their successor Sections
("Act"). At any time prior to the satisfaction of all liabilities with respect to Participants and
their Beneficiaries under the Trust created pursuant to this Plan, the Trust assets shall not be
used for, or diverted to, purposes other than the exclusive benefit of Participants or their
Beneficiaries, as prescribed in Section 401(a)(2) of the Code.
It is intended that the Plan satisfy the requirements of the applicable provisions of the
Uruguay Round Agreements Act, the Small Business Job Protection Act, the Taxpayer Relief
Act of 1997 and the Uniformed Service Employment and Reemployment Rights Act of 1994
(commonly referred to as the "GUST" amendments) and that the provisions of this restated
Plan reflecting the GUST amendments are hereby made effective as of the dates required by
the legislation referred to in this sentence.
It is further intended that the Plan satisfy the requirements of the applicable
provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 and the
related requirements of the revisions to Section 401(a)(9) of the Code (commonly referred to
as "EGTRRA") and that the provisions of this restated Plan reflecting EGTRRA are hereby
made effective as of the dates required by the legislation referred to in this sentence.
It is further intended that the Plan satisfy the requirements of the applicable
provisions of legislation enacted subsequent to EGTRRA, including the Pension Protection
Act of 2006 (commonly referred to as the "PPA") and the Heroes Earnings Assistance and
Relief Tax Act of 2008 (commonly referred to as the "HEART Act") and that the provisions
of this restated Plan reflecting such subsequent legislation (including the PPA and the
HEART Act) are hereby made effective as of the dates required by the legislation referred to
in this sentence.
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ARTICLE I
DEFINITIONS
1.1 "Account" means, with respect to each Participant, the value of all accounts
maintained on behalf of the Participant.
1.2 "Act" means California Government Code Sections 53215 - 53224.
1.3 "Aggregate Account" means, with respect to each Participant, the value of all
accounts maintained on behalf of the Participant, whether attributable to Employer or
Employee contributions.
1.4 "Amended Effective Date" means January 1, 2007.
1.5 "Beneficiary" means the person, trust or other entity to whom a share of a
deceased Participant's Aggregate Account is payable.
1.6 "Code" means the Internal Revenue Code of 1986 as amended from time to time.
1.7 "Compensation" means all compensation for that portion of the Plan Year during
which the Employee was a Participant, paid in cash by the Employer to the
Participant for personal services. Further, the Employer as defined in Section 1.13
hereof, defines compensation as "Gross Wages" defined as all remuneration to a
Participant by the Employer that is reportable on Form W-2, together with any
amounts contributed to an individual annuity contract under Section 403(b) of the
Code or deferred under an eligible deferred compensation plan under Section 457 of
the Code or contributed to a cafeteria plan under Section 125 of the Code or paid as a
qualified transportation fringe under Section 132(f)(4) of the Code. The annual
compensation of each Participant, as defined above by the Employer, taken into
account in determining allocations for any Plan Year beginning after December 31,
2001 shall not exceed $200,000, as adjusted for cost-of-living increases in accordance
with Section 401(a)(17)(B) of the Code. For any short Plan Year, the Compensation
limit shall be an amount equal to the Compensation limit for the calendar year in
which the Plan Year begins multiplied by a ratio obtained by dividing the number of
full months in the short Plan Year by twelve (12). The limitation on the maximum
amount of Compensation that may be taken into account under the Plan shall not
apply to any Participant eligible for a higher limit on annual compensation under the
transition rule described in Section 1.401(a)(17)-I(d)(4)(ii) of the Treasury
Regulations.
1.8 "Effective Date" means January 1, 1992.
1.9 "Eligible Class of Employees" means the eligible class of employees as provided
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herein and in the applicable governing board policies and regulations promulgated
thereunder by the Employer.
1.10 "Eligible Employee" means all of those Employees of the Employer whose
Participation in this Plan are not prohibited or restricted by the provisions of a
collective bargaining agreement or another plan or retirement system maintained by
the Employer. Employees who are exempt from coverage under Social
Security by federal law or regulation shall not be Eligible Employees.
1.11 "Employee" means an employee of the Employer.
1.12 "Employee Contribution Account" means the account by that name established
pursuant to Section 3.2 hereof.
1.13 "Employer" means City of Huntington Beach that has adopted this Plan.
1.14 "Employer Contribution Account" means the account by that name established
pursuant to Section 3.1 hereof.
1.15 "Inactive Participant" means a Participant who is no longer eligible to participate
because he is no longer in a class of Employees eligible to participate in this Plan but
is still employed by the Employer.
1.16 "Ineligible Employee" means all of those Employees of the Employer whose
participation in this Plan is prohibited or restricted by the provisions of a collective
bargaining agreement, another plan or retirement system maintained by the Employer,
or exempt from coverage under Social Security by federal law or regulation.
1.17 "Investment Manager" means the entity appointed by the Employer as the
investment manager under the Plan.
1.18 "Limitation Fear" means the limitation year under Section 3.5 hereof and shall
mean the Plan Year.
1.19 "Normal Retirement Age" means sixty-two (62)years of age.
1.20 "Normal Retirement hate" means the first day of the month coincident with or next
following the date on which the Participant attains Normal Retirement Age.
1.21 "Participant" means a Participant under Article II hereof.
1.22 "Participant Aggregate Accounts" means the accounts by that name established
pursuant to Article III hereof.
1.23 "Participant Contributions" means contributions made on behalf of the Participant
by the Employer as Pick Up Contributions.
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1.24 "Participant Contribution Account" means the value of the Participant's interest in
this Plan that is attributable to Pick Up Contributions and/or Participant after tax
contributions.
1.25 "PERS" means the California Public Employees' Retirement System.
1.26 "Pick Up Contributions" means Participant contributions made by the Employer on
behalf of the Participant pursuant to Section 414(h) of the Internal
Revenue Code. Pick Up Contributions shall not under any circumstances be paid to
the Participant or be directed by the Participant for any purpose except as Pick Up
Contributions to this Plan. The Employer may make Pick Up Contributions through a
reduction in salary, an offset against future salary increases, or a combination of the
two.
1.27 "Plan" means the City of Huntington Beach PARS Alternate Retirement System.
1.28 "Plan Administrator" means the individual or position designated by the Employer
to act on behalf of the Employer in matters relating to this Plan. If no designation is
made, the Employer shall be the Plan Administrator. If a Plan Administrator has been
appointed, the word "Employer" as used in this Plan shall mean Plan Administrator
unless the context indicates a different meaning is intended.
1.29 "Plan Year" means the consecutive twelve month period beginning January 1 and
ending on December 31.
1.30 "Public Agency" means an employer authorized under California Government Code
Article 1.5, Sections 53215 through 53224 to establish a pension trust.
1.31 "Regulations" means the regulations adopted or proposed by the Department of
Treasury from time to time pursuant to the Code.
1.32 "Retirement System" means any plan that meets the requirements for a
retirement system under Section 3121(b)(7)(F) of the Code and the final
regulations thereunder.
1.33 "Social Security" means the Social Security program as set forth in Title 42 of the
United States Code, Section 301 et seq.
1.34 "SIRS" means the California State Teachers' Retirement System.
1.35 "Trust" means the trust established as part of the Public Agency Retirement Trust to
hold the assets of the Plan.
1.36 "Trustee" means the trustee of the Trust.
1.37 "Valuation Date" means the last day of the Plan Year or such other day on which
the assets of the Trust are valued and the value of each Participant's Aggregate
Account is determined.
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1.38 "Vested" means the nonforfeitable portion of any Account maintained on behalf of a
Participant.
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ARTICLE II
ELIGIBILITY REQUIREMENTS FOR PAR'TICIPA'TION
2.1 Time of Participation
An Eligible Employee shall participate in this Plan on each day during which the Employee
is not accruing a benefit under Social Security or another Retirement System provided and
maintained by the Employer.
2.2 'Termination of Participation
A Participant shall cease to be a Participant on the date on which the Participant begins to
participate in another Retirement System or the date of his or her termination of employment
as determined by the Employer.
2.3 Effect of'Transfer to Ineligible Employment
If a Participant is no longer an Eligible Employee and becomes an Ineligible Employee, such
Employee will participate immediately upon returning to the Eligible Class of Employees.
Such participation shall commence as of the first day of such eligible employment.
2.4 In Service Distributions
A Participant who is no longer eligible to participate because he is no longer in the class of
Eligible Employees, but who has not terminated employment with the Employer, shall
become an Inactive Participant and shall remain such for twenty-four (24) months after
which his interest in the Plan will be distributed to him.
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ARTICLE III
CONTRIBUTIONS
3.1 Amount of Employer Contributions
There is hereby created and established and shall be maintained by the Plan Administrator
the Employer Contribution Account. For each day that an Employee remains a Participant
under this Plan, the Employer shall make a contribution of zero percent (0%) of
Compensation. Such contribution shall be made no later than the close of the Plan Year. This
amount shall be credited to the Employer Contribution Account. Employer Contributions will
be allocated to each Participant in the ratio that such Participant's compensation bears to the
compensation of all Participants.
3.2 Amount of Employee Contributions
There is hereby created and established and shall be maintained by the Plan Administrator
the Employee Contribution Account. For each day that an Employee remains a Participant
under this Plan, the Employee shall make a contribution of seven and one-half percent (7.5%)
of Compensation. Such contribution shall be credited to the Employee Contribution Account.
In accordance with Section 414(h) of the Code and Sections 1.23 and 1.26 of this Plan, the
contributions required under this Section 3.2 shall be Pick Up Contributions.
3.3 Administrative Expenses
In accordance with Section 53217 of the Act the Employer may make contributions to the
Trust sufficient to defray all or part of the expenses of administering the Plan or may pay
such expenses directly.
3.4 Allocation of Administrative Expenses
If the Employer chooses not to pay the expenses of administering this Plan, such expenses
shall be charged ratably against the Participants' Aggregate Accounts.
3.5 Limits on Annual Additions
Annual additions credited to a Participant's Account during a limitation year shall not exceed
the lesser of$40,000 (adjusted as permitted by Section 415(d) of the Code and Regulations
issued thereunder) or 100 percent of Section 415 Compensation (provided that such 100
percent limitation shall not apply to any contributions for medical benefits after separation
from service, within the meaning of Section 401(h) or Section 419A(f)(2) of the Code). This
Section 3.5 shall be construed and interpreted in accordance with the provisions of Article
IX.
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3.6 Vesting
A Participant will be fully Vested in his Aggregate Account at all times. If the Plan's vesting
schedule is amended or the Plan is amended in any way that directly or indirectly affects the
computation of a Participant's nonforfeitable percentage, or if the Plan is deemed amended
by an automatic change to or from a top-heavy vesting schedule, each Participant with at
least three years of service with the Employer may elect within a reasonable period of time
after the adoption of the amendment or change to have his nonforfeitable percentage
computed under the Plan without regard to the amendment or change.
3.7 Investment in Accordance With Act
All contributions, interest earned, and any assets of the Plan shall at all times be invested and
managed in accordance with the requirements of the Act.
3.8 Reversions
The Employer shall have the right to a reversion of assets from this Plan if(1) a contribution
is conditioned upon the initial qualification of the Plan, a timely determination letter request
is filed, and the Plan receives an adverse determination, or (2) the reversion is due to a good
faith mistake of fact, or (3) the contribution is conditioned on its deductibility under Section
404 of the Code. Notwithstanding the foregoing, (i) any contribution made by the Employer
because of a mistake of fact must be returned to the Employer within one year of the
contribution; (ii) in the event the deduction of a contribution made by the Employer is
disallowed under Section 404 of the Code, such contribution (to the extent disallowed) must
be returned to the Employer within one year of the disallowance of the deduction; and (iii) in
the event that the Commissioner of Internal Revenue determines that the Plan is not initially
qualified under the Internal Revenue Code, any contribution made incident to that initial
qualification by the Employer must be returned to the Employer within one year after the
date the initial qualification is denied, but only if the application for the qualification is made
by the time prescribed by law for filing the Employer's return for the taxable year in which
the Plan is adopted, or such later date as the Secretary of the Treasury may prescribe.
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ARTICLE IV
FUNDING AND VALUATION
4.1 Funding
In accordance with Section 53216 of the Act, the assets of the Plan shall be held in a trust or
invested in an insurance contract which may or may not be held in a trust. Subject to Sections
53216.1, 53216.5 and 53216.6 of the Act for the purpose of funding this Plan, the Employer
shall provide the Trustee or Investment Manager with written direction on how to invest the
assets of the Plan. Notwithstanding anything to the contrary contained in the Trust
agreement, in-kind contributions shall not be permissible under the Plan.
4.2 Valuation
The value of a Participant's Employer Contribution Account and Employee Contribution
Account shall be determined annually on a date hereafter referred to as a Valuation Date. As
of each Valuation Date there shall be determined the amount of the investment gain or loss to
be credited to the total of all assets held for Employer Contribution Accounts and Employee
Contribution Accounts during the period since the preceding Valuation Date. The total
adjustment shall be allocated among all of the individual Participant and Inactive Participant
Accounts as of the current Valuation Date. The assets of the Trust shall be valued annually at
fair market value. On the Valuation Date, the earnings and losses of the Trust will be
allocated to each Participant and Inactive Participant.
4.3 Type and Nature of Plan and Trust
Neither the faith and credit nor the taxing power of the Employer, the State of California or
any other political subdivision thereof other than the Employer is pledged to the distribution
of benefits hereunder. Except for contributions and other amounts hereunder, no other
amounts are pledged to the distribution of benefits hereunder. Distributions of benefits are
neither general nor special obligations of the Employer, but are payable solely from
contributions, as more fully described herein. No Employee or Beneficiary may compel the
exercise of the taxing power by the Employer. Distributions of benefits are not a debt of the
Employer, the State of California or any of its political subdivisions within the meaning of
any constitutional or statutory limitation or restriction. Distributions are not a legal or
equitable pledge, charge, lien or encumbrance, upon any of the Employer's property, or upon
any of its income, receipts or revenues, except amounts in the accounts which are, under the
terms of this Plan and the Act, set aside for distributions of benefits. Neither the Participants
of the legislative body of the Employer nor its officers, employees, agents or volunteers are
liable hereunder. Benefits under the Plan may not be assigned or alienated except to the
extent allowable under Sections 401(a)(13) and 414(p) of the Code.
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ARTICLE V
VESTING
5.1 Vesting in Employer Contribution Account
Each Participant shall be one hundred percent (100%) Vested in his Employer Contribution
Account at all times.
5.2 Vesting in Employee Contribution Account
Each Participant shall be one hundred percent (100%) Vested in his Employee Contribution
Account at all times.
5.3 Full or Partial Termination
Notwithstanding the vesting schedule in 5.1 and 5.2, upon the complete discontinuance of
Employer contributions to the Plan or upon any full or partial termination of the Plan, all
amounts credited to the Account of any affected Participant shall become one hundred
percent (100%) Vested and shall not thereafter be subject to forfeiture for any reason.
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ARTICLE VI
IDISTRIBUTION OF BENEFITS
6.1 Incidental(Death Benefits
(a) Distributions from the Plan shall be made in accordance with Section
401(a)(9) of the Code, including the incidental death benefits under Section 401(a)(9)(G) and
the regulations thereunder. The required beginning date of benefit payments that represent
the entire interest of the Participant shall be as follows:
(b) A Participant shall have the option of commencing distributions by April 1
following age 70'/2 or deferring payment until actual retirement. For avoidance of doubt, a
Participant is not required to receive a distribution while an Employee (in 2009 or any other
year).
(c) Time and Manner of Distribution.
(i) Required Beginning Date. The Participant's entire interest will be
distributed to the Participant no later than the Participant's Required Beginning Date.
(ii) Death of Participant Before Distributions Begin. If the Participant
dies before distributions begin, the Participant's entire interest will be distributed no later
than December 31 of the calendar year immediately following the calendar year in which the
Participant died.
(iii) Forms of Distribution. The Participant's interest shall be distributed in
the form of a single sum on or before the Required Beginning Date.
(iv) Required Beginning Date. The April 1 of the calendar year following
the calendar year in which the Participant attains age 70'/2 or, if the Participant opts to defer
payment until retirement, the April 1 of the calendar year following the calendar year in
which the Participant actually retires.
6.2 Amount of(Distribution
A Participant who terminates employment for any reason shall be entitled to one hundred
percent (100%) of the value of his Aggregate Account determined as of the most current
Valuation Date.
6.3 Lump Sum(Distributions
All distributions shall be made in a lump sum payment in cash constituting the entire value of
the distributee's Aggregate Account.
6.4 Time of(Distribution
Unless otherwise specified herein, benefits shall become distributable to a Participant (or the
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Participant's Beneficiary in any case of the Participant's death) upon any termination of the
Participant's employment by reason of resignation, discharge, retirement, disability, or death.
This Plan does not provide for mandatory distributions of any amount. Therefore, no
distribution is made (regardless of the amount of the distribution) without the consent of the
Participant (or the Participant's Beneficiary in any case of the Participant's death).
6.5 Participant's bights Not Subject To Execution
The right of a Participant to a benefit under this Plan is not subject to execution or any other
process whatsoever, except to the extent permitted by Section 704.110 of the Code of Civil
Procedure of the State of California and is unassignable.
6.6 Unclaimed Benefits
Each Participant and Beneficiary of a deceased Participant shall file with the Plan
Administrator from time to time in writing, his home address and each change of home
address. Any communication shall be addressed to the Participant or the Beneficiary at his
last home address filed with the Plan Administrator, or if no such address was filed, then at
his last home address as shown on the Employer's records, shall be binding on the
Participant or Beneficiary for all purposes of the Plan. The Plan Administrator shall not be
obligated to search for or ascertain the whereabouts of any Participant or Beneficiary, and
the Participant's Accrued Benefit shall be subject to the abandoned property law of the
applicable jurisdiction.
6.7 Direct Rollovers
(a) Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a distributee's election under this Plan, a distributee may elect, at the time and
in the manner prescribed by the Plan Administrator, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan specified by the distributee in
a direct rollover. A distributee includes an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(b) Effective for distributions after December 31, 2006, a Beneficiary who is not
the spouse of the Participant may elect a direct trustee to trustee transfer that qualifies as an
eligible rollover distribution under this Section 6.7. Such transfer shall be made to an
individual retirement plan described in Section 408(a) of the Code or an individual retirement
account that is established for the purpose of receiving the distribution on behalf of such
Beneficiary. Such individual retirement account shall be deemed an inherited IRA pursuant
to the provisions of Section 402(c)(11) of the Code. Also, in this case, the determination of
any required minimum distribution under Code Section 401(a)(9) that is ineligible for
rollover shall be made in accordance with Notice 2007-7, Q&A 17 and 18, 2007-5 I.R.B.
395.
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(c) Definitions
(i) Eligible Rollover Distribution
An eligible rollover distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does not include: (i) any
distribution that is one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the distributee's designated
Beneficiary, or for a specified period of ten (10) years or more; (ii) any distribution to the
extent such distribution is required under Section 401(a)(9) of the Code; and (iii) any
hardship distribution. A portion of a distribution shall not fail to be an eligible rollover
distribution merely because the portion consists of after-tax employee contributions which
are not includible in gross income. However, such portion may be transferred only to (A) an
individual retirement account or annuity described in Section 408(a) or (b) of the Code (or,
on or after January 1, 2008, to a Roth IRA described in Section 408A of the Code) or a
qualified defined contribution plan described in Section 401(a) of the Code; or (B) on or
after January 1, 2007, to a qualified defined benefit plan described in Section 401(a) of the
Code or to an annuity contract described in Section 403(b) of the Code, that agrees to
separately account for amounts so transferred (and earnings thereon), including separately
accounting for the portion of the distribution that is includible in gross income and the
portion of the distribution that is not so includible.
(ii) Eligible Retirement Plan
An eligible retirement plan is an individual retirement account described in Section 408(a) of
the Code, an individual retirement annuity described in Section 408(b) of the Code, a
qualified plan described in Section 401(a) of the Code that accepts the distributee's eligible
rollover distribution, an annuity contract described in Section 403(b) of the Code, a Roth
IRA described in Code Section 408A (but only if the distributee satisfies the requirements of
Code Section 408A(c)(3)(B)), and an eligible plan under Section 457(b) of the Code 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. The definition of eligible retirement plan shall also
apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who
is the alternate payee under a qualified domestic relation order, as defined in Section 414(p)
of the Code. With respect to eligible rollover distributions made on or after January 1, 2008,
an eligible retirement plan shall also include a Roth IRA as described in Section 408A of the
Code, provided that the distributee is not restricted from making such a rollover from this
Plan to a Roth IRA pursuant to Section 408A(c) of the Code.
(iii) Direct Rollover
A direct rollover is a payment by the Plan to the eligible retirement plan specified by the
distributee.
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6.8 Military Service
Notwithstanding any provision of this Plan to the contrary, contributions, benefits and
service credit with respect to qualified military service will be provided in accordance with
Section 414(u) of the Code. In addition, the survivors of any Participant who dies on or after
January 1, 2007 while performing qualified military service, are entitled to any additional
benefits (other than benefit accruals relating to the period of qualified military service)
provided under the Plan had the Participant resumed and then terminated employment on
account of death. A Participant receiving a "differential wage payment," as defined in Code
Section 3401(h)(2) shall be treated as an Employee of the Employer, and the differential
wage payment shall be treated as Compensation.
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ARTICLE VII
DEATH BENEFITS
7.1 Designation of Beneficiary
Each Participant and Inactive Participant shall have the right to designate a Beneficiary to
receive the death benefits that are payable from this Plan. Such designation must be
evidenced by a written instrument filed with the Employer on a form prescribed by the
Employer and signed by the Participant.
7.2 Married Participant
The Beneficiary for a married Participant shall at all times be the Participant's spouse and
may not be changed to someone other than such spouse unless the consent of such spouse is
provided upon a written form witnessed by a duly authorized Plan representative or a notary
public and acceptable to the Employer. If no such designation is on file with the Employer
at the time of the death of the Participant, or if for any reason at the sole discretion of the
Employer such designation is defective, then the spouse of such Participant shall be
conclusively deemed to be the Beneficiary designated to receive such benefit.
7.3 Spouse's Signature
The signature of the Participant's spouse shall be required on a designation of beneficiary
form if the spouse is not the Beneficiary, unless the Participant declares in writing that one
of the following conditions exists:
(a) The Participant is not married;
(b) The Participant does not know and has taken all reasonable steps to determine
the whereabouts of the spouse;
(c) The spouse is incapable of executing the acknowledgement because of an
incapacitating mental or physical condition.
7.4 Default Beneficiary
In the event the Participant dies and is not survived by a spouse, the Aggregate Account shall
pass by the laws of intestacy.
7.5 Domestic Partners
Effective as of January 1, 2005, for purposes of this Article VII only: (1) all references to
"marriage" shall also include "registered domestic partnerships," (2) individuals in a
"registered domestic partnership" shall be considered "married," and (3) all references to a
"spouse" shall also include a "registered domestic partner." A "registered domestic partner"
and a "registered domestic partnership" refer to persons and partnerships satisfying the
16
NB1:790870.2
requirements of the California Family Code and officially registered as of the date of death
with the Secretary of State as such in accordance with Section 298.5 of the California Family
Code.
17
NB 1:790870.2
ARTICLE VIII
ADMINISTRATION AND AMENDMENT OF PLAN
8.1 Designation of Plan Administrator
The Employer is the Plan Administrator under this Plan unless an individual employed by, or
a position within the Employer, has been appointed by the Employer as Plan Administrator.
In addition to a Plan Administrator the Employer may designate a delegatee to perform those
activities relating to the Plan as specified in the written appointment of such delegatee. The
term "Employer" as used in this Article VIII shall mean the Plan Administrator or delegatee
where responsibility for administration of the Plan has been given to such parties.
8.2 Rules and Regulations
The Employer shall supervise and control the operation of this Plan in accordance with its
terms and may make rules and regulations for the administration of this Plan that are not
inconsistent with the terms and provisions hereof. The Employer shall determine any
questions arising in connection with the interpretation, application or administration of the
Plan (including any question of fact relating to age, employment, Compensation or eligibility
of Employees) and its decisions or actions in respect thereof shall be conclusive and binding
upon any and all persons and parties. The Employer's interpretations, determinations and
actions taken under the Plan shall in all cases result in like treatment for Employees who are
similarly situated.
8.3 Amendment and Termination
The Employer shall have the right to amend, modify or terminate this Plan at any time. In the
event of a termination or the complete discontinuance of this Plan, the entire interest of each
Participant affected thereby shall immediately become 100%Vested. The Employer shall not
be liable for the payment of any benefits under this Plan and all benefits hereunder shall be
payable solely from the assets of the Trust.
18
NB 1:790870.2
ARTICLE IX
ANNUAL ADDITION LIMITS
9.1 Construction
Section 3.5 of the Plan shall be construed in accordance with this Article IX. Unless the
context clearly requires otherwise, words and phrases used in this Article IX shall have the
same meanings that are assigned to them under the Plan.
9.2 Definitions
As used in this Article IX, the following terms shall have the meanings specified below.
(a) "Annual Additions" shall mean the sum credited to a Participant's Accounts
for any Plan Year of (i) Employer contributions, (ii) Employee contributions, (iii)
forfeitures, and (iv) amounts credited after March 31, 1984 to an individual medical
account, as defined in Section 415(1)(2) of the Code which is part of a pension and annuity
maintained by the Employer.
(b) "Defined Benefit Plan" means a plan described in Section 4140) and
414(k)(2) of the Code.
(c) "Defined Contribution Plan" means a plan described in Section 414(i) and
414(k)(2) of the Code.
(d) "Section 415 Compensation" shall mean a Participant's wages within the
meaning of Code Section 3401(a) and all other payments of compensation to the Participant
by the Employer (in the course of the Employer's business) for which the Employer is
required to provide the Participant a written statement under Code Sections 6041(d),
6051(a)(3) and 6052. Section 415 Compensation shall be determined without regard to any
rules under Code Section 3401(a) that limit the remuneration included in wages based on
the nature or location of the employment or the services performed. Compensation for any
limitation year is the compensation actually paid or includible in gross income during such
year. Compensation paid or made available during a limitation year shall include amounts
that would otherwise be included in compensation but for an election under Code Section
125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b). "Section 415 Compensation"
does not include any amounts paid following a severance from employment, except
amounts paid or includible in gross income by the later of 2 1/2 months after a severance
from employment or the end of the Plan Year that includes the severance from employment
shall be included if, (i) absent the severance from employment, such compensation would
have been paid to the Participant while the Participant continued in employment with the
Employer, and such payments represent regular compensation for services during the
Participant's regular working hours (or compensation for services outside the Participant's
regular working hours, such as overtime or shift differential), commissions, bonuses or
similar compensation, (ii) the payment is for unused accrued bona fide sick, vacation or
19
NB 1:664952.7
other leave that the Participant would have been able to use if employment had continued,
or (iii) the payment is received by the Participant pursuant to a nonqualified unfunded
deferred compensation plan and would have been paid at the same time if employment had
continued, but only to the extent includible in gross income. Any payments not described
above shall not be considered Section 415 Compensation if paid after severance from
employment, even if they are paid by the later of 2 12 months after the date of severance
from employment or the end of the limitation year that includes the date of severance from
employment.
9.3 Annual Addition Limitations
(a) The compensation limitation of Section 3.5 of the Plan shall not apply to any
contribution for medical benefits (within the meaning of Code Section 419A(f)(2)) after
separation from service which is treated as an Annual Addition.
(b) If any Employer contributes amounts, on behalf of Participants covered by
the Plan, to other Defined Contribution Plans, the limitation on Annual Additions provided
in Article III of the Plan shall be applied to Annual Additions in the aggregate to the Plan
and such other plans. Reduction of Annual Additions, where required, shall be
accomplished by reducing contributions under such other plans pursuant to the directions of
the fiduciary for administration of such other plans or under priorities, if any, established by
the terms of such other plans, and then, if necessary, by reducing contributions under the
Plan.
(c) In the event the limitations of Section 3.5 of the Plan or Sections 9.3(a) or
(b) of this Article IX are exceeded such excess may be corrected as pennitted by applicable
IRS guidance(such as under Revenue Procedure 2008-50 or its successors).
20
NB 1:664952.7
ADOPTION OF THE AMENDED AND RESTATED
CITY OF HUNTINGTON BEACH
PARS ALTERNATE RETIREMENT SYSTEM
The Amended and Restated City of Huntington Beach PARS Alternate Retirement System
is hereby adopted.
BY:
K OMER
TITLE: Assistant City Manager
DATE: z4y5
Volume Submitter Sponsor: Public Agency Retirement Services
P.O.Box 11119
Newport Beach,CA 92658-5019
(800)540-6369
Volume Submitter Plan Letter Serial No: J593760a
21
NB 1:664952.7
f
CITY OF HUNTINGTON BEACH
INTERDEPARTMENTAL COMMUNICATION
HUNTINGTON BEACH
TO: Bill Osness
Personnel Director
FROM: Connie Brockway
City Clerk
DATE: October 14, 1997
SUBJECT: PUBLIC AGENCY RETIREMENT SYSTEM (PARS)—ADOPTION AGREEMENT
AND ADMINISTRATION AGREEMENT
According to Resolution 6338, Section 3 (copy attached) adopted by the City Council on
December 16, 1991, the Public Agency Retirement System (PARS) Plan Administrator is
"authorized to execute an adoption agreement and administration agreement . . ." In order to
comply with a citizen's request, please forward to my attention the original agreement
referenced in Section 3.
Thank you for your assistance.
CB:cjg
Attachment: Copy of City Council Resolution No. 6338
cbmemos/97-119cg
... ........
CiTY OF
PA R HUNTING-to
OCT
Public Agency Retirement System
PLAN DOCUMENT
City of Huntington Beach
-A-
Copyright c 1991 PHASE 11 SYSTEMS. All rights reserved. Reproduction in part or whole is prohibited.
INTRODUCTION
The Public Agency Retirement System Trust has adopted the following Defined Contribution Plan on
behalf of affiliated government agencies for the benefit of their employees. It is intended that this Plan
meet all requirements for qualification as a profit-sharing plan set forth in the Code as amended from
time to time, for governmental plans. If any provision of this Plan is subject to more than one
interpretation, such ambiguity shall be resolved in favor of that interpretation which is consistent with
this Plan being so qualified.
1
TABLE OF CONTENTS
ARTICLE
I DEFINITIONS 3
II ELIGIBILITY REQUIREMENTS 7
III CONTRIBUTIONS 8
IV INVESTMENT OF CONTRIBUTIONS 9
V VESTING 10
VI DISTRIBUTIONS 11
VII TERMINATION OF EMPLOYMENT 13
VIII DEATH BENEFITS 14
IX ADMINISTRATION 15
X AMENDMENT AND DISCONTINUANCE OF THE PLAN 16
XI MISCELLANEOUS 17
2
ARTICLE I
DEFINITIONS
1.01 "Administrator" means the Employer.
1.02 "Adoption Agreement" means the Public Agency Retirement System(PARS) Adoption Agreement.
1.03 "Beneficiary" means any person or persons, other than the Employer or the Trustee, designated by a
Participant to receive any distributions under this Plan which may be due upon the Participant's
death. The Beneficiary for a married Participant shall be the Spouse of the Participant and may not
be changed to someone other than the Spouse unless Spousal Consent is provided.
1.04 "Code" means the Internal Revenue Code of 1986 and amendments thereto.
1.05 (a) "Compensation" means all compensation for the Plan Year paid or payable in cash by the
Employer for personal services to an Eligible Employee. This definition of"Compensation"
shall be subject to the further provisions of this Article, as well as the additional terms, if
any, specified by the Employer in the Adoption Agreement.
(b) "Compensation" shall not include any amounts paid or payable by reason of services
performed (1)after the date an Employee ceases to be a Participant, or (2)prior to the date
an Employee becomes a Participant.
(c) "Compensation" shall not include, with respect to any Employee, in any Plan Year(or such
other applicable period specifically designated in the Plan), any compensation in excess of
$200,000 or such other amount established by the Secretary of Treasury in accordance with
Section 401(a)(17) of the Code. In addition, Compensation shall not include any amounts
contributed by an Employer, for or on account of Employees, under this Plan or under any
other employee benefit plan qualified under the provisions of Section 401(a)of the Code.
(d) For purposes of the Highly Compensated Employee and Family Member definition:
(1) Compensation shall mean total compensation as defined herein without regard to contri-
butions made under Sections 125, 402(a)(8), 402(h)(1)(B) and, in the case of Employer
Contributions made pursuant to a salary reduction agreement, 403(b)of the Code.
(2) Compensation paid to a Participant for any Plan Year shall include all Compensation for
that Plan Year paid to any Family Member(hereafter defined)who is a Participant in
this Plan during such Plan Year.
(3) "Family Member" shall mean an Employee who is, on any one day of the Plan Year, a
spouse, lineal ascendant, lineal descendant, or a spouse of an ascendant or descendant,
including a legally adopted individual, of an individual who during the Plan Year was:
(A) an active or former Employee and a five percent(5%)owner within the meaning of
Section 416(i)(1)(B)(i)of the Code and the regulations thereunder, or
(B) one of the ten most highly-paid Highly Compensated Employees.
3
1.06 "Computation Period" means the Plan Year.
1.07 'Determination Date' means with respect to any Plan Year(a) the last day of the preceding Plan
Year, or(b) in the case of the first Plan Year of the Plan, the last day of such Plan Year.
1.08 "Effective Date" means the effective date of this Plan as stated in the Adoption Agreement.
1.09 "Eligible Employee" means any Employee who, at any time during which the Employer
maintains this Plan, is not accruing a benefit under another Retirement System provided or
maintained by the Employer. This definition of"Eligible Employee" shall be subject to the
additional terms, if any, specified by the Employer in the Adoption Agreement.
1.10 'Employee" means any person employed by the Employer on or after the Effective Date of this
Plan.
1.11 "Employee After Tax Contributions' means Employee Contributions which are not Pick Up
Contributions.
1.12 "Employee Contributions" means contributions made to the Trust by the Participant, or made to
the Trust by the Employer on behalf of the Participant as Pick Up Contributions.
1.13 "Employee Contribution Account" means the value of the Participant's interest in this Plan which
is attributable to Employee Contributions and Employee After Tax Contributions, determined as of
a specified Valuation Date.
1.14 "Employer" means the Public Agency which by means of executing the Adoption Agreement has
adopted this Plan subject to the terms of the Trust.
1.15 "Employer Contributions' means contributions made to the Trust by the Employer on behalf of
the Participant which are not Pick Up Contributions.
1.16 "Employer Contribution Account" means the value of the Participant's interest in this Plan which
is attributable to Employer Contributions, determined as of a specified Valuation Date.
1.17 "Hour of Service" means:
(a) (1) Each hour for which an Employee is paid, or entitled to payment, for the performance of
duties for the Employer during an applicable computation period.
(b) (1) Each hour for which an Employee is paid, or entitled to payment, by the Employer
(irrespective of whether the employment relationship has terminated)on account of a
period of time during which no duties are performed due to vacation, holiday, illness,
disability, layoff,jury duty, military duty, or a paid leave of absence during the
applicable computation period.
(2) For purposes of paragraph(1)above a leave of absence shall include the absence of an
Employee due to pregnancy of the Employee, birth of a child of the Employee, placement
of a child with the Employee in connection with the adoption of such child by the Employee
or the caring for such child for a period beginning immediately following such birth or
placement. If an Employee has already been credited with a sufficient number of Hours of
4
Service during the computation period in which a leave of absence occurs as described in
this paragraph(2) in order to avoid a break in service, then such Hours of Service that
would have been credited pursuant to this paragraph(2)will be credited to the next
immediate computation period.
If the normal number of Hours of Service cannot be determined for an Employee who is
on sick leave of absence as described in this paragraph(2) then eight Hours of Service for
each day while the Employee is absent shall be used.
(3) For purposes of this paragraph(b)no more than 100 Hours of Service will be credited to
an Employee during any single Computation Period. The crediting of Hours of Service
under paragraph(2)will be solely for the purpose of determining whether the Employee
has incurred a break in service.
(c) Each hour for which back pay, irrespective of mitigation of damages, is either awarded or
agreed to by the Employer.
(d) Solely for purposes of determining whether a break in service for participation and vesting
purposes has occurred in a computation period, an individual who is absent from work for
maternity or paternity reasons shall receive credit for the hours of service which would
otherwise have been credited to such individual but for such absence, or in any case in
which such hours cannot be determined, eight(8)hours of service per day of such absence.
For purposes of this paragraph, an absence from work for maternity or paternity reasons
means an absence (1)by reason of the pregnancy of the individual, (2)by reason of the birth
of a child of the individual, (3)by reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or(4) for purposes of caring
for such child for a period beginning immediately following such birth or placement. The
hours of service credited under this paragraph shall be credited(1) in the computation period
in which the absence begins if the crediting is necessary to prevent a break in service in that
period, or (2) in all other cases, in the following computation period.
1.18 "Insurer" means any legal reserve life insurance company licensed to do business in the State
of California.
1.19 "Inactive Participant" means a Participant who is no longer eligible to participate because he is no
longer in the class of Employees eligible to participate under the provisions of Article 11.
1.20 "Normal Retirement Age" means sixty (60)years of age.
1.21 "Normal Retirement Date" means the first of the month coincident with or next following the date
on which the Participant attains Normal Retirement Age.
1.22 "Participant" means an Eligible Employee who has received Compensation from the Employer.
1.23 "PERS" means the California Public Employees Retirement System.
1.24 "Permanent and Total Disability" means presumably permanent incapacity in accordance with the
definition used by the Federal Social Security Act occurring after the Effective Date and resulting
in a Participant being unable to engage in any regular gainful employment or occupation by reason
of any medically demonstrable physical or mental condition. Such Disability shall be deemed to
exist only when written application has been filed with the Employer by or on behalf of such
_ 5
Participant and when such Disability is certified to the Employer by a licensed physician approved
by the Employer. Such Disability will not be considered established unless it has continued for a
period of not less than six(6)consecutive months.
1.25 "Pick Up Contributions' means Employee Contributions made by the Employer on behalf of the
Participant pursuant to Section 414(h)of the Code. Pick Up Contributions shall not, under any
circumstances, be paid to the Participant or be directed by the Participant to be paid for any
purpose except as Pick Up Contributions to this Plan. The Employer may make Pick Up Contri-
butions through a reduction in salary, an offset against future salary increases, or a combination of
the two.
1.26 "Plan' means the Public Agency Retirement System(PARS), a governmental plan as it may from
time to time be amended.
1.27 "Plan Year" means a period of twelve(12)consecutive months as stated in the Adoption Agreement.
1.28 "Public Agency" means a State, a political subdivision of a State, and any agency or instrumentality
of a State or political subdivision of a State.
1.29 'Retirement System" means any plan which meets the requirements for a retirement system under
Section 3121(b)(7)(F)of the Code and regulations thereunder.
1.30 "Spousal Consent" means a written election signed by the Spouse to have someone other than the
Spouse considered the Participant's Beneficiary in which case such consent must acknowledge the
non-Spouse Beneficiary. Such written election shall be witnessed by a Plan representative
designated by the Administrator or a notary public and shall acknowledge the effect of such election
on the Spouse.
1.31 "Spouse' means the person to whom the Participant is married as of the earlier of the date on
which the Participant's benefits commence or the date of the Participant's death. To the extent
provided in any qualified domestic relations order a Participant's former Spouse may be treated
as the surviving Spouse for purposes of this Plan.
1.33 "STRS" means the California State Teachers Retirement System.
1.34 "Trust" means the Public Agency Retirement System (PARS)Trust.
1.35 "Trustee" means the trustee of the Trust.
1.36 'Valuation Date" means the last day of the Plan Year.
1.37 "Vest" means to have a nonforfeitable right to the Employer Contribution Account and/or the
Employee Contribution Account.
1.38 "Year of Service" means a period of twelve(12)consecutive months coinciding with the Plan
Year.
1.39 As used in this Plan, the masculine shall include feminine and the singular shall include the plural,
where applicable.
6
ARTICLE H
ELIGIBILITY REQUIREMENTS FOR PARTICIPATION
2.1 Eligibility requirements are determined as stated in the Adoption Agreement.
2.2 For purposes of determining Years of Service and Breaks in Service for purposes of eligibility,
the initial eligibility computation period is based on requirements stated in the Adoption
Agreement which shall mean a period of twelve(12)months commencing on the date on which
the Employee first performs an Hour of Service. The second eligibility Computation Period
shall be the Plan Year which begins within the first eligibility Computation Period, and the third
and subsequent eligibility Computation Periods shall be subsequent Plan Years.
2.3 An Eligible Employee will become a Participant immediately upon being hired.
2.4 A Participant of this Plan shall cease to be a Participant for the purpose of accruing further
participation credits on the date on which he becomes eligible for another Retirement System, as
defined by IRS Section 3121(b)(7)(F) the date employment is terminated because of permanent and
total disability, the date on which death occurs, the date of his retirement, or the date of his
termination for any other reason.
2.5 (a) In the event a Participant is no longer a member of the eligible class of Employees as
provided for in Section 2.1 above and the Adoption Agreement, and becomes ineligible to
participate, such Employee will participate immediately upon returning to the eligible class
of Employees.
(b) In the event an Employee who is not a member of the eligible class of Employees becomes a
member of the eligible class, such Employee will participate immediately if such Employee
has satisfied the requirements of Section 2.1 and the Adoption Agreement.
2.6 A Participant who is no longer eligible to participate because he is no longer in the class of
eligible employees, but who has not terminated employment with the Employer shall become an
Inactive Participant and shall remain such for twenty-four(24)months after which his interest in
the Plan will be distributed to him.
_ 7
ARTICLE III
CONTRIBUTIONS
3.1 (a) For each month that an Employee remains a Participant under this Plan, the Employer is
responsible for and shall make Employer Contributions to the Trust hereunder which shall be
credited to the Participant's Employer Contributions Account. The amount of the Employer
Contributions to be made for any particular month and with respect to any particular
Participant shall be as stated in the Adoption Agreement.
(b) For each month that an Employee remains a Participant under this Plan, the Employee is respon-
sible for and shall make Employee Contributions to the Trust hereunder which shall be credited
to the Participant's Employee Contributions Account. The amount, if any, of the Employee
Contributions to be made for any particular month and with respect to any particular Participant
shall be as stated in the Adoption Agreement. The employee contribution shall be subject to
IRC Section 414(h) "before tax" employer pickup, if provided for in the Adoption Agreement.
3.2 The Employer may make contributions to the Trust hereunder sufficient to defray the expenses
of administering this Plan, including any expense charges or fees of the Insurer under the group
annuity contract. In the event of the failure of the Employer to pay such expenses, they shall be
charged against the Participants' Employer Contribution Accounts and Employee Contribution
Accounts as specified in the Adoption Agreement.
3.3 "Annual Additions" means for any Plan Year the sum of the following amounts credited to a
Participant's accounts in all qualified defined contribution plans maintained by the Employer:
(a) Employer Contributions
(b) Employee Contributions
(c) Forfeitures
Solely for the purposes of this paragraph, the Total Compensation for a totally disabled(within the
meaning of Section 22(e)of the Code)participant of a defined contribution plan maintained by the
Employer is the compensation which the participant would have received for the year if the participant
had been paid at the rate of compensation paid immediately before becoming permanently and totally
disabled; provided such imputed compensation may be taken into account only if the member is not
an officer, an owner, or a highly compensated employee, and only if contributions to the defined
contribution plan are nonforfeitable when made. In addition, amounts allocated after March 31,
1994 to an individual medical account, as defined in Section 415(1)(1)of the Code, which are part of
a defined benefit plan maintained by the Employer, and amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a key employee, as defined in
Section 419A(d)(3) of the Code, under a welfare benefit fund, as defined in Section 419(e)of the
Code, maintained by an Employer, shall also be treated as Annual Additions.
3.4 Notwithstanding anything to the contrary contained in this Plan, the Annual Additions to a
Participant's account for any Plan Year shall not exceed the lesser of the Defined Contribution
Dollar Limitation (currently $30,000) for the Plan Year or twenty-five percent(25%)of the
Participant's Total Compensation for the Plan Year. The percentage limitation of the preceding
sentence shall not apply to any contributions for medical benefits (within the meaning of Section
419A(f)(2)of the Code) after separation from service which is otherwise treated as an Annual
Addition under Section 415(l)(1)of the Code.
8
ARTICLE IV
,INVESTMENT OF CONTRIBUTIONS
Valuation of Accounts
4.1 For the purpose of funding this Plan, the Employer will provide the Trustee with written
direction on how to invest assets consistent with this Article IV. Alternatively, at the option
of the Employer, and with the written consent of the Trustee the Employer may delegate to the
Trustee the authority to determine how the assets of the Plan will be invested, consistent with
the terms of this Plan and accompanying Trust.
4.2 The Trustee may invest some or all of the contributions in an investment contract issued by an
insurance company licensed to do business in California with a rating of A+or better awarded
by Standard and Poor's Corporation's Insurer Solvency Review, or in any fund whose principal
is guaranteed by the Federal Deposit Insurance Corporation. Such investment to be made shall
be made at the direction of the Employer, or at the discretion of the Trustee if a valid delegation
of investment decision has been provided to the Trustee by the Employer pursuant to Section 4.1.
4.3 Any group investment contract shall provide for separate accounting of each Participant's Employer
Contribution Account and Employee Contribution Account.
4.4 The value of a Participant's Employer Contribution Account and Employee Contribution
Account shall be determined at least annually on a date herein referred to as a Valuation Date.
As of each Valuation Date the trustee shall determine the amount of interest adjustment credited
to the total of all assets held'for Employer Contribution Accounts and Employee Contribution
Accounts during the period since the preceding Valuation Date. The total interest adjustment
shall be allocated among all of the active individual Participant and Inactive Participant accounts
within each such classification as of the current Valuation Date. Not less frequently than
annually, the Employer shall notify each Participant of the value of his Employer Contribution
Account and Employee Contribution Account. All account values will be listed at book value
unless the Participant requests a listing of the current fair market value of such Account.
4.5 Contributions to the Trust Fund in an amount, and for a period, which are reasonable in the
discretion of the Trustee, shall be deposited in an interest-bearing account, which may be an interest
bearing account of the Trustee.
9
ARTICLE V
VESTING
5.1 (a) Each Participant shall be Vested in his Employer Contribution Account as provided in the
Adoption Agreement. '
(b) Each Participant shall be one hundred percent(100%) Vested in his Employee Contribution
Account at all times.
5.2 Any Participant who terminates his employment with the Employer prior to his Normal
Retirement Date and who does not meet the requirements under Section 5.1(a)and the Adoption
Agreement above shall lose all rights to the balance of his Employer Contributions Account
accrued prior to such date.
5.3 No change to a Vesting Schedule contained in this Article V and the Adoption Agreement shall
deprive a Participant of his nonforfeitable right to his Employer Contributions Account prior to
the adoption of the change. If the Vesting Schedule of this Plan is amended, each Participant
with at least five(5) Years of Service with the Employer prior to the adoption of the change,
may elect within a reasonable time after the adoption of the change to have his nonforfeitable
percentage computed under the Plan without regard to the change.
10
ARTICLE VI
DISTRIBUTIONS
6.1 A Participant who terminates his employment by reason of death, the attainment of Normal
Retirement Date or Permanent and Total Disability shall be entitled to one.hundred percent
(100%)of the sum of his Employer Contribution Account and his Employee Contribution
Account, valued as of the Valuation Date coincident with or next following the actual date of
distribution. The sum to which such a Participant is entitled shall be distributed in accordance
with the further provisions of this Article.
6.2 In the event that the termination of a Participant is caused by his death, his Beneficiary shall be
paid his entire benefit in the Plan in one lump sum.
6.3 If the sum to which the Participant is entitled is less than$3,500, it shall be distributed to the
Participant as a single sum. If the sum to which a Participant is entitled is$3,500 or greater it
will also be distributed in the form of a lump sum, but such distribution may not be distributed
to the Participant prior to his Normal Retirement Date without his consent.
6.4 A Participant may continue in employment beyond his Normal Retirement Date to a deferred
retirement date which may be the first day of any month subsequent to his normal Retirement
Date. A Participant who terminates his service on or after his deferred retirement date shall be
entitled to one hundred percent(100`Y) of the sum of his Employer Contribution Account and his
Employee Contribution Account, revalued as of the Valuation Date coincident with or next
following the actual date of distribution. The Account shall be distributed in accordance with
the further provisions of this Article.
6.5 The interest in the Plan of an Inactive Participant shall be distributed to him at the end of a
period of 24 (twenty four) months during which he has received no contributions to his accounts
in this Plan.
6.6 An Employee who is a Participant in this Plan will have his entire interest in this Plan distributed in
accordance with Section 401(a)(9) of the Code. A Participant's entire interest in this Plan will be:
(a) Distributed commencing not later than the required beginning date (in accordance with
Internal Revenue Service regulations)and must be made over one of the following periods
(or a combination thereof):
(1) the life of the Participant,
(2) the lives of the Participant and a designated Beneficiary,
(3) a period not extending beyond the life expectancy of the Participant, or
(4) a period not extending beyond the life expectancy of the Participant and a designated
Beneficiary.
(b) Distributed over a period specified in(a) (3)or(4)above, or over a period not extending
beyond the life expectancy of the designated Beneficiary.
(c) Except as provided below, the required beginning date for purposes of this Section shall be the
April 1st of the calendar year following the later of:
11
(1) the calendar year in which the Participant attains age 70 112 or,
(2) the calendar year in which the Participant retires.
(d) For purposes of this Article VI, life expectancy of the Participant and life expectancy of the
Participant and designated Beneficiary will be computed using the return multiples contained
in Section 1.72-9 of the Income Tax Regulations. A Participant's life expectancy(and his
Spouse's life expectancy)may not be recalculated.
(e) Distribution of a Participant's interest in this Plan will be made in accordance with Section
401(a)(9)of the Code and the provisions of such Code section will supersede any provision in
this Plan which may be inconsistent with such Code section.
(f) If distribution is considered to have commenced in accordance with the Regulations before
the Participant's death, the remaining interest will be distributed at least as rapidly as under
the method of distribution being used as of the date of the Participant's death.
6.7 Distributions made to a Participant's designated Beneficiary under this Plan shall be incidental to
the primary purpose of providing benefits to Participants and such distributions will be made in
accordance with Section 401(a)(9)of the Code.
6.8 Anything in this Plan to the contrary notwithstanding, the Participant shall not have the right to
elect to have all or part of his interest in this Plan, which would otherwise become available to
him during his lifetime, paid only to his Beneficiary after his death.
6.9 . In no event shall the annuity commencement date of a Participant who becomes entitled to benefits
under this Plan be later than 60th day after the close of the Plan year in which the latest of the
following events occurs:
(a) The Participant reaches his Normal Retirement Date;
(b) The Participant qualifies for Permanent and Total Disability;
(c) The Participant terminates employment with the Employer;
Notwithstanding the above, a Participant may make written application to the Administrator for a
deferred annuity commencement date which may be the first day of any month subsequent to the
latest date specified in(a), (b), or(c)above but in no event will such date be later than the
required beginning date specified in this Article.
6.10 A Participant who becomes eligible for another retirement system as defined by IRC Section
3121(b)(7)(F)or Social Security provided by his employer but does not terminate employment
with the Employer shall become an Inactive Participant.
12
ARTICLE VU
TERMINATION OF EMPLOYMENT
7.1 A Participant who terminates his employment by reason of death, the attainment of Normal
Retirement Date or Permanent and Total Disability shall be entitled to one hundred percent
(100%)of the sum of his Employer Contribution Account and his Employee Contribution
Account, valued as of the Valuation Date coincident with or next following the actual date of
distribution. The sum to which such a Participant is entitled shall be distributed in accordance
with the further provisions of this Article.
7.2 Upon the Participant's termination of employment with the Employer his Vested interest in this
Plan shall be determined in accordance with Article V of this Plan.
7.3 (a) If upon the Participant's termination of employment his Vested interest in this Plan is less
than$3,500, it shall be distributed immediately to the Participant as a single sum. If the sum
to which a Participant is entitled is $3,500 or greater it will also be distributed in the form of
a lump sum, but such distribution may not be distributed to the Participant prior to his
Normal Retirement Date without his consent.
(b) If upon the Participant's termination of employment his Vested interest in this Plan is $3,500
or more, a distribution it will be paid immediately unless the Participant requests that payment
made at his Normal Retirement Date.
7.4 If a Participant other than a part-time, seasonal or temporary employee terminates his
employment with the Employer and is not fully Vested in his Employer Contribution Account on
his date of termination, he shall forfeit that portion of his Employer Contribution Account in
which he was not vested as of the Valuation Date next following. Any amounts so forfeited shall
be applied to reduce future Employer Contributions made under this Plan.
13
ARTICLE VM
DEATH BENEFITS
8.1 If a married Participant dies prior to receiving his interest in this Plan, his spouse shall become
Beneficiary. If unmarried, his estate shall be the beneficiary unless otherwise evidenced by a
written instrument.
8.2 At any time, and from time to time, each Participant, retired Participant, disabled Participant or
terminated Participant shall have the right to designate the Beneficiary to receive the death
benefits to which he is entitled hereunder. The Beneficiary for a married Participant shall at all
times be the Spouse of the Participant and may not be changed to someone other than the Spouse
unless Spousal Consent is provided. Each such designation for death benefits shall be evidenced
by a written instrument filed with the Administrator and signed by the Participant. If no such
designation is on file with the Administrator at the time of the death of the Participant, or if for
any reason at the sole discretion of the Administrator such designation is defective, then the
Spouse of such Participant shall be conclusively deemed to be the Beneficiary designated to
receive such benefit.
14
ARTICLE IX
ADMINISTRATION
9.1 The Employer is the Plan Administrator under this Plan within the meaning of the Employee
Retirement Security Act of 1974(ERISA), as applicable to governmental plans and as amended
from time to time, and shall supervise and control the operation of this Plan in accordance with its
terms and may make rules and regulations for the administration of this Plan which are not
inconsistent with the terms and provisions hereof.
9.2 The Employer shall see that books of account are kept which shall show all receipts and
disbursements and a complete record of the operation of this Plan, including records of the
Accounts of individual Participants. The Administrator shall be responsible for the preparation,
submission, and/or publication of all reports, descriptions, and forms which may be required for
this Plan to conform to the applicable provisions of the Code.
9.3 In any case where the provisions of this Plan require the consent or approval of the Employer or
Administrator of an election or request made by an Employee, Participant, or Beneficiary, in
order to make such election or request effective, the Employer shall act on such election or
request as promptly as shall be reasonable in the circumstances. In any case where action by the
Insurer under the group annuity contract is necessary in order to make operative an effective
election or request made by an Employee, Participant or Beneficiary, it shall be the
responsibility of the Employer to transmit such election or request to the Insurer in writing and
as promptly as shall be reasonable in the circumstances. The Insurer shall not be obliged to take
action under the group annuity contract with respect to any particular election or request unless
the Insurer shall have received the election or request in such form and detail as shall be
reasonably required by the Insurer.
9.4 The Employer in interpreting any provision of this Plan or in making any judgment or
determination with respect to any person hereunder will apply uniform rules in a like manner to
all persons under similar circumstances.
9.5 If an application or a claim for benefits under this Plan has been filed with the Administrator by a
Participant or Beneficiary (claimant), the Administrator must decide within 90 days (an additional
90 days may be granted if proper notice is given to the claimant indicating the special circum-
stances requiring an extension prior to the termination of the initial 90-day period)whether to pay
benefits. If the claimant does not receive any answer from the Administrator within 90 days or in
180 days (in special instances) the claim for benefits shall be considered to have been denied. The
Administrator shall provide the claimant with a written explanation for the denial of benefits in
language calculated to be understood by the Participant citing pertinent provisions of the Plan, an
explanation of the Plan's claim review procedure with appropriate forms for the claimant's use in
submitting his claim, and a description of any information necessary for the claimant to perfect the
claim.
15
ARTICLE X
AMENDMENT AND DISCONTINUANCE OF THIS PLAN
10.1 While the Employer expects to continue this Plan indefinitely, it necessarily reserves the right to
amend this Plan at any time. No such amendment shall, however, deprive any Participant or
Beneficiary of any benefit previously vested in him under this Plan. Irrespective of any amendment,
no part of the assets held under this Plan shall ever revert to the Employer or be used for or diverted
to any purpose other than for the exclusive benefit of the Participants.
10.2 It is expressly understood, however, that the power of the Employer to amend this Plan is subject
to this Article, and that no amendment shall be made which would:
(a) deprive any Beneficiary of a then deceased Participant of the right to receive the benefits to
which the Beneficiary may be entitled hereunder,
(b) deprive any Participant of the benefits to which he is entitled hereunder,
(c) deprive any Participant of any of the proportionate interest in this Plan to which he would be
entitled were he to terminate employment on the date of such amendment,
(d) eliminate or reduce an early retirement benefit or retirement type subsidy (as defined in
regulations), or
(e) eliminate an optional form of benefit, except to the extent it may be required to qualify, or as
a condition of continued qualification of this Plan, under Section 401 of the Code.
10.3 This Plan shall be permanent and discontinued upon written notice to the Trustee by the Employer.
A complete discontinuance of contributions by the Employer shall be deemed a discontinuance of
this Plan.
10.4 If this Plan is terminated, partially terminated, or suspended, or if Employer Contributions to this
Plan are permanently discontinued, further contributions to this Plan shall thereupon cease and all
credits to the Account of Participants and former Participants who are affected by such termination,
partial termination, or suspension shall become one hundred percent(100%)vested. Any
forfeitures which shall have occurred in accordance with Article VII. Section 7.3 hereof prior to
reduce Employer Contributions hereunder shall be distributed pro-rats among the Accounts of
those Employees who were Participants on the effective date of the termination of this Plan.
10.5 In the event the Employer decides it is impossible or not advisable to continue to make its
contributions as herein provided, the Employer shall have the power to terminate this Plan through
appropriate resolutions.
10.6 This Plan may not be merged or consolidated with any other plan, nor may any assets or liabilities
of this Plan be transferred to any other plan unless each Participant in this Plan would(if such Plan
had then terminated) receive a benefit immediately after such merger, consolidation or transfer
which is equal to or greater than the benefit he would have been entitled to receive immediately
before such merger, consolidation or transfer(if this Plan had then terminated).
16
ARTICLE XI
MISCELLANEOUS
11.1 Inclusion in this plan shall not be construed as giving the Employee any right to be retained in the
service of the Employer without its consent, nor shall it interfere with the right of the Employer to
discharge the Employee, nor shall it give the Employee any right, claim or interest in any
retirement benefits herein described except upon fulfillment of the provisions and requirements of
this Plan.
11.2 (a) To the maximum extent permitted by law, the benefits or payments herein provided shall not
in any way be liable to attachment, garnishment or other process, or be seized, taken,
appropriated or applied by any legal or equitable process, to pay any debt or liability of any
Participant. Except as otherwise permitted by law or an order, decree or judgment issued
pursuant to a Qualified Domestic Relations Order, benefits or payments under this Plan may
not be assigned. In the event of any conflict between provisions of this Plan and the terms
of any description issued in conjunction with the Plan, the provisions of this Plan shall
control.
(b) For purposes of this Plan a "Qualified Domestic Relations Order' means a domestic
relations order(as specified below)which creates or recognizes the existence of an alternate
payee's (any Spouse, former Spouse, child or other dependent of a Participant) right to, or
assigns to an alternate payee the right to, receive all or a portion of the benefits payable to a
Participant under this Plan. A domestic relations order means any judgment, decree or
order (including approval of a property settlement agreement)which relates to the provision
of child support, alimony payments, or marital property rights to a Spouse, former Spouse,
child or other dependent of a Participant and is made pursuant to a state domestic relations
order. Such order (a) must clearly specify(1) the name and last known mailing address (if
any)of the Participant and the alternate payee covered by the order, (2) the amount or
percentage of the Participant's Account to be paid by the Plan to each alternate payee, or the
manner in which such amount or percentage is to be determined, (3) the number of payments
or period to which such order applies, and(4) the name of each Plan to which such order
applies, and (b) must not require(1) the plan to provide any type or form of benefits, or any
option, not otherwise provided under the Plan, or(2)provide increased benefits, and(3) the
payment of benefits to an alternate payee which are required to be paid to another alternate
payee under another order previously Qualified Domestic Relations Order. The provisions
relating to the establishment of a Qualified Domestic Relations Order and the payment of
any benefits to an alternate payee shall be applied in the method and manner which is
consistent with Section 414(p)of the Code.
Execu s y of , 199-1, at
Signature of ' 'strator
Title
P;1u�..v..wlpu.�aow..Klpl..emt.vkl
__ 17
r .
•
Amendments to the Public Agency Retirement System-City of Huntington Beach
11.3 (a) This section applies to distributions made on or after January 1, 1993. Notwithstanding
any provision of the plan to the contrary that would otherwise limit a distributee's
election under this section, a distributes may elect, at the time and in the manner
prescribed by the plan administrator,to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the distributee in a
direct rollover.
(b) Definitions
(I) Eligible Rollover Distribution: An eligible rollover distribution is any distribution of all
or any portion of the balance to the credit of the distributee, except that an eligible _
-" - rollover distribution does not include: any distribution that is one of a series of
substantially equal periodic payments(not less frequently than annually made for the
life (or life expectancy) of the distributee or the joint lives(or joint life expectancies)of
the distributee and the distributee's designated beneficiary, or for a specified period of
ten years or more; any distribution that is not includible in gross income(determined
without regard to the exclusion for net unrealized appreciation with respect to
employer securities).
(ii) Eligible retirement plan: An eligible retirement plan is an individual retirement
account described in section 408(a)of the Code, an individual retirement annuity
described in section 408(b)of the Code, an annuity plan described in section 403(a)of
the Code , or a qualified trust described in section 401(a) of the Code,that accepts the
distributee's eligible rollover distribution. However, in the case of.an eligible rollover
distribution to a surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(III) Distributee: A distributee includes an employee or former employee. In addition,
the employee's or former employee's surviving spouse and the employee's or former
employee's spouse or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in section 414(p) of the Code, are distributees with
regard to the Interest of the spouse or former spouse. _
(iv) Direct Rollover: A direct rollover is a payment by the plan to the eligible retirement
plan specified by the distributee.
ExWaturelan
y of f'�����- , 1993, atstrator
Title
RECEIVED Mkx 2 2 1393
Proposed Admendments — City of Huntington Beach
Public Agency Retirement System
City of Huntington Beach ("City") has adopted the Public
Agency Retirement System ("Plan") for the benefit of eligible employees, and
has reserved the right to amend the Plan. The Plan shall therefore be amended
as specified below as of January 1, 1992 the effective date of the Plan.
Amendment # One
Section 4.4 of the Plan shall be amended by adding the following:
The assets of the Trust will be valued annually at fair market value as of the last day
of the Plan Year. On such date, the earnings and losses of the Trust will be allocated
to each Participant's Accounts in the ratio that the value of each Account balance
bears to all account balances.
Amendment #Two
Section 3.4 shall be amended by adding the following:
Excess annual additions. If, as a result of the allocation of.forfeitures, or a
reasonable error in estimating a Participant's annual compensation, the annual
additions under the terms of a plan for a particular participant would cause the
limitations of Section 415 applicable to that participant for the limitation year
to be exceeded, the excess amounts shall not be deemed annual additions in
that limitation year and shall be treated as follows:
(i) The excess amounts in the participant's account shall be allocated and
reallocated to other participants in the plan. However, if the allocation or
reallocation of the excess amounts causes the limitations of Section 415 to be
exceeded with respect to each plan participant for the limitation year, then
these amounts shall be held unallocated in a supense account. If a suspense
account is in existence at any time during a particular limitation year, other
than the limitation year described in the preceding sentence, all amounts in
the suspense account shall be allocated and reallocated to Participants'
accounts (subject to the limitations of Section 415) before any employer
contributions and employee contributions which would constitute annual
additions may be made to the plan for that limitation year.
2
Amendment# Three
Section 3.4 shall be amended by adding the following:
If, in addition to this Plan, the Participant is covered under another qualified
defined contribution plan maintained by the Employer, a welfare benefit fund, as
defined in Code Section 419(e) maintained by the Employer, or an individual '
.medical account, as defined in Code Section 415 (1) (2), maintained by the
Employer, that provides an Annual Addition during any Limitation Year, the
Annual Additions that may be credited to a Participant's accounts under this Plan
for any Limitation Year will not exceed the maximum amount permitted under
Code Section 415 reduced by the Annual Additions credited to the Participant's
account under the other Plans and welfare benefit funds for the same Limitation
Year. If the Annual Additions with respect to the Participant under other
defined contribution plans and welfare benefit funds maintained by the Employer
are less than the maximum amount permitted under Code Section 415 and the
Employer contributions that would otherwise be contributed or allocated to the
Participant's accounts under this Plan would cause the Annual Additions for the
Limitation Year to exceed this limit, the amount contributed or allocated
under this Plan will be reduced so that the Annual Additions under all such plans
and funds for the Limitation Year will equal less than the maximum amount
permitted under Code Section 415. If the Annual Additions with respect to the
Participant under such other defined contribution plans and welfare benefit funds
in the aggregate are equal to or greater than the maximum amount permitted
under Code Section 415, no amount will be contributed or allocated to the
Participant's accounts under this Plan for the Limitation Year.
If the employer maintains, or at any time maintained, a qualified defined
benefit plan covering any Participant in this Plan, the sum of the Participant's
Defined Benefit Fraction and Defined Contribution Fraction will not exceed
1.0 for any Limitation Year. For this purpose, the amount of the Annual
Addition for any Limitation Year will be reduced to the extent necessary
so that the sum of the Defined Benefit Fraction and Defined Contribution
Fraction do not exceed 1.0. For purposes of the above, the following
definitions will apply:
Compensation: All of each Participants's compensation (as that term is defined
in Code §415(c)(3)). For any Self—Employed Individual covered under the Plan,
compensation will mean Earned Income. Compensation includes only that compensation
which is actually paid to, or includible in the gross income of, the Participant
during the "applicable period". For this Plan, except as specified to the contrary
elsewhere in this Plan document, the applicable period will be the Plan Year
unless applicable law mandates a different period, in which case the applicable
period will be such legally required period.
3
The annual compensation of each Participant taken into account under the Plan for
any year will not exceed $200,000, as adjusted by the Treasury Secretary at the
same time and in the same manner as under Code §415(d), except that the dollar
increase in effect on January 1 of any calendar year is effective for years beginning
in such calendar year. If the Plan determined compensation on a period of time that
contains fewer than 12 calendar months, then the annual compensation limit is an
amount equal to the annual compensation limit for the calendar year in which the
compensation period begins multiplied by the ratio obtained by dividing the
number of full months in the period by 12.
In determining the compensation of a Participant for purposes of this limit, the
rules of Code §414(q)(6) will apply, except in applying these rules, "family"
will include only the Participant's spouse and any lineal descendants of the
Participant who have not attained age 19 before the close of the year. If, as
a result of the application of these rules, the adjusted $200,000 limit is exceeded,
then (except for determining the portion of compensation up to the integration
level if this Plan provides for permitted disparity), the limit will be prorated
among the affected individual's compensatin determined under this section before
this limit is applied.
If compensation for any prior plan year is taken into account in determining the
employee's contributions or benefits for the current year, the compensation for such
year, is subject to the applicable annual compensation limit in effect for that
prior year.
Defined Benefit Fraction: .A fraction, the numerator of which is the sum of
the Participant's projected annual benefits under all the defined benefit plans
(whether or not terminated) maintained by the Employer, and the
denominator of which is the lesser of 125% of the dollar limit determined ,
for the Limitation Year under Code §415(b) and (d) or 140% of the highest
average compensation, including any adjustments under Code §415(b).
Notwithstanding the above, if the Participant was a Participant as of the first
day of the first Limitation Year beginning after December 31, 1986, in one
or more defined benefit plans maintained by the Employer that were in
existence on May 6, 1986, the denominator of this fraction will not be less
than 125% of the sum of the annual benefits under such plans that the
Participant had accrued as of the close of the last Limitation Year beginning
before January, 1, 1987, disregarding any changes in the terms and
conditions of the plan after May 5, 1986. The preceding sentence applies
only if the defined benefit plans individually and in the aggregate satisfied
Code §415 for all Limitation Years beginning before January 1, 1987.
4
Defined Contribution Dollar Limitation: $30,000 or if greater, one—fourth
of the defined benefit dollar limitation of Code §415(b)(1) as in effect for
the Limitation Year.
Defined Contribution Fraction: A fraction, the numerator of which is the
sum of the Annual Additions to the Participant's account under all the
defined contribution plans (whether or not terminated) maintained by the
Employer for the current and all prior Limitation Years (including the
Annual Additions attributable to the Participant's nondeductible employee
contributions to all defined benefit plans, whether or not terminated,
maintained by the Employer, and the Annual Additions attributable to all
welfare benefit funds, as defined in Code §419(e), and individual medical
accounts, as defined in Code §415(1)(2), maintained by the Employer), and
the denominator of which is the sum of the maximum aggregate amounts for
the current and all prior Limitation Years of service with the Employer
(regardless of whether a defined contribution plan was maintained by the '
Employer). The maximum aggregate amount in any Limitation Year is the
lesser of 125% of the dollar limitation determined under Code §415(b) and
(d) in effect under Code §415(c)(1)(A) or 35% of the Participant's
compensation for such year.
If the Employee was a Participant as of the end of the first day of the first
Limitation Year beginning after December 31, 1986, in one or more defined
contribution plans maintained by the Employer that were in existence on
May 6, 1986, the numerator of this fraction will be adusted if the sum of
this fraction and the Defined Benefit Fraction would otherwise exceed 1.0
under the terms of this plan. Under the adjustment, an amount equal to the
product of(i) the excess of the sum of the fractions over 1.0 times (ii) the
denominator of this fraction, will be permanently subtracted from the
numerator of this fraction. The adjustment is calculated using the fractions
as they would be computed as of the end of the last Limitation Year
beginning before January 1, 1987, and disregarding any changes in the
terms and conditions of the Plan made after May 5, 1986, but using the §415
limitation applicable to the first Limitation Year beginning on or after
January 1, 1987.
Employer: For purposes of this Article, Employer will mean the Employer
that sponsors this Plan, and all members of a controlled group of
corporations (as defined in Code §414(b) as modified by §415(h), all
commonly controlled trades or businesses (as defined in §414(c) as modified
by §415(h) or affiliated service groups (as defined in §415(m) of which the
Employer is a part, and any otber entity required to be aggregated with the Employer
pursuant to regulations under §414(o).
-5
Ammendment Four
A new Section 3.5 will be added as follows:
If the Plan's vesting schedule is amended or the Plan is amended in any way that
directly or indirectly affects the computation of a Participant's nonforfeitable
percentage, or if the Plan is deemed amended by an automatic change to or from
a top-heavy vesting schedule, each Participant with at least three years of
service with the Employer may elect within a reasonable period after the
adoption of the amendment or change to have his nonforfeitable percentage
computed under the Plan without regard to such amendment, or change.
Election period. The period during which the election may be made will begin
with the date the amendment is adopted or deemed to be made and will end on
the latest of:
(i) 60 days after the amendment is adopted;
(ii) 60 days after the amendment becomes effective; or
(iii) 60 days after the Participant is issued written notice
of the amendment by the Employer or Plan Administrator.
Ammendment #Five
Section 4.4 shall be amended.to delete the following sentence:
Not less frequently than annually, the Employer shall notify each participant of
the value of his Employer Contribution Account and Employee Contribution Account.
6
Execute 's a f . Qt� , 199-, at T i4i&-ion
Signa ure of la Administr or
LM
Title
1`f 0 E7 07 Ik)CnToo
Agency Name
................................................................
:
:::..............................................................................................,....................................
P A R S
Public Agency Retirement System
ON
sm
MOEN
ADOPTION AGREEMENT
Version 6
October 22, 1991
Copyright c 1991 PHASE 11 SYSTEMS. All rights reserved. Reproduction in part or whole is prohibited.
ADOPTION AGREEMENT TO
THE PUBLIC AGENCY RETIREMENT SYSTEM (PARS)
AND TRUST AGREEMENT
EMPLOYER City of Huntington Beach, California
FEDERAL I.D. # 95-6000723
PLAN ADMINISTRATOR Robert J. Franz
(Name)
Duty City Administrator
(Title)
ADDRESS Administrative Services
(Department)
2000 Main Street
(Number and Street)
Huntington Beach, California 92648
(City) (State and Zip Code)
NAME OF PLAN PUBLIC AGENCY RETIREMENT SYSTEM (PARS)--
City of Huntington Beach
(Agency Name)
l
INTRODUCTION
This Adoption Agreement, the provisions of the Public Agency Retirement System(PARS), and the
provisions of the PARS Trust of which this Agreement is a part, are hereby adopted by the Employer
executing this Agreement for the benefit of Eligible Employees and their Beneficiaries.
This Adoption Agreement is part of the adoption of a new Plan, as provided in Section 2.5 of the PARS
Trust.
Item 1: EFFECTIVE DATE
EFFECTIVE DATE shall mean January 1, 1992
Item 2: ELIGIBLE EMPLOYEE
A. ELIGIBLE EMPLOYEE shall mean only those Employees who, at any time during which the
Employer maintains this Plan, are not accruing a benefit under Social Security or another Retirement
System provided and maintained by the Employer which meets the minimum requirements of IRS
Regulations of 1RC Section 3121 (b)(7)(f).
B. ELIGIBLE EMPLOYEE shall include all active and inactive employees until termination of
employment.
C. ELIGIBLE EMPLOYEE shall exclude all employees exempted under IRC Section 3121 (b)(7)(f).
D. ELIGIBLE EMPLOYEE shall include the following:
Those employees not enrolled in PERS (Public Employees'
Retirement System)
Item 3: ELIGIBILITY CONDITIONS
A. SERVICE REQUIREMENT: An Employee who qualities as an ELIGIBLE EMPLOYEE under
Item 2 above shall be eligible to participate immediately.
B. EMPLOYMENT REQUIREMENT: An Employee who terminates employment during the Plan
Year shall still be eligible to participate during such Plan Year.
Item 4: COMPENSATION
A. COMPENSATION shall mean all compensation for the Plan Year paid or payable in cash or in kind
by the Employer for personal services by the Eligible Employee. This definition of COMPENSATION
shall be subject to the provisions of Article 1.06 of the Plan as well as the further provisions of this Item.
B. If elected in this Item, the term COMPENSATION shall be defined as follows:
CALIF. PERS Compensation [] YES [ ] NO
CALIF. STRS Compensation [ ] YES [ ] NO
Base Salary [ ] YES [] NO
Other [xJ YES [ ] NO (define below)
HQ ley wage
2
Item S: NORMAL RETIREMENT AGE
NORMAL RETIREMENT AGE shall mean sixty (60)years of age.
Item 6: NORMAL RETIREMENT DATE
NORMAL RETIREMENT DATE shall mean the first of the month coincident with or next following
the date on which the Participant attains NORMAL RETIREMENT AGE.
Item 7: DEATH AND TOTAL DISABILITY PROVISION
I
A Participant's Vesting and distribution rights on the date of his death or 'Permanent and Total
Disability" will be the same as the Vesting and distribution rights applicable on the date of his
attainment of Normal Retirement Age.
Item 8: ALLOCATION AND AMOUNT OF CONTRIBUTIONS
A. The Employer shall make Employer Contributions in the amount of 0 % of each Participant's
Compensation. Employer Contributions shall be forwarded to the Trustee to be allocated to each
Participant's Employer Contribution Account.
B. Each Participant shall make Employee Contributions in the amount of 7.59o' of his Compensation.
Employee Contributions shall be forwarded to the Trustee to be allocated to the Participant's Employee
Contribution Account. Employee contributions will be "before tax" due to the employer's adoption of
IRC Section 414(h) "employer pickup" in the Plan Document.
C. All Plan expenses shall be paid out of Plan assets, and shall be allocated as follows:
0 % to the Employer Contribution Accounts, and 100 % to the Employee Contribution Accounts.
D. A Participant shall not be permitted to direct the investment of his Employer Contribution Account
or his Employee Contribution Account.
Item 9: INVESTMENT OF CONTRIBUTIONS
A. Yes X No Contributions will be deposited in Imperial Trust Company's Money Market
Fund and wire-transferred on last working day of the month to the Hartford's Group Immediate
Participation Guarantee (IPG) insured investment contract.
B. Yes No X Contributions will be deposited in Imperial Trust Company's Money Market
Fund.
Item 10:VALUATION DATE
VALUATION DATE shall mean the last day of the Plan Year.
Item 11:METHOD OF FUNDING
The Plan shall be funded as provided under Section 4.1 of the PARS Plan Document.
3
Item 12:VESTING
A. Yes No_2L_Years of Service with the Employer completed before the Employer maintained this
Plan shall be counted to determine the nonforfeitable percentage in such Employee's benefit from
Employer Contributions.
B. Yes_X_No Years of Service completed prior to termination of employment shall not be credited
to an Employee who terminates employment before satisfying the eligibility requirements in Item 3 of
the Adoption Agreement.
C. For Vesting purposes, a Participant will be credited with a Year of Participation or Service only if
he or she completes at least one Hour of Service during the computation period.
D. The Participant's Employee Contribution Account shall be 100% Vested at all times. The
Participant's Employer Contribution Account shall be 100% Vested at Normal Retirement Age, or Total
Disability or death. However, notwithstanding anything to the contrary in this Plan, the Participant shall
be Vested in his Employer Contribution Account to such a degree and at such a time as to meet the
minimum requirements for a retirement system under Section 3121(b)(7)(F) of the Code.
E. Benefits shall be vested in accordance with the following:
Yes No_X_A participant transferring to an eligible retirement plan with the same
employer shall be 100% vested.
Yes No_X_The scheduling shown below shall be used:
Item 13:PLAN YEAR
The PLAN YEAR shall be the period of twelve (12) consecutive months commencing on
1/1/92 and ending on 12/31/92
Item 14:MISCELLANEOUS
This Adoption Agreement shall be used only in conjunction with the Public Agency Retirement System
(PARS) and the PARS Trust.
Executed this d _ , 1991, at Huntington Beach, , California.
Signature o mnlstrator
Robert J. Franz, Depot Cit 'strator
Title
4
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
DISTRICT DIRECTOR
2 CUPANIA CIRCLE
MONTEREY PARK, CA 91754
Employer Identification Number:
Date: FEBO 3 Im 95-6000723
File Folder Number:
CITY OF HUNTINGTON BEACH 331005129
C/O MYLES MARGADY Person to Contact:
PHASE II SYSTEMS RAMON CHAVEZ
350 EAST SEVENTEENTH ST SUITE 212 Contact Telephone Number:
COSTA MESA, CA 92627 (213) 725-0905
Plan Name:
PUBLIC AGENCY RETIREMENT SYSTEM
CITY OF HUNTINGTON BEACH
Plan Number: 002
Dear Applicant:
We have made a favorable determination on your plan, identified above,
based on the information supplied. Please keep this letter in your permanent
records.
Continued qualification of the plan under its present form will depend
on its effect in operation. (See section 1.401-1 (b) (3) of the Income Tax
Regulations.) We will review the status of the plan in operation periodically.
The enclosed document explains the significance of this favorable
determination letter, points out some features that may affect the qualified
status of your employee retirement plan, and provides information on the
reporting requirements for your plan. It also describes some events that
automatically nullify it. It is very important that you read the publication.
This letter relates only to the status of your plan under the Internal
Revenue Code, It is not a determination regarding -the-effect of other federal
or local statutes.
This determin4tion letter is applicable for the plan adopt&.. z
12-16-91.
This letter is based upon the certification and..demonstrationsyouu sub- .
mitted pursuant to Revenue Procedure 91-66. Therefore, the certification and
demonstrations are considered an integral part of this letter. Accordingly,
YOU MUST KEEP A COPY OF THESE DOCUMENTS AS A PERMANENT RECORD OR YOU WILL NOT
BE ABLE TO RELY ON THE ISSUES DESCRIBED IN REVENUE PROCEDURE 91-66.
We have sent a copy of this letter to your representative as indicated in
the power of attorney.
Letter 835 (DO/CG)
RECEIVED FES 0 1993
r / ,
-'-
CITY OF HUNTINGTON BEACH
If you have questions concerning this matter, please contact the person
whose name and telephone number are shown above.
Sincerely yours,,
Mich el J. inn
District Director
Enclosures:
Publication 794
PWBA 515
Letter 835(DO/CG)
CITY COUNCIL RESOLUTION NO. 6338
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
HUNTINGTON BEACH, APPROVING PARTICIPATION IN
PUBLIC AGENCY RETIREMENT SYSTEM (PARS)
WHEREAS, it is determined to be in the best interest of the City of Huntington
Beach and its employees to provide a qualified retirement system to all part—time
employees, thereby meeting the requirements of Section 11332 of the Social Security
Act; and
WHEREAS, an alternative qualified defined contribution pension plan entitled Public
Agency Retirement System (PARS) is designed for California Public Agencies; and
WHEREAS, the Public Agency Retirement System (PARS) will qualify as a retirement
plan in place of Social Security coverage.
NOW, THEREFORE, the City Council of the City of Huntington Beach, DOES HEREBY
RESOLVE, DETERMINE, AND ORDER as follows:
SECTION 1 . Adoption of the PARS pension plan effective January 1 , 1991 ; and
SECTION 2. The Deputy City Administrator/Chief of Administrative Services is
hereby appointed as the Plan Administrator; and
SECTION 3. The Plan Administrator is hereby authorized to execute an adoption
I agreement and administration agreement and other necessary actions
to maintain participation and compliance with Section 11332 of the
Social Security Act and the relevant regulations issued or as may
be issued.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at an
adjourned regular meeting held on the 16th day of oec- _mber 1991 .
MAYOR Q/f/
ATTESTED: APPROVED AS TO FORM:
CITY CLERK CITY ATTO Y
REVIEWED IAT
CITY ADMINI TOR DEPOT Y DMINtTOR
s
Res. No. 6338
1 .
STATE OF CALIFORNIA
COUNTY OF ORANGE ss:
CITY OF HUNTINGTON BEACH )
I, CONNIE BROCKWAY, the duly elected, qualified City
Clerk of the City of Huntington Beach, and ex-officio Clerk of the
City Council of said City, do hereby certify that the whole number of
members of the City Council of the City of Huntington Beach is seven;,- -
that the foregoing resolution was passed and adopted by the affirmative
vote of at least a majority of all the members of said City Council
at a regular - meeting thereof held on the 16th day
Of December 1991 by the following vote:
AYES: Councilmembers:
Robitaille, Moulton-Patterson, Winchell, Silva, Green, MacAllister, Kelly
NOES: Councilmembers:
None
ABSENT: Councilmembers:
None
city er an ex-o ici er
of the City Council of the City
of Huntington Beach, California
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
DISTRICT DIRECTOR
2 CUPANIA CIRCLE
MONTEREY PARK, CA 91754
Employer Identification Number:
Date: FEBO 3 95-6000723
File Folder Number:
CITY OF HUNTINGTON BEACH 331005129
C/O MYLES MARGADY Person to Contact:
PHASE II SYSTEMS - RAMON CHAVEZ
350 EAST SEVENTEENTH ST SUITE 212 Contact Telephone Number:
COSTA MESA, CA 92627 (213) 725-0905
Plan Name:
PUBLIC AGENCY RETIREMENT SYSTEM
CITY OF HUNTINGTON BEACH
Plan Number: 002
Dear Applicant:
We have made a favorable determination on your plan, identified above,
based on the information supplied. Please keep this letter in your permanent
records.
Continued qualification of the plan under its present form will depend
on its effect in operation. (See section 1.401-1 (b) (3) of the Income Tax
Regulations.) We will review the status of the plan in operation periodically.
The enclosed document explains the significance of this favorable
determination letter, points out some features that may affect the qualified
status of your employee retirement plan, and provides information on the
reporting requirements for your plan. It also describes some events that
automatically nullify it. It is very important that you read the publication.
This letter relates only to the status of your plan under the Internal
Revenue Code. It is not a determination regarding the effect of other federal
or local statutes.
This determination letter is applicable for the plan adoptE 1
12-16-91.
This letter is based upon the certification and demonstrations you sub-
mitted pursuant to Revenue Procedure 91-66. Therefore, the certification and
demonstrations are considered an integral part of this letter. Accordingly,
YOU MUST KEEP A COPY OF THESE DOCUMENTS AS A PERMANENT RECORD OR YOU WILL NOT
BE ABLE TO RELY ON THE ISSUES DESCRIBED IN REVENUE PROCEDURE 91-66.
We have sent a copy of this letter to your representative as indicated in
the power of attorney.
Letter 835 (DO/CG)
)RECEIVED FEB 0; 9 83
-2-
CITY OF HUNTINGTON BFsACH
If you have questions concerning this matter, please contact the person
whose name and telephone number are shown above.
Sincerely yours,
L.�i
Mich hel J. inn
District Director
Enclosures:
Publication 794
PWBA 515
f:
Letter, 835 (DO/CG)
r
:: :::::::::.....:.::..:......::::::::::::::::::::.::::.::.:.:........::::.:::.:::::::.:.::::::.:........................................................................:.............. ........ :::.:::::........::..:::::......:::::.::::::::.
i}i::4' ::.:::i:::::vi:[1}i:•i.;:!:}:i}is.;?i::4i}is< ::::::::.:::::::::i:iiii?::::.:':<L::::::::i:i}iii:[.is::.::v:i>iii:S iiiii:::::4:4::.::::i:Y::i::-A..... 4iii........................... is iiiiiiiiiiiiiJi}iiiii:::.i:4iiiiiY:
P A R S
Public Agency Retirement System
Nov o l 199,
City of
Re: PARS Implementation Packet Huntington Beach
Personnei Dept
Dear PARS Administrator;
This is to confirm your agency's interest in the Public Agency Retirement System (PARS) and
to provide you with the documents and information necessary for the next steps of implementation.
The checklist below shows what is needed to implement PARS. We require all outstanding fees
and documents before we can begin to process your file.
FEES AU PARS fees may be paid by a single check made out to Imperial Trust Co-PARS Account
Received Not Yet Received (send as soon as possible)
$750 PARS Implementation Fee
7 r_x_j $825 IRS application fee ($700 if fewer than 100 participants)
7 $1,000 Initial Hartford Deposit (credited to Employer Contributions)
DOCUMENTS
Received Not Yet Received (copy or sample enclosed: send as soon as possible)
A Signed PARS Engagement Letter
Fix� A Signed Hartford Application
❑ Fix� A Completed and Signed PARS Adoption Agreement
A Completed IRS Data Form
0 A Signed Resolution from your governing board adopting PARS for your agency
A Completed and Signed IRS 2848 Power of Attorney Form appointing the firm
of Grant Thornton to represent your agency and file your application for an IRS
Determination Letter
In order to implement the plan in a timely manner, we will need to receive all PARS fees and
documents at the address below as soon as possible. As questions arise now or in the future,
please do not hesitate to call us. If you are outside the (714) area, please use the toll—free
number listed below. We look forward to working with you.
Cordially,
Karen Zfaty, M.B.A.
Director, Marketing Services Tara\pars\imp
350 E. 17th St., Suite 212 Costa Mesa,CA 92627 (714)631-6369 (800)540-6369 fax(714)631-2063
O
:u
P A R S
Public Agency Retirement System
Subject: Engagement Letter for Adoption of the Public Agency Retirement System (PARS)
Phase H Systems is prepared to implement PARS which is intended to be an alternative to
mandatory Social Security coverage effective 1/1/92 for public agency employees not eligible for a
current public agency pension plan. Phase II will be available for ongoing consultations with staff
and governing body representatives concerning mandatory Social Security coverage and related
matters.
The Implementation Fee, payable to Imperial Trust Company - PARS Account, will be $1,575:
$825 ($700 if fewer than 100 participants) is a non-refundable fee for a Letter of Determination from
the IRS (to establish IRS approval of the tax status of your plan), payable upon the return of this
signed Engagement Letter, and $750 is payable upon adoption of PARS by the governing body. This
Implementation Fee is specifically for those services described in this letter.
If the terms expressed in this letter are in accordance with your understanding of this engagement,
sign this letter and return it to Phase II.
Sincerely,
PHASE II SYSTEMS
350 E. 17th St., Suite 212
Costa Mesa, CA 92627
The foregoin r fu ribes the services desir
Au
City of Huntington Beach
Signature Public Agency
Robert J. Franz Administrative Services
Name- Print or Type Department
Deputy City Administrator 2000 Main Street
Tide Address
December 23, 1991 Huntington Beach, California 92648
Date City, State
Phase II systems is not licensed to provide and does not offer eaz,accounting or<legal advice The public agency uz urged'to cona07
with pppropn8te professionals'regarding the tax;accounting and legal unpLcations of adopting a PARS Pension Plan.
350 E. 17th St.,Suite 212,Costa Mesa,CA 92627 (714)631-6369 (800)540-6369 fax(714)631-2063
Application for Group Annuity Contract AOL THE HARTFORD
The Insurance People of ITT
Application is Hereby Made to
HARTFORD LIFE INSURANCE COMPANY
Hartford,Connecticut
(Contractholder)by
Whose Main Office Address is
for a Group Annuity Contract.
Separate Account Contributions: ® Not Applicable ❑ To be Included
Plan Assets maybe deposited in Separate Account NA
Dated at on 19
(Agent or Broker) (Legal Name of Applicant)
by
(Witness) (Signature and Title)
Amount of Binding Payment$ 1,000
Form PAL-1879-0 Printed in U.S.A.
HARTFORD LIFE INSURANCE COMPANY
Hartford,Connecticut
RECEIPT
Received by
dollars to be applied as a credit towards the payment of the first contribution under the contract for
which application is made.If the application is not accepted,the payment evidenced by this receipt shall be returned.
Date Agent or Broker
(Detach this receipt when payment is made)
P A R S
Public Agency Retirement System
ADOPTION AGREEMENT
Version 6
October 22, 1991
Copyright c 1991 PHASE 11 SYSTEMS. All rights reserved. Reproduction in part or whole is prohibited.
ADOPTION AGREEMENT TO
THE PUBLIC AGENCY RETIREMENT SYSTEM (PARS)
AND TRUST AGREEMENT
EMPLOYER City of Huntington Beach, California
FEDERAL I.D. # 95-6000723
PLAN ADMINISTRATOR Robert J. Franz
(Name)
Deputy City Administrator
(Title)
ADDRESS Administrative Services
(Department)
2000 Main Street
(Number and Street)
Huntington Beach, California 92648
(City) (State and Zip Code)
NAME OF PLAN PUBLIC AGENCY RETIREMENT SYSTEM (PARS)--
City of Huntington Beach
(Agency Name)
l
INTRODUCTION
This Adoption Agreement, the provisions of the Public Agency Retirement System (PARS), and the
provisions of the PARS Trust of which this Agreement is a part, are hereby adopted by the Employer
executing this Agreement for the benefit of Eligible Employees and their Beneficiaries.
This Adoption Agreement is part of the adoption of a new Plan, as provided in Section 2.5 of the PARS
Trust.
Item 1: EFFECTIVE DATE
EFFECTIVE DATE shall mean January 1, 1992
Item 2: ELIGIBLE EMPLOYEE
A. ELIGIBLE EMPLOYEE shall mean only those Employees who, at any time during which the
Employer maintains this Plan, are not accruing a benefit under Social Security or another Retirement
System provided and maintained by the Employer which meets the minimum requirements of IRS
Regulations of 1RC Section 3121 (b)(7)(f).
B. ELIGIBLE EMPLOYEE shall include all active and inactive employees until termination of
employment.
C. ELIGIBLE EMPLOYEE shall exclude all employees exempted under IRC Section 3121 (b)(7)(f).
D. ELIGIBLE EMPLOYEE shall include the following:
Those emloyees not enrolled in PERS (Public Etmloyees'
Retirement System)
Item 3: ELIGIBILITY CONDITIONS
A. SERVICE REQUIREMENT: An Employee who qualities as an ELIGIBLE EMPLOYEE under
Item 2 above shall be eligible to participate immediately.
B. EMPLOYMENT REQUIREMENT: An Employee who terminates employment during the Plan
Year shall still be eligible to participate during such Plan Year.
Item 4: COMPENSATION
A. COMPENSATION shall mean all compensation for the Plan Year paid or payable in cash or in kind
by the Employer for personal services by the Eligible Employee. This definition of COMPENSATION
shall be subject to the provisions of Article 1.06 of the Plan as well as the further provisions of this Item.
B. If elected in this Item, the term COMPENSATION shall be defined as follows:
CALIF. PERS Compensation [ ] YES ( ] NO
CALIF. STRS Compensation [ ] YES [ ] NO
Base Salary [ ] YES [ ] NO
Other D4 YES [ ] NO (define below)
Hourly wage
2
Item 5: NORMAL RETIREMENT AGE
NORMAL RETIREMENT AGE shall mean sixty (60)years of age.
Item 6: NORMAL RETIREMENT DATE
NORMAL RETIREMENT DATE shall mean the first of the month coincident with or next following
the date on which the Participant attains NORMAL RETIREMENT AGE.
Item 7: DEATH AND TOTAL DISABILITY PROVISION
A Participant's Vesting and distribution rights on the date of his death or "Permanent and Total
Disability" will be the same as the Vesting and distribution rights applicable on the date of his
attainment of Normal Retirement Age.
Item 8: ALLOCATION AND AMOUNT OF CONTRIBUTIONS
A. The Employer shall make Employer Contributions in the amount of 0 `Yo of each Participant's
Compensation. Employer Contributions shall be forwarded to the Trustee to be allocated to each
Participant's Employer Contribution Account.
B. Each Participant shall make Employee Contributions in the amount of__7 of his Compensation.
Employee Contributions shall be forwarded to the Trustee to be allocated to the Participant's Employee
Contribution Account. Employee contributions will be "before tax" due to the employer's adoption of
IRC Section 414(h) "employer pickup" in the Plan Document.
C. All Plan expenses shall be paid out of Plan assets, and shall be allocated as follows:
0 q to the Employer Contribution Accounts, and 100 % to the Employee Contribution Accounts.
D. A Participant shall not be permitted to direct the investment of his Employer Contribution Account
or his Employee Contribution Account.
Item 9: INVESTMENT OF CONTRIBUTIONS
A. Yes X No Contributions will be deposited in Imperial Trust Company's Money Market
Fund and wire-transferred on last working day of the month to the Hartford's Group Immediate
Participation Guarantee (IPG) insured investment contract.
B. Yes No X Contributions will be deposited in Imperial Trust Company's Money Market
Fund.
Item 10:VALUATION DATE
VALUATION DATE shall mean the last day of the Plan Year.
Item 11:METHOD OF FUNDING
The Plan shall be funded as provided under Section 4.1 of the PARS Plan Document.
3
Item 12:VESTING
A. Yes No_Years of Service with the Employer completed before the Employer maintained this
Plan shall be counted to determine the nonforfeitable percentage in such Employee's benefit from
Employer Contributions.
B. Yes X No Years of Service completed prior to termination of employment shall not be credited
to an Employee who terminates employment before satisfying the eligibility requirements in Item 3 of
the Adoption Agreement.
C. For Vesting purposes, a Participant will be credited with a Year of Participation or Service only if
he or she completes at least one Hour of Service during the computation period.
D. The Participant's Employee Contribution Account shall be 100% Vested at all times. The
Participant's Employer Contribution Account shall be 100% Vested at Normal Retirement Age, or Total
Disability or death. However, notwithstanding anything to the contrary in this Plan, the Participant shall
be Vested in his Employer Contribution Account to such a degree and at such a time as to meet the
minimum requirements for a retirement system under Section 3121(b)(7)(F) of the Code.
E. Benefits shall be vested in accordance with the following:
Yes No_X—A participant transferring to an eligible retirement plan with the same
employer shall be 100% vested.
Yes No_X_The scheduling shown below shall be used:
Item 13:PLAN YEAR
The PLAN YEAR shall be the period of twelve (12) consecutive months commencing on
1/1/92 and ending on 12/31/92
Item 14:MISCELLANEOUS
This Adoption Agreement shall be used only in conjunction with the Public Agency Retirement System
(PARS) and the PARS Trust.
Executed this QOMstrator
1991, at Huntington Beach, , California.
lof
Sig
Robert J. Franz, Deputy Cit2nitrator
Title
4
P A R S
Public Agency Retirement System
I.R.S. Data Forth
INSTRUCTIONS: The IRS Letter of Plan Determination Application requires the following information:
♦ A list of the 25 highest paid employees eligible for PARS in order of compensation, starting
with the highest paid, including Name, Date of Birth, Years of Service, and 1990 W-2 Income
♦ The information requested at the bottom of this page
• The information may be submitted on another page--you need not use this form.
Particiaants' Last Name and Initials Date of Birth Hire Date 1990 W-2 Income
1 W. S. 12 27 27 09 09 74
2
3 15 53 07 2 8
4
5
6
7
8 Lep 9 2 09/01/90
10 Chriat, P. 08 22 61 09 29 89
11
12
13
14
15
16 Boterly0 15 38 03 0 0
17
18 in L. I 02 16 41 09 18 2
19 Perkins, B. 01 16 38 01 23 82
20F. p. 2 03/28/66
21
22
23
24
25
Name of Agency City of Huntington Beach
Person to whom correspondence relating
to PARS should be addressed Robert J. Franz, Deputy City Administrator
Mailing Address 2000 Main Street
City, State ZIP Huntington Beach, California 92648
Phone Number (714) 536-5228
Year Agency was Founded(approximate) February 17, 1909
Agency or District's Federal Tax ID Number 95-6000723W
Total Number Total 1990 W-2 Payroll
Employees Eligible for PARS 1,030
Employees Participating in PERS 1 085
Employees Participating in STRS 0
350 E. 17th St., Suite 212,Costa Mesa,CA 92627 (714)631-6369 (800)540-6369 fax(714)631-2063
48
Form 2 V
Power of Attorney OMB No.1545-0150
(Rev.March 1991)
Department of the Treasury and Declaration of Representative Expires 5.31.93
Internal Revenue Service ► For Paperwork Reduction and Privacy Act Notice,see the instructions.
Power of Attorney
1 Taxpayer Information
Taxpayer name(s)and address(Please type or print.) Social security number(s) Employer identification
number
City of Huntington Beach 95-6000723W
2000 Main Street
Huntington Beach, California 92638 Plan number(if applicable)
Daytime telephone number
( 714 ) 536-5228
hereby appoint(s)the following representative(s)as attorneys)-in-fact:
2 Representative(s) (Please type or print.)
Name and address Myles Margady CAF No...-.-----
2005-28454R
C/O GRANT THORNTON Telephone No. (213 ) 627-1717_.._
1000 Wilshire Blvd.,Ste 700 Fax No. ( 213 )_624-6793
Los Angeles,CA 90017 Check if new: Address . ❑ Tele hone No. ❑
Name and address CAF No.
N/A Telephone No. ( ) ........................
FaxNo. ( )--------------------------------
Check if new: Address . ❑ Telephone No. ❑
Name and address CAF No.
N/A Telephone No. ( ) ........................
Fax No. ( )--• -------------•--
Check if new: Address . ❑ Telephone No. ❑
to represent the taxpayer(s)before the Internal Revenue Service for the following tax matters:
3 Tax Matters
Type of Tax(Income, Employment,Excise,etc.) Tax Form Number(1040,941,720,etc.) Year(s)or Period(s)
Application for Determination of
RetirementPlan-Sian Form 5300 5300 1991
N/A
N/A
4 Specific Use Not Recorded on Centralized Authorization File(CAF).—If the power of attorney is for a specific use not recorded on
CAF,please check this box.(See the instructions for Specific Use Not Recorded on CAF on page 4.) . . . . . . . . ► ❑
5 Acts Authorized.—The representatives are authorized to receive and inspect confidential tax information and to perform any and all
acts that I can perform with respect to the tax matters described in line 3,for example,the authority to sign any agreements,consents,
or other documents. The authority does not include the power to receive refund checks or the power to sign certain returns. (See
instructions.)
List any specific additions or deletions to the acts otherwise authorized in this power of attorney: .........Nolte.....................:....
.........................._...-------------••••-----•----•-•.......-----------------•---•------------••---•-------•----•----•-•----•...------•----
------•---..-•-----...---------------------------••-------------------------------------------••----------•----...--------•---------------•-------
Note: In general,an unenrolled preparer of tax returns cannot sign any document for a taxpayer. See Revenue Procedure 81.38, printed
as Pub.470, for more information.
Note: The tax matters partner/person of a partnership or S corporation is not permitted to authorize representatives to perform certain
acts.See the instructions for more information.
6 Receipt of Refund Checks.—If you want to authorize a representative named in line 2 to receive,BUT NOT TO ENDORSE OR CASH,
refund checks,initial here N/A and list the name of that representative below.
Name of representative to receive refund check(s) ► N/A
Cat.No. 11980J Form 2848 (Rev.3.91)
Form 2848(Rev.3.91) Page 2
7 Notices and Communications.—Notices and other written communications will be sent to the first representative listed in line 2.
a If you want the second representative listed to receive such notices and communications,check this box . . . . . . . ►
b If you do not want any notices or communications sent to your representative,check this box . . . . . . . . . . . ► ❑
8 Retention/Revocation of Prior Power(s) of Attorney.—The filing of this power of attorney automatically revokes all earlier
power(s) of attorney on file with the Internal Revenue Service for the same tax matters and years or periods covered by this
document.If you do not want to revoke a prior power of attorney,check here . . . . . . . . . . . . . . . . . ► 0
YOU MUST ATTACH A COPY OF ANY POWER OF ATTORNEY YOU WANT TO REMAIN IN EFFECT.
9 Signature of Taxpayer(s).—If a tax matter concerns a joint return, both husband and wife must sign if joint representation is
requested, otherwise, see the instructions. If signed by a corporate officer, partner, guardian,tax matters partner/person, executor,
receiver, administrator, or trustee on behalf of the taxpayer, I certify that I have the authority to execute this form on behalf of the
taxpayer.
► If this power of attorney Is not signed,It will be returned.
City Administrator
-- -- --- ------ -
Signature Date Title(if applicable)
MichaeV5ga--------------- --- - ....----•-•--•-•-------------••-•-•.
e
, Deputy City Administrator
.......... ....... ........ ..................... .. ....... ....._,_ ....._......-ate Title if applicable)
Robert J. Franz
..............•----•---------------•-•-------------•--•---•--------------------
Print Name
Declaration of Representative
Under penalties of perjury,I declare that:
• I am not currently under suspension or disbarment from practice before the Internal Revenue Service;
• I am aware of regulations contained in Treasury Department Circular No.230(31 CFR,Part 10),as amended,concerning the
practice of attorneys,certified public accountants,enrolled agents,enrolled actuaries,and others;
• I am authorized to represent the taxpayer(s)identified in Part I for the tax matter(s)specified there;and
• I am one of the following:
a Attorney—a member in good standing of the bar of the highest-court of the jurisdiction shown below.
b Certified Public Accountant—duly qualified to practice as a certified public accountant in the jurisdiction shown below.
c Enrolled Agent—enrolled as an agent under the requirements of Treasury Department Circular No.230.
d Off icer—a bona fide officer of the taxpayer organization.
e Full-Time Employee—a full-time employee of the taxpayer.
f Family Member—a member of the taxpayer's immediate family(i.e.,spouse,parent,child,brother,or sister).
g Enrolled Actuary—enrolled as an actuary by the Joint Board for the Enrollment of Actuaries under 29 U.S.C. 1242(the authority
to practice before the Service is limited by section 10.3(d)(1)of Treasury Department Circular No.230).
h Unenrolled Return Preparer—an unenrolled return preparer under section 10.7(a)(7)of Treasury Department Circular No.230.
► If this power of attorney is not signed,It will be returned.
Designation—Insert Jurisdiction(state)or Signature Date
above letter(a—h) Enrollment Card No.
Myles Margady(a)
REQUEST FOR CITY COUNCIL ACTI - -
ra/8
Date December IF, 1991
Submitted to: Honorable Mayor and City Council
Submitted by: Michael T. Uberuaga, City Administrator
L
Prepared by: Robert J. Franz, Deputy City Administrato v Y GIT
1921
Subject: Mandatory Pension Plan for Temporary and Part—T ees
C CL
Consistent with Council Policy? [ ] Yes VI New Policy or Exception ' 3 3 8
Statement of Issue, Recommendation,Analysis, Funding Source,Alternative Actions,Attachments:
STATEMENT OF ISSUE: The Internal Revenue Service (IRS) has issued final
regulations, which require all state and local government employees not
covered by a Pension plan to be included in Social Security, effective January
1 , 1992. If such employees are not added to the Federal Social Security
program, the City must take affirmative steps to implement an alternative
qualifying pension program.
RECOMMENDATION:
Adopt Resolution No. 3 3� , approving participation in a qualifying
pension program, the Public Agency Retirement System (PARS) , effective
January 1 , 1992.
ANALYSIS: In May of this year the City Council approved the establishment of
a trust fund for employer and . employee deposits toward a qualified pension
program in the amount of 7.65% of salary for both employee and employer
contributions. This action provided the City the remainder of the calendar
year to investigate alternatives to Social Security. The federal law allows
for either a "defined benefit plan" or "defined contribution plan." After
analyzing the differences between the plans a "defined contribution plan" is
recommended. A summary of the analysis of the advantages of this
recommendation is contained in Attachment A.
After analyzing the various qualifying defined contribution plans available on
the market, it is recommended that the City enter into an agreement with the
Public Agency Retirement System (PARS) to provide for this coverage. PARS is
a 401 (a) tax qualified plan which seems best suited as an alternative to
Social Security. Attachment B provides a brief analysis of two alternatives
to PARS, Section 403(b) and Section 457 plans, and their disadvantages.
Basis for Recommending PARS:
1 . PARS has no cost to the City compared to Social Security which is an
estimated $196,000 per year cost to the City (see #10 below for
detailed cost comparison of PARS vs Social Security) .
2. PARS has a corporate trustee, the Imperial Trust Company. Adopting a 1
plan with an experienced and well regarded corporate fiduciary is
preferred to alternative plans with no trustee which requires the City
to assume all fiduciary responsibilities.
P10 5185
3. PARS offers E voice of two investment vehic which provide a high
degree of safety:
a. Imperial Bank' s Money Market Fund for short or long term
investment with FDIC' s $100,000 insurance protection for each
participating employee, and
b. Hartford Life Insurance Company' s Immediate Participation Group
(IPG) annuity for an alternative long-term investment.
4. PARS can adapt to our payroll system. The only data required is:
Name, social security number, amount of compensation and amount of
contribution.
5. Administrative fees are based on the actual number of employees
employed each month (See attachment E) .
6. No enrollment forms are required by PARS (as with Social Security) .
Beneficiaries will be automatically designated as the spouse, if
married, the estate if unmarried, unless someone other is designated.
7. Upon termination of employment, the individual ' s PARS account will be
terminated and a lump sum distribution will be made if there is less
than $3,500 in the account. If the account balance exceeds $3,500, a
deferred life-time annuity payable at age 60 is issued.
8. PARS provides the freedom for the City to withdraw from PARS at any
time without penalty.
9. Employees will prefer PARS over Social Security for the following
reasons:
a. PARS contributions are 100% owned by the employee and in most
cases will be refunded upon termination.
b. PARS provides an option for pre-tax contributions while Social
Security contributions must be after-tax.
c. Many employees are already covered by Social Security and do not
need or desire this extra deduction.
10. Additional cost savings of PARS over Social Security (temporary and
part-time employees only) :
Employees hired after 3/31/86 Employees hired before 4/l/86
Social Security PARS Social Security PARS
Employer Contributions
FICA-Before Tax 6.20% -- 6.20% --
Medicare-Before Tax 1 .45% 1 .45% 1 .45% --
Employee Contributions
FICA-After Tax 6.20% -- 6.20% --
Medicare-After Tax 1 .45% 1 .45% 1 .45% --
PARS-Before Tax -- 7.50% -- 7.50%
Total Contributions
Employer 7.65% 1 .45% 7.65% --
Employee 7.65% 8.95% 7.65% 7.50%
is AM. 10.40% 15.30% 7.50%
FUNDING SOURCE: The City has budgeted for the cost of Social Security for
this fiscal year, which with the PARS alternative will result in a savings of
$196,000 per year.
ALTERNATIVE ACTION:
1 . Enroll all current and future employees, who are not members of PERS,
into Social Security.
2. Pay a portion of the PARS cost instead of having employees pay the full
7.5% PARS cost.
ATTACHMENTS:
A. Advantages of a Defined Contribution Plan
B. Alternatives to PARS
C. Summary of Major Differences Between Social Security and PARS
D. PARS Implementation Packet
E. Administrative Expenses
F. Resolution
WHO:pdc
WPPERSP:232
ATTACHMENT A
ADVANTAGES OF A DEFINED CONTRIBUTION PLAN
The following advantages support the selection of a defined contribution plan
over a defined benefit plan:
1 . The nature of a Defined Benefit Plan requires that older, higher cost
employees be subsidized by younger employees ' contributions. Even though
benefits are presumed to be equal , a short-term, young employee may not
receive a "fair" termination benefit in comparison with contributions
made. This issue is compounded when the majority of funding is through
employee contributions.
2. A Defined Benefit Plan benefit formula and distribution report is
difficult to communicate to part-time, seasonal , and temporary employees.
3. The Defined Benefit Plan funding formula may make it much more expensive
to provide benefits to older employees.
4. Governmental Accounting Standards Board regulations will require a clear
identification of actuarial funding liability in the city' s annual
financial statements, which, in turn, can affect the city' s credit rating.
5. There is a requirement to provide each employee and the agency with an
annual actuarial evaluation as well as an evaluation of each terminated
or retired employee' s benefit, which is a relatively costly undertaking.
This expense is not required with a defined contribution plan.
6. High turnover among part-time employees creates serious record-keeping
and actuarial projection complications (and therefore high administrative
Costs) for defined benefit plans due to the 100% vesting requirement.
WPPERSP:232
ATTACHMENT B
ALTERNATIVES TO PARS
403(b) Tax Sheltered Annuity 457 Deferred Compensation
Contracts Have These Problems Plans Have These Problems
- Under 403(b) regulations there is - There is no legislation enabling
no legislation enabling an mandatory employee contributions.
employer to institute mandatory
employee contributions. This can - Employees' accounts can not be
result in an employer providing vested until termination of
Social Security coverage for employment or retirement, yet,
those employees who refuse to proposed regulations require 100%
contribute to the 403(b) plan. vesting.
- 403(b) employer contributions - Benefits, when received, are
will be 100% vested even if the subject to Social Security (FICA)
final regulations permit delayed and Unemployment Insurance (FUTA)
vesting. There would be no cost deductions if regular payroll is
reductions from forfeitures. subject to Social Security.
403(b) regulations permit only - 457 assets are technically subject
one yearly change in to an employer' s creditors.
contributions. If a City cannot
make percentage deductions, a - Distribution cannot be rolled over
flat dollar deduction will not to an IRA.
adequately handle fluctuating
compensation.
WPPERSP:232
, ATTACHMENT
RM:
�.:.
P A R S
B e n e f i t s U p d a t e
Public Agency Retirement System
k...
.x::;•:w:::::::::::::/:. ..:...:vw::%+..,;,,':+v::::?::::::ii;::n;:•:::::.::•::+r is
ii:Ci:?•i:•iY:
August 1991
SOCIAL SECURITY vs. PARS
Below are some of the major differences between PARS and Social Security.
SOCIAL SECURITY PARS
Employee "contribution" (tax)not deductible on federal Employee contribution is pretax salary deduction which
tax return reduces taxable income
Unstable costs- FICA &Medicare percentage of payroll Congress controls minimum contribution basis (currently
and wage base subject to change by Congress (currently 7.5% for Defined Contribution Plan)
FICA is 12.4% up to $53,400, Medicare is 2.9% up to
$125,000)
Vested after 10 years of service Vested immediately for part-time, seasonal, and
temporary employees
Pension benefit is monthly income payment Pension benefit is lifetime annuity with 50% to survivor if
married or lump sum (with spousal consent)
Retirement income capped no matter how much No cap on retirement income; income based on
tax paid account balance
Pension benefit subject to annual earnings limitation Benefit not subject to annual earnings limitation; can
until age 7/0 receive benefit from one employer while working for
another
Portable Portable to next employer or IRA rollover
Survivor benefits to eligible spouse, children under 18, or Beneficiary can be anyone -- subject only to spousal
disabled children consent
Forfeiture of benefits at death with limited survivor Account balance paid to beneficiariestheirs
benefits
Limited disability benefits if minimum number of quarters Disability benefits from cash out of account balance
of coverage earned
2 worker families -- working spouse receives greater of 2 worker families -- each individual accrues full benefits
own benefit or 50% of spouse's benefit
Fhas6 H SystemsJs not Lce sdd to provid6.:.. does:not offer tax, accom'*...r legal advice: The pubLc agency
is urged to'consult with appropriate professionals regarding the tax'accounting and legal implications of adopting PARS.
Copyright 1991 Public Agency Retirement System (PARS)
350 E. 17th St., Suite 212 Costa Mesa, CA 92627 (714) 631-6369 (900) 540-6369 fax (714) 631-2063
{ }�'j'AC'HMFNT D
f
` P A R S
,.
Public Agency Retirement System
NOV o 1 1991 �►
City of
Re: PARS Implementation Packet Huntington Beach
Personnel Dept
Dear PARS Administrator;
This is to confirm your agency's interest in the Public Agency Retirement System (PARS) and
to provide you with the documents and information necessary for the next steps of implementation.
The checklist below shows what is needed to implement PARS. We require all outstanding fees
and documents before we can begin to process your file.
FEES All PARS fees may be paid by a single check made out to Imperial Trust Co-PARS Account
Received Not Yet Received (send as soon as possible)
$750 PARS Implementation Fee
0 $825 IRS application fee ($700 if fewer than 100 participants)
0 $1,000 Initial Hartford Deposit (credited to Employer Contributions)
DOCUMENTS
Received Not Yet Received (copy or sample enclosed: send as soon as possible
❑ Fx_� A Signed PARS Engagement Letter
M A Signed Hartford Application
7 F-x-] A Completed and Signed PARS Adoption Agreement
❑ A Completed IRS Data Form
7 A Signed Resolution from your governing board adopting PARS for your agency
0 A Completed and Signed IRS 2848 Power of Attorney Form appointing the firm
of Grant Thornton to represent your agency and file your application for an IRS
Determination Letter
In order to implement the plan in a timely manner, we will need to receive all PARS fees and
documents at the address below as soon as possible. As questions arise now or in the future,
please do not hesitate to call us. If you are outside the (714) area, please use the toll-free
number listed below. We look forward to working with you.
Cordially,
Karen Zfaty, M.B.A.
Director, Marketing Services Tara\pars\imp
350 E. 17th St., Suite 212 Costa Mesa,CA 92627 (714)631-6369 (800)540-6369 fax(714)631-2063
P A R S
Public Agency Retirement System
Subject: Engagement Letter for Adoption of the Public Agency Retirement System (PARS)
Phase H Systems is prepared to implement PARS which is intended to be an alternative to
mandatory Social Security coverage effective 1/l/92 for public age'ncy employees not eligible for a`
current public agency pension plan. Phase II will be available for ongoing consultations with staff
and governing body representatives concerning mandatory Social Security coverage and related
matters.
The Implementation Fee, payable to Imperial Trust Company — PARS Account, will be $1,575:
$825 ($700 if fewer than 100 participants) is a non—refundable fee for a Letter of Determination from
the IRS (to establish IRS approval of the tax status of your plan), payable upon the return of this
signed Engagement Letter, and $750 is payable upon adoption of PARS by the governing body. This
Implementation Fee is specifically for those services described in this letter.
If the terms expressed in this letter are in accordance with your understanding of this engagement,
sign this letter and return it to Phase II.
Sincerely,
PHASE II SYSTEMS
350 E. 17th St., Suite 212
Costa Mesa, CA 92627
The foregoing letter fully describes the services desired.
Authorized by:
Signature Public Agency
Name - Print or Type Department
Title Address
Date City, State
Ptiese.11.Systems is not licensed to provide and does not offer tax,accounting or legal advice. The public agengy is urged to consult
wrtli appropriate professionals regarding the tax,accounting and legal implications of adopting a PARS Pension Plan
350 E. 17th St.,Suite 212,Costa Mesa,CA 92627 (714)631-6369 (800)540-6369 fax(714)631-2063
Application for Group Annuity Contract THE HARTFORD
The Insurance People of ITT
Application is Hereby Made to
HARTFORD LIFE,,INSURANCE COMPANY
Hartford,Connecticut
(Contractholder)by
Whose Main Office Address is
for a Group Annuity Contract.
Separate Account Contributions: ® Not Applicable ❑ To be Included
Plan Assets maybe deposited in Separate Account NA
Dated at on 19
(Agent or Broker) (Legal Name of Applicant)
by
(Witness) (Signature and Title)
Amount of Binding Payment$ 1,000
Form PAL-1879-0 Printed in U.S.A.
HARTFORD LIFE INSURANCE COMPANY
Hartford,Connecticut
RECEIPT
Received by
dollars to be applied as a credit towards the payment of the first contribution under the contract for
which application is made. If the application is not accepted,the payment evidenced by this receipt shall be returned.
Date Agent or Broker
(Detach this receipt when payment is made)
P A R S
Public Agency Retirement System
ADOPTION AGREEMENT
Version 6
October 22, 1991
Copyright c 1991 PHASE 11 SYSTEMS. All rights reserved. Reproduction in pert or whole is prohibited.
ADOPTION AGREEMENT TO
THE PUBLIC AGENCY RETIREMENT SYSTEM (PARS)
AND TRUST AGREEMENT
EMPLOYER
FEDERAL I.D. #
PLAN ADMINISTRATOR
(Name)
(Title)
ADDRESS
(Department)
(Number and Street)
(city) (State and Zip Code)
NAME OF PLAN PUBLIC AGENCY RETIREMENT SYSTEM (PARS)--
(Agency Name)
1
INTRODUCTION
This Adoption Agreement, the provisions of the Public Agency Retirement System (PARS), and the
provisions of the PARS Trust of which this Agreement is a part, are hereby adopted by the Employer
executing this Agreement for the benefit of Eligible Employees and their Beneficiaries.
This Adoption Agreement is part of the adoption of a new Plan, as provided in Section 2.5 of the PARS
Trust.
Item 1: EFFECTIVE DATE
EFFECTIVE DATE shall mean
Item 2: ELIGIBLE EMPLOYEE
A. ELIGIBLE EMPLOYEE shall mean only those Employees who, at any time during which the
Employer maintains this Plan, are not accruing a benefit under Social Security or another Retirement
System provided and maintained by the Employer which meets the minimum requirements of IRS
Regulations of IRC Section 3121 (b)(7)(f).
B. ELIGIBLE EMPLOYEE shall include all active and inactive employees until termination of
employment.
C. ELIGIBLE EMPLOYEE shall exclude all employees exempted under IRC Section 3121 (b)(7)(f).
D. ELIGIBLE EMPLOYEE shall include the following:
Item 3: ELIGIBILITY CONDITIONS
A. SERVICE REQUIREMENT: An Employee who qualifies as an ELIGIBLE EMPLOYEE under
Item 2 above shall be eligible to participate immediately.
B. EMPLOYMENT REQUIREMENT: An Employee who terminates employment during the Plan
Year shall still be eligible to participate during such Plan Year.
Item 4: COMPENSATION
A. COMPENSATION shall mean all compensation for the Plan Year paid or payable in cash or in kind
by the Employer for personal services by the Eligible Employee. This definition of COMPENSATION
shall be subject to the provisions of Article 1.06 of the Plan as well as the further provisions of this Item.
B. If elected in this Item, the term COMPENSATION shall be defined as follows:
CALIF. PERS Compensation [ ] YES [ ) NO
CALIF. STRS Compensation [ ] YES [ ] NO
Base Salary [ ] YES [ ] NO
Other [ ] YES [ ] NO (define below)
2
Item 5: NORMAL RETIREMENT AGE
NORMAL RETIREMENT AGE shall mean sixty (60) years of age.
Item 6: NORMAL RETIREMENT DATE
NORMAL RETIREMENT DATE shall mean the first of the month coincident with or next following
the date on which the Participant atwins NORMAL RETIREMENT AGE.
Item 7: DEATH AND TOTAL DISABILITY PROVISION
A Participant's Vesting and distribution rights on the date of his death or "Permanent and Total
Disability" will be the same as the Vesting and distribution rights applicable on the date of his
attainment of Normal Retirement Age.
Item 8: ALLOCATION AND AMOUNT OF CONTRIBUTIONS
A. The Employer shall make Employer Contributions in the amount of % of each Participant's
Compensation. Employer Contributions shall be forwarded to the Trustee to be allocated to each
Participant's Employer Contribution Account.
B. Each Participant shall make Employee Contributions in the amount of % of his Compensation.
Employee Contributions shall be forwarded to the Trustee to be allocated to the Participant's Employee
Contribution Account.. Employee contributions will be "before tax" due to the employer's adoption of
IRC Section 414(h) "employer pickup" in the Plan Document.
C. All Plan expenses shall be paid out of Plan assets, and shall be allocated as follows:
to the Employer Contribution Accounts, and % to the Employee Contribution Accounts.
D. A Participant shall not be permitted to direct the investment of his Employer Contribution Account
or his Employee Contribution Account.
Item 9: INVESTMENT OF CONTRIBUTIONS
A. Yes No Contributions will be deposited in Imperial Trust Company's Money Market
Fund and wire-transferred on last working day of the month to the Hartford's Group Immediate
Participation Guarantee (IPG) insured investment contract.
B. Yes No Contributions will be deposited in Imperial Trust Company's Money Market
Fund.
Item 10:VALUATION DATE
VALUATION DATE shall mean the last day of the Plan Year.
Item 11:METHOD OF FUNDING
The Plan shall be funded as provided under Section 4.1 of the PARS Plan Document.
3
Item 12: VESTING
A. Yes No Years of Service with the Employer completed before the Employer maintained this
Plan shall be counted to determine the nonforfeitable percentage in such Employee's benefit from
Employer Contributions.
B. Yes No Years of Service completed prior to termination of employment shall not be credited
to an Employee who terminates employment before satisfying the eligibility requirements in Item 3 of
the Adoption Agreement.
C. For Vesting. purposes, a Participant will be credited with a Year of Participation or Service only if
he or she completes at least one Hour of Service during the computation period.
D. The Participant's Employee Contribution Account shall be 100% Vested at all times. The
Participant's Employer Contribution Account shall be 100% Vested at Normal Retirement Age, or Total
Disability or death. However, notwithstanding anything to the contrary in this Plan, the Participant shall
be Vested in his Employer Contribution Account to such a degree and at such a time as to meet the
minimum requirements for a retirement system under Section 3121(b)(7)(F) of the Code.
E. Benefits shall be vested in accordance with the following:
Yes No_X_A participant transferring to an eligible retirement plan with the same
employer shall be 100% vested.
Yes No_X_The scheduling shown below shall be used:
Item 13:PLAN YEAR
The PLAN YEAR shall be the period of twelve (12) consecutive months commencing on
and ending. on
Item 14:MISCELLANEOUS
This Adoption Agreement shall be used only in conjunction with the Public Agency Retirement System
(PARS) and the PARS Trust..
Executed this day of 1991, at , California.
Signature of Plan Administrator
Title
4
P A R S
Public Agency Retirement System
I.R.S. Data Form
INSTRUCTIONS: The IRS Letter of Plan Determination Application requires the following information:
• A list of the 25 highest paid employees eligible for PARS in order of compensation, starting
with the highest paid, including Name, Date of.Birth, Years of Service, and 1990 W-2 Income
♦ The information requested at the bottom of this page
♦ The information may be submitted on another page--you need not use this form.
Participants' Last Name and Initials Date of Birth Hire Date 1990 W-2 Income
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Name of Agency
Person to whom correspondence relating
to PARS should be addressed
Mailing Address
City, State ZIP
Phone Number
Year Agency was Founded(approximate)
Agency or District's Federal Tax ID Number
Total Number Total 1990 W-2 Payroll
Employees Eligible for PARS
Employees Participating in PERS
Employees Participating in STRS '
350 E. 17th St., Suite 212, Costa Mesa, CA 92627 (714)631-6369 (800)540-6369 fax(714)631-2063
Form Z V 4 V Power of Attorney/. OMB No.1545.0150
(Rev.March 1991) 1
Department ot the Treasury and Declaration of Representative Expires 5.31-93
Internal Revenue Service No, For Paperwork Reduction and Privacy Act Notice,see the instructions.
Power of Attorney
1 Taxpayer information
Taxpayer name(s)and address(Please type or print.) Social security number(s) Employer identification
number
Plan number(if applicable)
Daytime telephone number
hereby appoint(s)the following representative(s)as attorney(s)-in-fact:
2 Representative(s) (Please type or print.)
Name and address Myles Margady CAF No.____-__-_2005-28454R
C/O GRANT THORNTON Telephone No. (213 ) ••---- 627-1717
1000 Wilshire Blvd., Ste 700 Fax No. ( 213 ) 624-6793
Los Angeles,CA 90017 Check if new: Address . ❑ Telephone No. ❑
Name and address CAF No.
NIA Telephone No. ( ) ........................
FaxNo. ( )-----------•-----•------------•-
Check if new: Address ❑ Telephone No. ❑
Name and address CAF No...........................................
N/A Telephone No. ( ) ........................
Fax No. ( )--------------------------------
Check if new: Address ❑ Telephone No. ❑
to represent the taxpayer(s)before the Internal Revenue Service for the following tax matters:
3 Tax Matters
Type of Tax(Income, Employment, Excise,etc.) Tax Form Number(1040,941,720,etc.) Year(s)or Period(s)
Application for Determination of
Retirement Plan - Sign Form 5300 I 5300 1991
N/A
N/A
4 Specific Use Not Recorded on Centralized Authorization File(CAF).—If the power of attorney is for a specific use not recorded on
CAF,please check this box.(See the instructions for Specific Use Not Recorded on CAF on page 4.) . . . . . . . . ► ❑
5 Acts Authorized.—The representatives are authorized to receive and inspect confidential tax information and to perform any and all
acts that I can perform with respect to the tax matters described in line 3,for example,the authority to sign any agreements,consents,
or other documents. The authority does not include the power to receive refund checks or the power to sign certain returns. (See
instructions.)
List any specific additions or deletions to the acts otherwise authorized in this power of attorney: ---------NQOe..........................
•-------•--•-•-----••--•----•...............................................•----•--•-••------•------......•----•--•----••••-----•---•-----•-----
--•---••-•---••---•....---•--•••••---•-•-....-••................••-•-•-•--••----....--••-----......................------•--------•--------•-----•.
Note: In general, an unenrolled preparer of tax returns cannot sign any document for a taxpayer. See Revenue Procedure 81-38, printed
as Pub.470, for more information.
Note: The tax matters partner/person of a partnership or S corporation is not permitted to authorize representatives to perform certain
acts.See the instructions for more information.
6 Receipt of Refund Checks.—If you want to authorize a representative named in line 2 to receive, BUT NOT TO ENDORSE OR CASH,
refund checks,initial here N/A and list the name of that representative below.
Name of representative to receive refund check(s) ► N/A
Cat.No. 119801 Form 2848 (Rev.3.91)
a Form 2848(Rev 3-91) Page 2
7 Notices and Communications.—Notices and other written communications will be sent to the first representative listed in line 2.
,! a If you want the second representative listed to receive such notices and communications,check this box . . . . . . . ► ❑
b If you do not want any notices or communications sent to your representative,check this box . . . . . . . 0-
8 Retention/Revocation of Prior Power(s) of Attorney.—The filing of this power of attorney automatically revokes all earlier
power(s) of attorney on file with the Internal Revenue Service for the same tax matters and years or periods covered by this
document. If you do not want to revoke a prior power of attorney,check here . . . . . . . . . . . . . . . . ► ❑
YOU MUST ATTACH A COPY OF ANY POWER OF ATTORNEY YOU WANT TO REMAIN IN EFFECT.
9 Signature of Taxpayer(s).—If a tax matter concerns a joint return, both husband and wife must sign if joint representation is
requested, otherwise, see the instructions. If signed by a corporate officer, partner, guardian, tax matters partner/person, executor,
receiver, administrator, or trustee on behalf of the taxpayer, I certify that I have the authority to execute this form on behalf of the
taxpayer.
► If this power of attorney is not signed,it will be returned.
............................................................................... ................... ........------------..............-----
Signature Date Title(if applicable)
••.........................................................................•---
Print Name
•.............................................................................. ................... .......................................
Signature Date Title(if applicable)
Print Name
Declaration of Representative
Under penalties of perjury, I declare that:
• I am not currently under suspension or disbarment from practice before the Internal Revenue Service;
• I am aware of regulations contained in Treasury Department Circular No.230(31 CFR, Part 10),as amended,concerning the
practice of attorneys,certified public accountants,enrolled agents,enrolled actuaries,and others;
• I am authorized to represent the taxpayer(s)identified in Part I for the tax matter(s)specified there;and
• I am one of the following:
a Attorney—a member in good standing of the bar of the highest court of the jurisdiction shown below.
b Certified Public Accountant—duly qualified to practice as a certified public accountant in the jurisdiction shown below.
c Enrolled Agent—enrolled as an agent under the requirements of Treasury Department Circular No. 230.
d Officer—a bona fide officer of the taxpayer organization.
e Full-Time Employee—a full-time employee of the taxpayer.
f Family Member—a member of the taxpayer's immediate family(i.e.,spouse,parent,child,brother,or sister).
g Enrolled Actuary—enrolled as an actuary by the Joint Board for the Enrollment of Actuaries under 29 U.S.C. 1242(the authority
to practice before the Service is limited by section 10.3(d)(1)of Treasury Department Circular No.230).
h Unenrolled Return Preparer—an unenrolled return preparer under section 10.7(a)(7)of Treasury Department Circular No.230.
► If this power of attorney is not signed,it will be returned.
Designation—Insert Jurisdiction(state)or
above letter(a—h) Enrollment Card No. Signature Date
Myles Margady(a)
` ATTACHMENT E
4) Administrative Expenses
A) Imperial Trust Company - .001 of monthly account balance
B) Hartford Life Insurance Co. - charged to "pooled" investment of all
participating agencies.
Base charge- $500 1 st year, $200/yr thereafter, plus
Asset Management Fee - up to$1 million = .0050%
1 -4 million = .0025%
5 million & over = .0010%
C) Phase R Systems -Trust Administrator
Set-up Fee (one-time only) _ $750.00
IRS Determination Letter (one time only) - optional $825.00
Marketing Fee _ 2% of Contributions
Monthly Base Charge $50.00
�T
onthly Service Fee per listed employee
(includes vested terminated employees*.)
0-49 $4.00
50-99 3.33
100-149 2.50
150-199 2.00
200--249 1.83
250-349 1.67
350-499 1.50
500-749 1.42
750-1499 1.33
1500-1999 1.25
2000+ negotiable
* The employee's account balance is paid as a lifetime atutuity in case of death., total disability of
retirement. If less than$3500, the account balance will be paid in a lump sutra. If married, a retiring
participant will receive a joint lifetime annuity with a selection of either 50% or 100% to be continued
to tbie spouse. With spousal consent, a lump sum may be taken.
Copyright 1991 Public Agency Retirement System (PARS) (714) 631-6369
J V-0.
f
CITY COUNCIL RESOLUTION NO.
-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
HUNTINGTON BEACH, APPROVING PARTICIPATION IN
PUBLIC AGENCY RETIREMENT SYSTEM (PARS)
WHEREAS, it is determined to be in the best interest of the City of Huntington
Beach and its employees to provide a qualified retirement system to all part-time
employees, thereby meeting the requirements of Section 11332 of the Social Security
Act; and
WHEREAS, an alternative qualified defined contribution pension plan entitled Public
Agency Retirement System (PARS) is designed for California Public Agencies; and
WHEREAS, the Public Agency Retirement System (PARS) will qualify as a retirement
plan in place of Social Security coverage.
NOW, THEREFORE, the City Council of the City of Huntington Beach, DOES HEREBY
RESOLVE, DETERMINE, AND ORDER as follows:
SECTION 1 . Adoption of the PARS pension plan effective January 1 , 1991 ; and
SECTION 2. The Deputy City Administrator/Chief of Administrative Services is
hereby appointed as the Plan Administrator; and
SECTION 3. The Plan Administrator is hereby authorized to execute an adoption
agreement and administration agreement and other necessary actions
to maintain participation and compliance with Section 11332 of the
Social Security Act and the relevant regulations issued or as may
be issued.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at an
adjourned regular meeting held on the day of 1991 .
MAYOR
ATTESTED: APPROVED AS TO FORM:
CITY CLERK CITY ATTORNEY
REVIEWED BY: INITIATED BY:
CITY ADMINISTRATOR DEPUTY CITY ADMINISTRATOR
REQUE.jT FOR CITY COUNG„ ACTION
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Date May 22, 1991 c
Submitted to: Honorable Mayor and City Council cY.
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Submitted by: Michael T. Uberuaga, City Administrato t� a
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Prepared by: Robert J. Franz, Deputy City. Administrat
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Subject: IRS SOCIAL SECURITY REQUIREMENTS —"
APP OVED BY CITY C NC
Consistent with Council Policy? [ ] Yes [l�New Policy or Exception
Statement of Issue, Recommendation, Analysis, Funding Source,Alternative Actions,Attachments:
STATEMENT OF ISSUE: The Internal Revenue Service (IRS) has issued regulations
implementing last years budget law, which requires all state and local
government employees not covered by a pension plan to , be included in Social
Security, effective July 2, 1991 . If such employees are not added to the
Federal Social /-Security program, the City must take affirmative steps to
implement an alternative qualifying pension program.
RECOMMENDATION•
1 . Approve the establishment of a trust fund for employer and employee
deposits toward a qualified pension program.
2. Approve an employee payroll deduction and an equal employer
contribution of up to 7.65% (temporary employees only) .
3. Direct the City Administrator to investigate alternative qualifying
pension programs and recommend a program to be implemented before the
end. of December .1992, covering employees retroactively to July 2, 1991 .
ANALYSIS: IRS regulations allow employers ' until the end of 1992 to
retroactively establish a pension program in lieu of Social . Security (see
attached summary) . This law applies to all full time, part—time, temporary
and seasonal employees that are not now participating in a statewide
retirement system such as PERS. Full social security involves both the Old
Age, Survivors, and Disability Insurance (OASDI) and Hospital Insurance (HI)
known as Medicare. Currently the social security tax is 12.4 percent of wages
up to $53,400 and Medicare is 2.9 percent of wages up to $125,000. Both the
employer and employee pay an equal share of the tax (7.65%) . All employees
hired since April 1 , 1986 are already subject to the Medicare portion.
Although the law becomes effective on July 2, 1991 , the City may delay
enrollment into Social Security by initiating "affirmative steps" to establish
a qualifying pension program. Approval of the above recommendations will
serve as "affirmative steps" to comply with the law. Currently the law
defines a retirement plan as "a pension, annuity, retirement, or similar fund
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1EQUEST FOR CITY COUNCIL ACTIO"
IRS SOCIAL SECURITY REQUIREMENTS
or system established by a State or by a political subdivision thereof." The
law allows for either a "defined benefit plan" or "defined contribution plan"
to qualify providing that it meets certain criteria. Congressional hearings
were scheduled beginning on May 20, 1991 , on the proposed IRS regulations on
this matter. Alternative options will be better known after these hearings
have been completed and the regulations clarified. In typical Federal
Government fashion, the rules, regulations, definitions and other critical
information needed in order to implement the new law are not expected to be
finalized until well after the July 2, 1991 effective date of the law.
Approval of staff recommendations will allow the City to explore all
alternatives in order to provide the City, with the most cost effective program
to meet the requirement of the regulations upon approval of these
recommendations affected temporary employees will be notified of the proposed
deduction and its purpose.
FUNDING SOURCE: The new Social Security mandated cost has been included in
the proposed budget for fiscal year 1991-92. This is the highest cost
alternative.
ALTERNATIVE ACTION: Enroll all current and future employees, that are not
members of PERS, into Social Security effective July 2, 1991 .
ATTACHMENTS•
Government Finance Offices Association Washington Update, April 26, 1991 .
WHO:pdc
WPPERSP:61
-- Washington Update
Contact: Cathie Eitelberg April 26, 1991
Betsy Dotson
Social Security Coverage Requirements
Pronosed Regulations Released
On April 10, 1991 the Department of the Treasury and the Internal Revenue Service (IRS)
released proposed regulations and a revenue procedure under a new law that mandates Social
Security taxes for public sector employees who are not members of a retirement system.
These proposed regulations set a precedent--for the first time, the federal government is
requiring public employee retirement systems (PERS) to meet minimum contribution and
benefit level standards. Public plans must-meet these tests if the Social Security tax is to
be avoided.
1. Q: Which employees are covered?
A: Full-time, part-time, temporary, and seasonal employees that are not participating in
a qualifying retirement system made available through their employer are to
participate in full social security. To qualify as a retirement system certain tests
contained in the regulations must be, met. If these tests are not met all the
participants in the plan must be covered under Social Security. Both appointed and
elected officials are considered employees.
2. Q: Are there any exceptions?
A: Yes: full-time students regularly attending classes in the institutions in which they
are working, employees hired temporarily to handle disaster emergencies (fire,
flood, storm, snow, earthquake or similar emergencies), election officials and
workers paid less than $100 in a calendar year, persons hired through programs to
relieve unemployment such as summer youth programs, and individuals paid for
services performed in a hospital, home or other institution where they are a patient
or inmate. Also, employees of the District of Columbia, Guam and American Samoa
and authorized non-resident aliens with F, J or M teaching visas are exempt.
3. Q: When does this provision take effect?
A: After July 1, 1991, all services performed by affected employees would be covered.
4. Q: Are there any exceptions to the effective date?
A: Yes. Defined benefit plans in existence on November 5, 1990 (the date the
mandatory coverage law was passed) have until January 1, 1993 to bring the plan
into compliance providing that benefits are not significantly decreased and
participation eligibility for part-time, temporary, and seasonal workers materially
increased. A second rule gives employers until the end of 1992 to make plan
changes or establish a new plan that will meet the law's requirements thereby
avoiding the FICA tax if certain conditions are met. Affirmative steps must be
taken to reasonably demonstrate that a plan meeting the requirements of the
Government Finance Officers Association
1750 K Street, N.W.,Suite 200
Washington,DC 20006
202/429-2750 - FAX 202/429-2755
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regulations will be in existence by the end of 1992 and cover employees
retroactively going back to July 2, 1991.
5. Q: What is full Social Security?
A: Full social security includes both the tax for the Old Age, Survivors, and Disability
Insurance (OASDI) program and Hospital Insurance (HI) known as Medicare. In 1991
.the Social Security (OASDI) tax is 12.4 percent of wages up to $53,400 and the
Medicare (HI) tax is 2.9 percent on wages up to $125,000. This year will be the
first time that the wage base for each component of the tax is set at different
levels. Both the employer and employee pay an equal share of the tax.
6. Q: What does it mean to be a member of a retirement system?
A: A member must actively participate in the system. If an employee is eligible to-
participate and decides not to, that individual would be required to be. covered by
Social Security. One exception is individuals that "drop-out" because they have
reached the maximum benefit level and cannot accrue additional benefits.
7. Q: What is a retirement plan?
A: The law's definition follows the Social Security Act's description found in 42 U.S.C.
Sec. 418(b)(4). .A retirement plan is "a pension, annuity, retirement, or similar fund
or system established by a State or by a political subdivision thereof." In addition,
retirement arrangements (both defined benefit and defined contribution) must meet
the tests described below.
8. Q: If a local government participates in a statewide retirement system, is the plan
considered "established" by the employer?
A: Yes. Even though the plan is not maintained by the local government it is offered
through the employer and would qualify.
9. Q: What are the tests for a defined benefit (DB) plan?
A: The general rule is that the plan must offer a "meaningful" benefit. Basically, this
means a benefit comparable to Social Security's primary insurance amount. Safe
harbor rules in the Revenue Procedure set up minimum DB retirement benefit tests
based on the plan's formula. For example, a retirement system that provides an
annual benefit at age 65 that is equal to 1.5 percent of an employee's average last
three years of compensation would satisfy the test. The final three years can be
used instead of the three highest years. Periods greater than three years can be
used with a corresponding increase in the 1.5 percent multiplier.
10. Q: What are the tests for a defined contribution (DC) plan?
A: To qualify, DC plans are required to allocate at least 7.5 percent of a worker's
annual compensation into the employee's account. The deposit can include any
combination of before- or after-tax contributions made by the employer and/or the
employee. Qualified benefits can be provided through Section 457 plans, Section
403(b) tax-sheltered annuities or other DC arrangements.
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11. Q: How are part-time, seasonal and temporary (PST) workers defined?
A: A part-time employee works 20 hours or less per week, a seasonal employee works
full-time but less than 5 months a year, and a temporary employee performs
services under a contractual arrangement of two years or less. A special "lookback
rule" allows the employer to determine an employee's eligibility status to participate
in a retirement plan based on past work experience or reasonable expectations as to
future employment. For example, a PST employee may be treated as a member of a
retirement system for a calendar year if he or she was a member of the retirement
system on the last day of the plan year ending in the previous calendar year.
12. Q: Are there special vesting rules for PST workers?
A: Yes. PST employees must be immediately and fully vested (100 percent) in any
employer-sponsored retirement arrangement for it to satisfy the rules. J
13. Q: Do retirees that return to work for a former employer have to pay FICA?
A: A retiree who is a former employee and participated in the employer's retirement
system and is currently receiving retirement benefits from or has reached normal
retirement age under the plan does not have to participate in Social Security under
the new law.
14. Q: Do employees have to be covered during a probationary period?
A: Employees who are excluded from participating in the employer's retirement system
during a probationary period would be required to participate in Social Security.
Once the employee is covered under the employer's retirement system, Social
Security coverage can be dropped.
15. Q: How do the new rules apply to volunteer fire fighters?
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A: If a volunteer fire fighter is reimbursed based on a nominal set amount for each
fire responded to and has no other benefits of employment, mandatory coverage
does not apply. These individuals fall under the exception for temporary hiring of
employees in the event of a disaster.
16. Q: How can an employer verify if an individual is an "employee" under the IRS rules?
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A: Employers can request a private ruling from the IRS to determine if an individual is
an "employee". Requests should be filed on IRS Form SS-8, Information for Use in
Determining Whether a Worker is an Employee for Federal Employment and Income
Tax Withholding. Usually a user fee of $2500 is charged for a private ruling but in
the case of determining if a worker is an employee the fee is waived. The request
for a ruling is to be filed in the IRS District office in which your jurisdiction is
located. If an adverse decision is anticipated, a hearing should be requested in
writing along with IRS Form SS-8. The hearings are held at the National IRS
office in Washington D.C., but arrangements can be made for a conference call.
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17. Q: If a jurisdiction has a Section 218 contract in place does it have to be revised?
A: No. These agreements between public employers and the Secretary of Health and
Human Services provide that employees of state and local governments can be {
covered by Social Security on a voluntary basis. Therefore, Section 218 contracts,
named after the section of the Social Security Act they were created under, only
govern voluntary coverage. This new requirement is mandatory making revisions to
the contracts unnecessary.
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18. Q: How is the tax reported and when do deposits have to be made?
A: Both the Social Security and _Medicare tax are to be reported on IRS Form 941_,
Employers Quarterly Federal Tax Return. Because these taxes are now based on
two different wage base amounts, each tax is reported in separate boxes on the
form. Separate reporting on IRS Forms W-2 and W-3 will also be required. Payroll
tax deposit rules that took effect on July 31, 1990 require employers with $100,000
or more in withheld payroll taxes to deposit these taxes by the next banking day.
IRS Circular E, available at local IRS offices, provides a complete explanation of
reporting and deposit rules.
19. Q: Where does the regulatory process go from here?
A: An IRS hearing on the proposed regulations is scheduled for May 20. After the
hearing the regulations may be revised to include suggested changes and released as
final rules. GFOA will ask to testify and is interested in comments from our
members in preparing the association's remarks.
The information for this Update was drawn from the proposed regulations contained in the
April 10 Federal Register pages 14488 - 14495, a soon to be published IRS Revenue Procedure
and IRS Employer's Tax Guide (Circular E). This Update was prepared by the staff of the
Pension & Benefits Program.
WARNING: There are several commercial products being marketed to state and local
governments to cover PST employees. Some of these products fall short of meeting the
standards set out in the regulations. GFOA members are advised to review the regulations
before entering into any arrangement.
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