HomeMy WebLinkAboutOrdinance - 2005-O0064 - Amending Ordinance 2004-O0099 Plan For Retirement Age - 06/09/2005First Reading
June9,2005
Item31
Second Reading
June 23, 2005
Item 10
ORDINANCE NO: 2005-o0064
AN ORDINANCE AMENDING ORDINANCE NO. 2004-00099 OF
THE CITY OF LUBBOCK, WHICH ORDINANCE PROVIDED
PARTICULARS OF A DEFERRED COMPENSATION PLAN FOR CITY
EMPLOYEES, AND MODIFYING SAID ORDINANCE TO CLARIFY THE
TERM "NORMAL RETIREMENT AGEu AS IT RELATES TO THE SPECIAL
CATCH-UP RULE AND TO REVISE THE OVERSIGHT CO:Ml\tfiTTEE.
WHEREAS, the City Council heretofore established a Deferred
Compensation Plan for City employees by enacting Ordinance No. 7809 as
amended by Ordinance 8904, 9781, and 10121,2001-00109 and 2004-00099; and
WHEREAS, it is the desire of the City Council to amend the City's
Deferred Compensation Plan to clarify the meaning of the term "Normal
Retirement Age" as it relates to the special catch-up rule under IRC 457(b )(3);
and
WHEREAS, the City Council also desires to change the make-up of the
Oversight Committee; NOW THEREFORE:
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK:
THAT Ordinance No. 2004-00099 of the City of Lubbock, BE and is
hereby amended effective immediately, to read as follows:
DEFERRED COMPENSATION PLAN
I. INTRODUCTION
The City of Lubbock, Texas, by virtue of the authority granted by
V.T.C.A., Government Code §§690.001 et seq. and 26 U.S.C. §457, hereby
establishes the City of Lubbock Employees Deferred Compensation Plan,
hereinafter referred to as the 11Plan", the purpose of which is to attract and retain
certain individuals as Employees by permitting them to enter into agreements
with the City which will provide for monthly payments of deferred compensation
on retirement, as well as death benefits in the event of death before or after
Deferred Compensation Plan -2005 1
retirement. The effective date of the start of this Plan shall be July 1, 1978, or as
soon as practical thereafter.
Nothing contained in this Plan shall be deemed to constitute an
employment contract or agreement for services between the Participating
Employees and the City and nothing contained herein shall be deemed to give any
such Employee a right to be retained in the employ of the City. Nothing herein
shall be construed to modify the terms of the employment relationship between
Participating Employees and the City, this Plan being intended as part of each
Participant's Compensation and as a Retirement supplement.
This Plan shall, unless otherwise determined as provided by State and
Federal Laws governing Deferred Compensation Plans, be implemented and
serviced by Qualified Vendors selected by the Plan Administrator or with whom
the Plan Administrator has contracted for participation in the Plan subject to
approval of the governing body of the City.
II. DEFINITIONS
2.01. Automatic Distribution Date: Prior to January 1, 2002, "Automatic
Distribution Date means the 60th day of the calendar year after the Plan
Year of the Participant's Retirement or any other date permitted under the
regulations promulgated under Code section 457. On and after January 1,
2002, "Automatic Distribution Date" means April 1 of the calendar year
after the Plan Year the Participant attains age 70 Y2 or if later, has a
Severance Event.
2.02 Beneficiary: The Beneficiary or Beneficiaries of certain benefits of the
Plan designated by the Participant in the Participation Agreement.
Nothing herein shall prevent the Participant from designating more than
one Beneficiary or primary and secondary Beneficiaries or changing the
designation of a Beneficiary. If two or more or less than all designated
Beneficiaries survive the Participant, payments shall be made equally to
all such Beneficiaries, unless otherwise provided in the Beneficiary
designation. Elections made by a Participant in the Participation
Agreement shall be binding on any such Beneficiary or Beneficiaries
except for the right of a Beneficiary as provided in Section 6.05.
If no beneficiary is designated in the Participation Agreement, if the
designated beneficiary predeceases the participant, or if the designated
beneficiary does not survive the Participant for a period of fifteen (15)
days, then the estate of the Participant shall be the beneficiary. If a
married Participant resides in a community or marital property state, the
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Participant shall be responsible for obtaining appropriate consent of his or
her spouse in the event the Participant designates someone other than his
or her spouse as beneficiary.
2.03 Code: The Internal Revenue Code of 1986, as amended.
2.04 Deferral: The amount of Compensation the receipt of which a
Participating Employee has agreed to defer under the Plan.
2.05 Deferred Compensation: The amount of Compensation not yet earned, as
designated in the Participation Agreement, which the Participant and the
City mutually agree shall be deferred in accordance with the provisions of
this Plan, subject to the following limitations:
(a) Normal Limitation: Except as provided in 2.0S(b), the maximum
amount of Deferred Compensation for a Participant's taxable year,
shall not exceed the lesser of the Dollar Limitation or the
Percentage Limitation. Any excess deferrals, plus allocable net
earnings, shall be distributed to the Participant as soon as
administratively practicable after determination by the Plan
Administrator that the amount is an excess deferraL Excess
deferrals distributed shall be reported on Form 1099-R as required
by the Internal Revenue Service.
(b) Catch-up Limitation:
(l} Catch up Contributions for Participants Age 50 and Over:
A Participant who has attained the age of 50 before the
close of the Plan Year, and with respect to whom no other
elective deferrals may be made to the Plan for the Plan
Year by reason of the Normal Limitation of Section
2.05(a), may enter into a Participation Agreement to make
elective deferrals in addition to those permitted by the
Normal Limitation in an amount not to exceed the lesser of
(1) the applicable dollar amount as defined in Section
414(v)(2)(B) of the Code, as adjusted for the cost of living
in accordance with Section 414(v}(2)(C} of the Code, or (2}
the excess (if any} of (I) the Participant's compensation a
(as defined in Section 415 (c)(3) of the Code) for the year,
over (ii) any other elective deferrals of the Participant for
eferred Compensation Plan -2005 3
such year which are made without regard to this Section
2.05(b) shall not, with respect to the year in which the
contribution is made, be subject to any otherwise applicable
limitation contained in Section 2.05(a) above, or be taken
into account in applying such limitation to other
contributions or benefits under the Plan or any other plan.
This Section 2.05(b)(l) shall not apply in any year to which
Section 2.05(b)(2) applies.
(2) Last Three Years Catch-up Contribution: For each of the
last three (3) taxable years for a Participant ending before
his or her attainment of Normal Retirement Age, the
maximum amount of Deferred Compensation shall be the
lesser of: ( 1) the 457 Catch-Up Dollar Limitation, or (2) the
sum of (i) the Normal Limitation for the taxable year, and
(ii) the Normal Limitation for each prior taxable year of the
Participant commencing after I 978 less the amount of the
Participant•s Deferred Compensation for such prior taxable
years. A prior taxable year shall be taken into account
under the preceding sentence only if (x) the Participant was
eligible to participate in the Plan for such year (or in any
other eligible deferred compensation plan established under
Section 457(b) of the Code which is properly taken into
account pursuant to regulations under Section 457), and (y)
compensation (if any) deferred under the Plan (or such
other plan) was subject to the Normal Limitation.
(c) Other Plans: Not withstanding any provision of the Plan to the
contrary, the amount excludible from a Participant•s gross income
under this Plan or any other eligible deferred compensation plan
under Section 457(b) of the Code shall not exceed the limits set
forth in Sections 457(b) and 414(v) of the Code. Prior to January 1,
2002, the limits under Section 457(b) of the Code described in the
first sentence of this section shall be further reduced by any
amount excluded from gross income under Sections 401 (k),
402(e)(3), 402(h)(l)(B), and 403(b) of the Code, or any amount
with respect to which a deduction is allowable by reason of a
contribution to an organization described in Section 501(c)(18) of
the Code.
2.06 Deferred Compensation Trust Fund: The fund in which Deferrals and
Investment Income of Participants are temporarily held.
eferred Compensation Plan -2005 4
2.07 Direct Rollover: A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee
2.08 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.
2.09 Dollar Limitation: The applicable dollar amount within the meaning of
Section 457(b)(2)(A) of the Code, as adjusted for the cost-of-living in
accordance with Section 457(e)(l5) of the Code.
2.10 Eligible Individual: Any individual Employee of the City who performs
services for the City for which Compensation is paid and who meets the
criteria set forth in Section 4.0 1.
2.11 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 Sections 403(a) or 403(b) of the Code, a qualified trust
described in Section 401 (a) of the Code, or an eligible deferred
compensation plan described in Section 457(b) of the Code which is
maintained by an eligible governmental employer described in Section
457(e)(l)(A) of the Code, that accepts the distributee's eligible rollover
distribution.
2.12 Eligible Rollover Distribution: An eligible rollover distribution is any
di stribution 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 to the extent such
distribution is required under Sections 401 (a) (9) and 457(d) (2) of the
Code; and any distribution made as a result of an unforeseeable
emergency of the employee. For purposes of distributions from other
eligible retirement plans rolled over into this Plan, the term eligible
rollover distribution shall not include the portion of any distribution that is
eferred Compensation Plan -2005 5
not includible in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities)
2.13 Employee: An individual who is an employee of the City.
2.14 Family Member: A dependent as that term is defined in Section I 52( a) of
the Code.
2.15 Includible Compensation: That arnotmt of a Participant's compensation
from the Employer for a taxable year that is attributable to services
performed for the Employer and that is includible in a Participant's federal
gross income as defined in Section 457(e)(5) of the Code, reduced both by
amounts of Compensation deferred under this Plan or any other Plan or
arrangement pursuant to Section 457(b) of the Code or any other amotmt
excludable from gross income for federal income tax pwposes. Includible
Compensation shall be determined without regard to any community
property laws.
2.16 Investment Income: The amount earned from investment in a Qualified
Investment Product of Compensation deferred under the Plan.
2.17 Investment Product: Includes life insurance policies, fixed or variable rate
annuities, mutual funds, certificates of deposit, money market accotmts
and passbook savings accounts.
2.18 Normal Compensation: The total annual remuneration for employment or
contracted services payable by the City that would be included in the
federal gross income of the Participant but for the Participant's election to
participate in the Plan.
2.19 Normal Retirement Age: Normal Retirement Age determines the period
during which a Participant may utilize the 457 CatchMUp Dollar Limitation
of Section 2.05(b) hereunder. In order to utilize the 457 Catch-Up Dollar
Limitation of Section 2.05(b ), Participant must specify the actual Normal
Retirement Age which will apply to the Participant personally, when they
are in range of the three years prior to Normal Retirement Age. Once a
Participant has to any extent utilized the catch-up limitation of Section
2.05(b ), his Normal Retirement Age may not be changed.
eferred Compensation Plan -2005 6
a) General Rule: A Participant's alternate Normal Retirement
Age may not be earlier than the earliest date that the Participant
will become eligible to retire and receive unreduced retirement
benefits under the rules and regulations of the Texas Municipal
Retirement System, Employer's basic retirement plan covering
the Participant, and may not be later than the date the
Participant will attain age 70-1/2. If a Participant continues
employment after attaining age 70-112~ not having previously
elected alternate Normal Retirement Age, the Participant's
alternate Normal Retirement Age shall not be later than the
mandatory retirement age, if any, established by the Employer,
or the age at which the Participant actually has a Severance
Event if the Employer has no mandatory retirement age. If the
Participant will not become eligible to receive benefits under a
basic retirement plan maintained by the Employer, the
Participant's alternate Normal Retirement Age may not be
earlier than age 65 and may not be later than age 70-112.
b) Special Rule for Qualified Police or Firefighters: Qualified
police an firefighters as defmed under Section
415(b )(2)(H)(ii)(l) may designate a Normal Retirement Age
that is between age 40 and age 70 Yz.
2.20 Participant or Participating Employee: An employee who has executed a
Participation Agreement to participate in the Plan or an Eligible Individual
who the Plan Administrator has determined may participate in the Plan
and who has executed a Participation Agreement.
2.21. Participation Agreement: A written agreement between an Approved
Vendor on behalf of the City and a Participant for the deferment of a
portion of the Participant's Compensation through automatic payroll
deductions. Said Agreement may be amended to allow for a deferral
election for sick pay, vacation pay, or back pay that is not yet payable
(subject to the maximum deferral limitations of Section 457 in the year of
deferral) if the election is made during employment and before the
beginning of the month when the compensation would have been payable.
Amounts paid in the form of severance pay may not be deferred.
2.22 Percentage Limitation: Prior to January 1 ~ 2002, the Percentage
Limitation means 33 113 percent of the participant's Includible
Compensation for the taxable year, which will ordinarily by equivalent to
the lesser of the Dollar Limitation in effect for the taxable year or 25
percent of the Participant's Normal Compensation. After December 31,
2001, the Percentage Limitation means 100 percent of the participant's
Includible Compensation for the taxable year, which will ordinarily be
Deferred Compensation Plan -2005 7
equivalent to the lesser of the Dollar Limitation in effect for the taxable
year or 50 percent of the Participant's Normal Compensation.
2.23 Plan Administrator: The person responsible for administering the Plan,
who shall be the Benefits Coordinator of Human Resources for the City.
2.24. Plan Year: The calendar year.
2.25 Qualified Investment Product: An Investment Product that a Plan
Administrator has in writing approved to receive Deferrals and Investment
Income.
226 Qualified Vendor: A Vendor recommended by the Oversight Committee
and approved by the City Council or a vendor with whom the City has a
current contract for participation in the Plan.
2.27 Required Beginning Date. Participant payments received from qualified
retirement plans must begin no later than April 1 of the year that follows
the later of the calendar year in which Participant reaches age 70 Yz , or the
calendar year in which Participant retires.
2.28 Retirement: The first date upon which both of the following shall have
occurred with respect to a participant: Severance Event and attainment of
age 65.
2.29 Severance Event: Prior to January 1,2002, severance of the Participant's
employment with the City that constitutes a "separation from service"
within the meaning of Section 402(e)(4)(D)(iii) of the Code. After
December 31, 2001, a Severance Event means a severance of the
Participant's employment with the Employer within the meaning of
Section 457(d)(I)(A)(ii) of the Code.
In general, a Participant shall be deemed to have experienced a Severance
Event for purposes of this Plan when, in accordance with the established
practices of the City, the employment relationship is considered to have
actually terminated.
2.30 Vendor: A private entity that sells Investment Products.
Deferred Compensation Plan -2005 8
Ill ADMINISTRATION
3.01. Administrator: This Plan shall be administered by a Plan Administrator
subject to the supervision of an Oversight Committee as hereinafter
provided.
3.02. Oversight Committee: The Oversight Committee shall consist of the
City's Chief Financial Officer~ the Director of Human Resources and the
Deputy City Manager. The Committee shall meet as often as necessary to
transact business but not less than quarterly. A quorum must be present to
conduct business. The agenda for such meetings shall be prepared by the
Plan Administrator and shall include all matters concerning the Plan which
Plan Participants desire to submit for the Committee's consideration,
including, but not limited to, requests from Participants for withdrawals
due to unforeseeable emergencies. In addition, the Committee shall
review all criteria and procedures developed by the Plan Administrator
under Section 3.03 of this Plan and may also promulgate rules and
regulations for the administration of the Plan provided they are not
inconsistent with the provisions of this Plan or State and Federal Laws
governing this Plan.
3.03. Responsibilities of Plan Administrator: Subject to the direction and
supervision of the Oversight Committee, the Plan Administrator shall:
(1) Submit a Participating Employee's Deferrals and Investment
Income in the Qualified Investment Products designated by such
Employee to a qualified vendor for investment;
(2) Detennine the minimum and maximum number of Vendors that
may be Qualified Vendors for the Plan at any given time;
(3) Execute necessary documents for the administration of Plan,
subject to prior approval of the governing body of the City, if
necessary.
(4) Develop and implement criteria and procedures for evaluating a
Vendor's application to become a Qualified Vendor, including
developing and implementing criteria and procedures for
evaluating a Qualified Vendor's Investment Products to detennine
whether those products are acceptable as Qualified Investment
Products;
eferred Compensation Plan -2005 9
(5) Develop and implement requirements for Qualified Vendors and
their employees concerning disclosure, reporting, standards of
conduct, solicitation, advertising, relationships with Participating
Employees, the nature and quality of services provided to those
Employees, and other matters;
( 6) Develop and implement procedures that allow a Participating
Employee to designate a Beneficiary to receive such Employee's
Deferrals and Investment Income if the Employee dies;
(7) Develop and implement procedures for distributing Deferrals and
Investment Income to a Participating Employee or such
Employee's Beneficiary, as appropriate, because of the Employee's
death, termination of employment, financial hardship, or other
reason permissible under federal law;
(8) Develop and implement criteria and procedures on any other matter
the Plan Administrator considers appropriate for the operation of
the Plan.
(9) Change the amount of a Participant's Deferrals upon written
notification from the Participant.
( 1 0) Determine whether an excess deferral by a participant has occurred
and arrange for distribution to Participant.
3.04. Vendor Qualifications: A Plan Administrator may not approve a Vendor's
participation, in the Plan if the Vendor is:
(1) a state or national bank or savings and loan assoctatton, the
deposits of which are not insured by the Federal Deposit Insurance
Corporation;
(2) a credit union whose deposits are not insured by the National
Credit Union Administration Board or the Texas Share Guaranty
Credit Union; or
(3) an insurance company that:
(a) is not a member of the Life, Accident, Health and Hospital
Services Insurance Guaranty Association; or
(b) is an impaired or insolvent insurer under V.A.T.S.
fusurance Code. art. 21.28-D.
eferred Compensation Plan -2005 10
3.05. Certification by the Texas Department of Insurance: The Plan
Administrator may request the Texas Department of Insurance to certify in
writing whether an insurance company is prohibited from being approved
as a Qualified Vendor under Section 3.03(3) of this Plan and the Plan
Administrator may rely on the certification.
3.06. Approval of Vendor; Contract: After the Oversight Committee, with the
concurrence of the City Council, approves a Vendor's request to become a
Qualified Vendor, the Plan Administrator shall execute a written contract
with the Vendor to participate in the Deferred Compensation Plan.
Each Vendor may offer only Qualified Investment Products to
Participating Employees, and each Qualified Vendor shall file with the
Plan Administrator a form, statement or report setting forth the
calculations of benefits peculiar to said Vendor's Qualified Investment
Products, which document or documents above referred to are hereby
incorporated as if fully set out herein.
3.07. Failure of Vendor to Satisfy Reguirements: A Vendor may become and
remain a Qualified Vendor only if the Vendor satisfies the requirements of
state and federal law governing Deferred Compensation Plans and the Plan
Administrator for participation in the Plan. If any Vendor fails to satisfy
either of these requirements, the Plan Administrator shall immediately
give to each Participating Employee affected a notice which states that (1)
the Vendor's Investment Products are ineligible to receive additional
Deferrals; and (2) such Employee's Deferrals must be transferred from
said Vendor to a Qualified Vendor.
3.08. Eligibility of Committee members: voting: Each member of the
Committee shall be eligible to participate in the Plan but may not vote or
otherwise participate in discretionary decisions relating to such member's
own participation in the Plan.
3.09. Administration Rules: The Committee may adopt rules and regulations
for the administration of this Plan; provided, however, no such rule or
regulation shall be contrary to State or Federal Law or any regulation
adopted pursuant thereto.
3.10. Procedural Rules: The Committee may adopt rules and procedures for
conducting business.
eferred Compensation Plan -2005 11
IV. PARTICIPATION IN THE PLAN
4.01. Eligibility: Any Eligible Individual who performs services for the City for
which Compensation is paid and who executes a Participation Agreement
is eligible to participate in the Plan.
4.02. Enrollment in the Plan:
(a) An Eligible Individual may become a Participant and agree to
defer Compensation not yet earned by entering into a Participation
Agreement prior to the first day of the following pay period in
which it is to become effective after execution of the Participation
Agreement.
(b) At the time of entering into or modifying the Participation
Agreement hereunder to defer Compensation or at the time of re-
entry following a withdrawal under Article Vll, a Participant must
agree to defer a minimum amount of$260.00 annually.
(c) A Participant who defers Compensation may not modify such
agreement to change the amount deferred except with respect to
Compensation to be earned in a subsequent calendar month or
except as provided in Article Vll hereof with respect to
withdrawals. Notice of such modification must be given prior to
the biweekly payroll deadline for which such modification is to be
effective.
(d) A Participant may at any time revoke the Participation Agreement
to defer Compensation with respect to Compensation not yet
earned. The revocation is effective and the Participant's full
Compensation will be restored in the next applicable pay period
subsequent to the month such revocation is approved by the Plan
Administrator.
(e) A Participant who has withdrawn from the Plan, as set forth in
Article VII, or who has revoked the Participation Agreement, as set
forth in paragraph (d) of this section, or who returns to perform
services for the City after a Separation from Service, may again
become a Participant in the Plan and agree to defer Compensation
not yet earned by entering into a new Participation Agreement as
provided in paragraph (a) of this section.
eferred Compensation Plan -2005 12
(f) Effective for Plan Years beginning after December 31, 2002, the
City may elect to allow Participants to make voluntary employee
contributions to a separate account or annuity established under the
Plan that complies with the requirements of Code section 408( q)
and any regulations promulgated thereunder. Such accounts or
annuities shall meet the applicable requirements of Code sections
408 or 408A and shall be treated as an individual retirement plan
that is not part of the Plan.
(g) A Participant may amend the Participation Agreement to allow for
a deferral election for sick pay, vacation pay, or back pay that is
not yet payable (subject to the maximum deferral limitations of
Section 457 in the year of deferral) if the election is made during
employment and prior to the beginning of the month when the
compensation would have been payable. Amounts paid in the
form of severance pay may not be deferred.
V. BENEFITS
5.01. Benefits and Election on Severance Event:
(a) General rule: Except as otherwise provided in this Article VI, the
distribution of a Participant's Account shall commence as of a
Participant's Automatic Distribution Date, and the distribution of
such benefits shall be made in accordance with one of the payment
options described in Section 5.02. Notwithstanding the foregoing,
but subject to the following paragraphs of this Section 5.01, the
Participant may elect following a Severance Event to have the
distribution of benefits commence on a fixed determinable date
other than that described in the preceding sentence, but not later
than the Required Beginning Date (April 1 of the year following
the year of the Participant's Retirement or attainment of age 70 Y2,
whichever is later). Prior to January 1, 2002, an election made
pursuant to the preceding sentence shall not be valid unless such
election is made not less than 30 days prior to the date that the
distribution of a Participant's Account would otherwise
commence.
(b) Additional Delay in Distribution: Prior to January 1, 2002, the
Participant may elect to defer the commencement of distribution of
benefits to a fixed determinable date later than the date provided in
Section 5.03(a), but not later than the Required Beginning Date
(April l of the year following the year of the Participant's
eferred Compensation Plan -2005 l3
retirement or attainment of age 70 ~. whichever is later), provided
however, that (a) such election is made after the 618t day following
the Participant's Severance Event and before commencement of
distributions, (b) the Participant may make only one such election,
and (c) such election is made not less than 30 days prior to the date
the distribution of a Participant's Account would otherwise
commence. On or after January 1, 2002, the Participant's right to
change his or her election with respect to commencement of the
distribution of benefits shall not be restrained by this Section 5.03.
Notwithstanding the foregoing, the Administrator, in order to
ensure the orderly administration of this provision, may establish a
deadline after which such election to defer the commencement of
distribution of benefits shall not be allowed.
(c) Reouired Distributions: By the Required Beginning Date, the
Participant must either receive the entire interest in the plan, or
begin receiving periodic distributions in annual amounts calculated
to distribute Participant's entire interest 1) over Participant's life or
life expectancy, 2) over the joint lives or joint life expectancies of
Participant and a designated beneficiary, or 3) over a shorter
period. After the starting year for periodic distributions,
Participant must receive the minimum required distribution for
each year by December 31 of that year.
5.02 General Benefit Terms:
(a) Benefit payments to a Participant or Beneficiary shall be made
according to the manner and method of payment as elected in the
Participation Agreement, which election may be changed by a
Participant or a Beneficiary, as appropriate, and as allowed by the
Plan, at any time more than thirty (30) days prior to the
commencement of such benefit payments pursuant to the
Participation Agreement.
(b) Subject to the restrictions on choice of benefit contained in
Sections 5.02(c), 5.02(d), 5.04 and 5.05, the options available for
selection by the Participant or Beneficiary as to the manner and
method of distribution of the value of the Participant's Account
are:
1) Equal monthly, quarterly, semi-annual payments in an
amount chosen by the Participant, continuing until his or
her Account is exhausted;
2) One lump-sum payment;
eferred Compensation Plan -2005 14
3} Approximately equal monthly, quarterly, semi-annual or
arumal payments, calculated to continue for a period certain
chosen by the Participant;
4} Annual Payments equal to the minimum distributions
required under Section 40l(a)(9} of the Code, including the
incidental death benefit requirements of Section
40l(a)(9)(G), over the life expectancy of the Participant or
over the life expectancies of the Participant and his or her
Beneficiary;
5) Payments equal to payments made by the issuer of a
retirement annuity policy acquired by the Employer.
6) A split distribution under which payments under options
(1). (2}. (3) or (5) commence or are made at the same time,
as elected by the Participant under Section 5.03, provided
that all payments commence (or are made) by the latest
benefit commencement date under Section 5.03;
7) Any other payment option elected by the Participant and
agreed to by the City and Administrator.
(c) A Participant's selection of a payment option made after December
31, 1995, under Subsections (b)(l}, (b)(3), or (b)(7) above may
include the selection of an automatic annual cost-of-living
increase. Such increase will be based on the rise in the Consumer
Price Index for All Urban Consumers (CPI-U) from the third
quarter of the last year in which a cost-of-living increase was
provided to the third quarter of the current year. Any increase will
be made in periodic payment checks beginning the following
January.
(d) If, prior to January 1, 2002, a Participant made a timely election of
a payment date but failed to specify a payment option or failed to
make a timely election of both payment date and option, and as a
result, was defaulted to benefit commencement at age 65, or such
other date as the Participant may have specified, benefits shall be
paid annually in the amount of $1 00 per year commencing at age
65 or the date specified by the Participant until the Participant
reaches age 70-1/2. When the Participant reaches age 70-112,
payments shall be made in accordance with Code section 40l(a)(9)
and the regulations thereunder.
(e) Limitation on Options: No payment option may be selected by a
Participant under subsections S.Ol(a)(l) or (3) unless the amount
of any installment is not less than $100. No payment option may
be selected by a Participant unless it satisfies the requirements of
Sections 40l(a)(9) and 457(d)(2) of the Code, including that
payments commencing before the death of the Participant shall
eferred Compensation Plan-2005 15
satisfy the incidental death benefit requirements under Section
40I(a)(9) (G).
(f) Subject to the restnct10ns on choice of benefit contained in
Sections S.Ol(d), 5.01 (e), 5.04 and 5.05, the options available for
selection by the Participant or Beneficiary as to the manner and
method of payment for Investment Products other than fixed or
variable rate annuities shall be determined by Qualified Vendors;
provided, however, such options shall not be contrary to State and
Federal Laws governing this Plan.
5.03. Post-Retirement Death Benefits:
(a) Should the Participant die after he/she has begun to receive
benefits under a payment option, the remaining payments, if any,
under the payment option shall continue until the Administrator
receives notice of the Participant's death. Upon notification of the
Participant's death, benefits shall be payable to the Participant's
Beneficiary commencing not later than December 31 of the year
following the year of the Participant's death, provided that the
Beneficiary may elect to begin benefits earlier than that date.
(b) If the Beneficiary has not attained age 80 at the time payments
commence, he or she may elect to receive payments in a single
lump-sum payment or in equal or approximately equal monthly,
quarterly, semi-annual or annual payments continuing over a
period not to exceed ten years from the first payment. The
Beneficiary also may elect to receive a partial lump-sum payment
followed by monthly, quarterly, semi-annual or annual
installments, provided that all payments are made within a period
of ten years from the initial payment. In the event that the
Beneficiary is age 80 or over, the remaining balance in the
Participant's account will be paid to the Beneficiary in a single
lump sum.
(d) In the event that the Beneficiary dies before the payment of death
benefits has commenced or been completed, the remaining value of
the Participant's Account shall be paid to the estate of the
Beneficiary in a lump sum. In the event that the Participant's
estate is the Beneficiary, payment shall be made to the estate in a
lump sum.
5.04 Pre-Retirement Death Benefits
eferred Compensation Plan -2005 16
(a) Should the Participant die before he or she has begun to receive the
benefits provided by Section 6.01, the value of the Participant's
Account shall be payable to the Beneficiary commencing not later
than December 31 of the year following the year of the
Participant's death, provided that the Beneficiary may elect to
begin benefits earlier than that date.
(b) If the Beneficiary has not attained age 80 at the time payments
commence, he or she may elect to receive payments in a single
lump-sum payment or in equal or approximately equal monthly,
quarterly, semi-annual or annual payments continuing over a
period not to exceed ten years from the first payment. The
Beneficiary also may elect to receive a partial lump-sum payment
followed by monthly, quarterly, semi-annual or annual
installments, provided that all payments are made within a period
of ten years from the initial payment. In the event that the
Beneficiary is age 80 or over, the remaining balance in the
participant's account will be paid to the Beneficiary in a single
lump sum.
(c) In the event that the Beneficiary dies before the payment of death
benefits has commenced or been completed, the remaining value of
the Participanfs Account shall be paid to the estate of the
Beneficiary in a lump sum. In the event that the Participant's
estate is the Beneficiary, payment shall be made to the estate in a
lump sum.
5.05 De Minimis Accounts: Notwithstanding the foregoing provisions of this
Article, prior to January 1, 2002, if the value of a Participant's Account
does not exceed the dollar limit under Section 4ll(a)(ll)(A) of the Code
as described in Section 457(e)(9}(A} of the Code and (a) no amount has
been deferred under the Plan with respect to the Participant during the 2-
year period ending on the date of the distribution and (b) there has been no
prior distribution under the Plan to the Participant pursuant to this Section
6.05, the Participant may elect to receive or the Employer may
involuntarily distribute the Participant's entire Account without the
consent of the Participant. Such distribution shall be made in a lump sum.
On or after January 1, 2002, if the value of a Participant's Account is less
than $1,000, the Participant's Account shall be paid to the Participant in a
single lump sum distribution, provided that (a) no amount has been
deferred under the Plan with respect to the Participant during the 2-year
period ending on the date of the distribution and (b) there has been no
prior distribution under the Plan to the Participant pursuant to this Section
eferred Compensation Plan -2005 17
6.05. If the value of the Participant's Account is at least $1,000 but not
more than the dollar limit under Code Section 411(a)(ll}(A) and (a) no
amount has been deferred under the Plan with respect to the Participant
during the 2-year period ending on the date of the distribution and (b)
there has been no prior distribution under the Plan to the Participant
pursuant to this Section 7.07, the Participant may elect to receive his or
her entire Account. Such distribution shall be made in a lump sum.
Vl WITHDRAWALS
6.0 I. Application for Withdrawal: In the case of an unforeseeable emergency
prior or subsequent to the commencement of benefit payments, a
Participant may apply to the Committee for withdrawal of an amount
reasonably necessary to satisfy the emergency need. If such application
for withdrawal is approved by the Committee, the Participant shall be paid
only such amount as the Committee deems necessary to meet the
emergency need, but payment shall not be made to the extent that the
financial hardship may be relieved through cessation of deferral under the
Plan, insurance or other reimbursement, or liquidation of other assets to
the extent such liquidation would not itself cause severe financial
hardship. The approved amount shall be payable in a lump sum within
thirty (30) days of such effective date or in some other manner consistent
with the emergency need as determined by the Committee.
6.02. Unforeseeable emergency defined: For purposes of this Plan, the term
"unforeseeable emergency" means a severe financial hardship of the
Participant or beneficiary resulting from an illness or accident of the
Participant or beneficiary, the Participant or beneficiary's spouse, or the
Participant or beneficiary's dependant (as defined in Section I 52( a) of the
Code); loss of the Participant's or beneficiary's property due to casualty
(including the need to rebuild a home following damage to a home not
otherwise covered by homeowner's insurance, e.g., as a result of a natural
disaster); or similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the Participant or the
beneficiary. For example, the imminent foreclosure of or eviction from
the Participant's or beneficiary's primary residence may constitute an
unforeseeable emergency. In addition, the need to pay for medical
expenses, including nonrefundable deductibles, as well as for the cost of
prescription drug medication, may constitute an unforeseeable emergency.
Finally, the need to pay for the funeral expenses of a spouse or a
dependent (as defined in section 152(a)) may also constitute an
unforeseeable emergency. Except as otherwise specifically provided in
this paragraph, the purchase of a home and the payment of college tuition
Deferred Compensation Plan -2005 18
shall not be considered unforeseeable emergencies. The detennination as
to whether such an unforeseeable emergency exists shall be based on
relevant facts and circumstances of each individual case. In any case, a
distribution on account of unforeseeable emergency may not be made to
the extent that such emergency is or may be relieved through
reimbursement or compensation from insurance or otherwise, by
liquidation of the Participant's assets (to the extent the liquidation of such
assets would not itself cause severe financial hardship), or by cessation of
deferrals under the Plan.
6.03. Withdrawal amount: Distributions because of an unforeseeable
emergency must be limited to the amount reasonably necessary to satisfy
the emergency need (which may include any amounts necessary to pay
any federal, state, or local income taxes or penalties reasonably anticipated
to result from the distribution. In no event shall the amount of a
withdrawal for an unforeseeable emergency exceed the amount of benefits
which would have been available to the Participant at the time of
withdrawal. Notwithstanding any other provision of this Plan, if a
Participant makes a withdrawal hereunder, the value of benefits under the
Plan shall be appropriately reduced to reflect such withdrawal, and the
remainder of any benefits shall be payable in accordance with otherwise
applicable provisions of the Plan.
VII. LEAVE OF ABSENCE
A Participant on an approved leave of absence with Compensation may
continue to participate in the Plan subject to all the terms and conditions of
the Plan; provided, further, Compensation may be deferred for such
Participant if such Compensation continues while the Participant is on an
approved leave of absence.
VIII. NON·ASSIGNABILITY
8.01 In General:
Except as provided in Section 8.02, neither the Participant nor Beneficiary
shall have any right to commute, sell, assign, pledge, transfer or otherwise
convey or encumber the right to receive any payments hereunder, which
payments and rights thereto are expressly declared to be unassignable and
nontransferable.
Deferred Compensation Plan -2005 19
8.02 Domestic Relations Orders:
(a) Allowance of Transfers: To the extent required under a final
judgment, decree, or order (including approval of a property
settlement agreement) that (i) relates to the provision of child
support, alimony payments, or marital property rights and (ii) is
made pursuant to a state domestic relations law, any portion of a
Participant's Account may be paid or set aside for payment to a
spouse, former spouse, child, or other dependent of the Participant.
Where necessary to carry out the terms of such an order, a separate
Account shall be established with respect to the spouse, former
spouse, or child who shall be entitled to make investment
selections with respect thereto in the same manner as the
Participant; any amount so set aside for a spouse, former spouse, or
child shall be paid out in a lump sum at the earliest date that
benefits may be paid to the Participant, unless the order directs a
different time or form of payment. Nothing in this Section shall be
construed to authorize any amount to be distributed under the Plan
at a time or in a form that is not permitted under Section 457(b) of
the Code. Any payment made to a person pursuant to this Section
shall be reduced by any required income tax withholding.
(b) Release from Liability to Participant: The City's liability to pay
benefits to a Participant shall be reduced to the extent that amounts
have been paid or set aside for payment to a spouse, former spouse,
or child pursuant to paragraph (a} of this Section. No such transfer
shall be effectuated unless the City or Administrator has been
provided with satisfactory evidence that the City and the
Administrator are released from any further claim by the
Participant with respect to such amounts. The Participant shall be
deemed to have released the City and the Administrator from any
claim with respect to such amounts, in any case in which (i) the
City or Administrator has been served with legal process or
otherwise joined in a proceeding relating to such a transfer, (ii) the
Participant has been notified of the pendency of such proceeding in
the manner prescribed by the law of the jurisdiction in which the
proceeding is pending for service of process in such action or by
mail from the Employer or Administrator to the Participant's last
known mailing address, and (iii) the Participant fails to obtain an
order of the court in the proceeding relieving the Employer or
Administrator from the obligation to comply with the judgment,
decree or order.
(c) Participation in Legal Proceedings: The City and Administrator
shall not be obligated to defend against or set aside any judgment,
decree, or order described in paragraph (a} or any legal order
Deferred Compensation Plan -2005 20
relating to the garnishment of a Participant's benefits, unless the
full expense of such legal action is borne by the Participant. In the
event that the Participant's action (or inaction) nonetheless causes
the City or Administrator to incur such expense, the amount of the
expense may be charged against the Participant's Account and
thereby reduce the City's obligation to pay benefits to the
Participant. In the course of any proceeding relating to divorce,
separation, or child support, the City and Administrator shall be
authorized to disclose information relating to the Participant's
Account to the Participant's spouse, former spouse, dependent or
child (including the legal representatives of the spouse, former
spouse, or child), or to a court.
IX. AMENDMENT OR TERMINATION OF PLAN
9.01. Termination or amendment: The City may terminate or amend the
provisions of this Plan at any time; provided, however, no termination or
amendment shall affect the rights of a Participant or a Beneficiary to the
receipt of benefits with respect to any Compensation deferred before the
time of the termination or amendment.
9.02. Distribution upon termination: Upon termination of the Plan, the
Participants in the Plan will be deemed to have withdrawn from the Plan
as of the date of such termination. The full Compensation of all
Participants will be thereupon restored on a non-deferred basis. The City
shall not distribute Plan benefits at the time of such termination; the City
shall rather retain all Deferrals and Investment Income and shall only pay
or dispose of Plan benefits as otherwise provided in the Plan and
according to the terms and conditions of the Plan.
X. ELIGIBLE ROLLOVER DISTRIBUTIONS AND TRANSFERS
10.01 Effective Date: Sections 10.02 shall be effective January 1, 2004
10.02 Incoming Roll overs: An eligible rollover distribution may be accepted
from an eligible retirement plan maintained by another employer and
credited to a Participant's Account under the Plan. The City may require
such documentation from the distributing plan as it deems necessary to
effectuate the rollover in accordance with Section 402 of the Code and to
confirm that such plan is an eligible retirement plan within the meaning of
Deferred Compensation Plan-2005 21
Section 402(c)(8)(B) of the Code. The Plan shall separately account for
eligible rollover distributions from any eligible retirement plan that is not
an eligible deferred compensation plan described in Section 457(b) of the
Code maintained by an eligible governmental employer described in
Section 457(e)(l)(A) of the Code.
10.03 Outgoing Rollovers: Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this
Section, a distributee may elect, at the time and in the manner prescribed
by the 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.
10.04 Treatment of Distributions of Amounts Previously Rolled Over From 401
(a) and 403(b) Plans and lRAs: For purposes of Section 72(t) of the
Code, a distribution from this Plan shall be treated as a distribution from a
qualified retirement plan described in Section 4974(c}(l) of the Code to
the extent that such distribution is attributable to an amount transferred to
an eligible deferred compensation plan from a qualified retirement plan (as
defined in Section 4974(c) of the Code). Eligible rollover distributions
separately accounted for in this Plan may be distributed at any time
pursuant to the Participant's request. Any amounts rolled into a 457 plan
from a qualified plan, 403(b) or IRA may be subject to the 10% premature
distribution penalty if distributed from the Plan prior to age 59 Yl, as
determined by federal law.
10.05 Transfers:
(a) Incoming Transfers: A transfer may be accepted from an eligible
deferred compensation plan maintained by another employer and
credited to a Participant's' Account under the Plan if (i) the
Participant has had a Severance Event with that employer and
become an Employee of the City, and (ii) the other employer's
plan provides that such transfer will be made. The City may
require such documentation from the predecessor plan as it deems
necessary to effectuate the transfer in accordance with Section
457(e)(l0) of the Code, to confirm that such plan is an eligible
deferred compensation plan within the meaning of Section 457(b)
of the Code, and to assure that transfers are provided for under
such plan. The City may refuse to accept a transfer in the form of
assets other than cash, unless the City and the Administrator agree
to hold such other assets under the Plan.
Deferred Compensation Plan -2005 22
Any such transferred amount shall not be treated as a deferral
subject to the limitations on deferrals above, except that for
purposes of applying the limitations of Sections 2.05(a) and
2.05(b), and amount deferred during any taxable year under the
plan from which the transfer is accepted shall be treated as if it has
been deferred under this Plan during such taxable year and
compensation paid by the transferor employer shall be treated as if
it had been paid by the City.
(b) Outgoing Transfers: An amount may be transferred to an eligible
deferred compensation plan maintained by another employer, and
charged to a Participant's Account under this Plan, if (i) the
Participant has a Severance Event with the City and becomes an
employee of the other employer, (ii) the other employer's plan
provides that such transfer will be accepted, and (iii) the
Participant and the employers have signed such agreements as are
necessary to assure that the City's liability to pay benefits to the
Participant has been discharged and assumed by the other
employer. The City may require such documentation from the
other plan as it deems necessary to effectuate the transfer, to
confirm that such plan is an eligible deferred compensation plan
within the meaning of Section 457(b) of the Code, and to assure
that transfers are provided for under such plan. Such transfers
shall be made only under such circumstances as are permitted
under Section 457 ofthe Code and the regulations thereunder.
10.06 Trustee-to-Trustee Transfers to Purchase Permissive Service Credits:
All or a portion of a Participant's Account may be transferred directly to
the trustee of a defined benefit governmental plan (as defined in Section
414( d) of the Code) if such transfer is (A) for the purchase of permissive
service credit (as defined in Section 415(n)(3)(A) of the Code) if permitted
under such plan, or (B) a repayment to which Section 415 of the Code
does not apply by reason of subsection (k)(3) thereof, within the meaning
of Section 457(e)(l7) ofthe Code.
XII. APPLICABLE LAW
This Plan shall be construed under the laws of the State of Texas.
AND IT IS SO ORDERED.
Deferred Compensation Plan-2005 23
Passed by City Council on frrst reading this 9th day of_.=.Jun=e=-----' 2005.
Passed by City Council on second reading this 23rd day of June 2005.
ATIEST:
Scott Snider, Director of
Human Resources
APPROVED AS TO FORM:
~:L~C7~~
Linda Chamales, Senior Attorney
Office Practice Section
L:/cityattllinda/deferr comp ord amend-2005-final
May31,2005
eferred Compensation Plan -2005 24