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HomeMy WebLinkAbout11492RESOLUTION NO. 11492 A RESOLUTION ADOPTING THE PERA'S QUALIFIED REPLACEMENT BENEFIT ARRANGEMENT AND AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE THE ADOPTION AGREEMENT THEREFOR BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1 The City of Pueblo hereby adopts PERA's Qualified Replacement Arrangement. The PERA's Qualified Replacement Arrangement Adoption Agreement, a copy of which is attached hereto, having been approved as to form by the City Attorney, is hereby approved. SECTION 2 The President of the City Council is authorized to execute the PERA's Qualified Replacement Arrangement Adoption Agreement in the name of the City and the City Clerk in the name of the City and the City Clerk is directed to affix the seal of the City thereto and attest same. BY: Randy Thurston Councilperson PRt ATTESTED aY { CLERK INTRODUCED: December 22, 2008 D O ED A e Background Paper for Proposed RESOLUTION AGENDA ITEM # 15 DATE: December 22, 2008 DEPARTMENT: Law Department 1111111111144 A RESOLUTION ADOPTING THE PERA'S QUALIFIED REPLACEMENT BENEFIT ARRANGEMENT AND AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE THE ADOPTION AGREEMENT THEREFOR ISSUE Should City Council adopt PERA's Qualified Replacement Benefit Arrangement ( "Arrangement ")? RECOMMENDATION Adopt the Arrangement. BACKGROUND Under the Arrangement, if a PERA member retires and his PERA retirement benefit exceeds Internal Revenue Code Section 415(b) limits, the amount in excess of such limits will be remitted to the PERA employer. The PERA employer will then pay the excess amount received from PERA to the retired PERA member reduced by all applicable federal, state and local income, payroll and estate tax withholding, if any. PERA will be the Administrator of the Arrangement. FINANCIAL IMPACT None. PERMS QUALIFIED REPLACEMENT BENEFIT COL ARRANGEMENT ADOPTION AGREEMENT R"ERA. Colorado Public Employees' Retirement Association PO Box 5800, Denver, Colorado 80217.5800 303 -832 -9550 or 1 •L00- 759 -PERA (7372) 1. General Information Employer: City of Pueblo Address: #1 Citv Hall Place _ Employer Contact. Neldon Demke, Director of Human Resources Phone: (719) 553 -2633 Employer No.: 940 2. Adoption of Arrangement The undersigned Employer hereby adopts PERA's Qualified Replacement Benefit Arrangement ( "Arrangement ") with respect to employees of Employer who are Members of PERA and with respect to benefits paid by PERA under the provisions of Article 51 of Title 24, Colorado Revised Statutes. The signatories represent that they have the authority to sign this Agreement and bind the Employer to the terms hereof. The signatories further representthat they and the Employer have taken all actions necessaryto effectuate the terms of this Agreement, including but not limited to obtaining any approval required by the Employer's board or other body. 3. Agreement to be Bound by Terms of Arrangement Employer agrees to be bound by the terms of the Arrangement, as the same may be amended from time to time. Employer further agrees to lie bound by all actions, decisions and interpretations of PERA orthe board of trustees of PERA, in connection with the administration of the Arrangement. 4. Obligations of Employer Employer acknowledges that it shall be solely responsible for paying ar f amounts received from PERA and due under the terms of the Arrangement to the Benefit Recipients for the Eligible Members who retired from Employer or who died while employed by Employer. Employer agrees to payto each such Bersefit Recipient on each payment date the amount remitted to Employer by PERAto satisfythe Employers obligation to each such Benefit Recipient, reduced byall applicable federal, state and local income, payroll and estate taxwithholding amounts, if any. Employer acknowledges that itshall be solely responsible for satisfying all taxwithholding, payroll tax payments, other applicable tax payments and reporting requirements applicable under the Arrangement, if any. AGREED, on this 22— fid�, December ,2008 , signature Barbara P. Vidmar Name President of the City Council Title On Behalf of City of Pueblo Employer Name' 5/25 (REV 3 -03) Introduction Internal Revenue Code Section 415(b) imposes a dollar limit on the benefit amount a pension plan can pay from tax - deferred trust funds. PERA cannot pay a retiree any benefit amount that exceeds this federal tax limit. Currently, this limit is set at $185,000 ($15,417 per month) for retirees who are age 62 to 65. This dollar amount is actuarially decreased for retirees younger than age 62 and increased for retirees over age 65. Any tax -paid contributions or tax -paid service credit purchases in a member's account will also affect these limits. Since PERA members may retire as early as age 50 with a high percentage of highest average salary (HAS), a few highly paid members may encounter this limit. For example, a PERA member who retires at age 50 is limited to an annual benefit of $79,422. A PERA member who retires at age 55 is limited to an annual benefit of $110,557. See the table on page 4, prepared by PERA's actuary, for the dollar limits at various ages. This table is for those retiring in 2008; those retiring in later years may have somewhat higher limits. While 415(b) imposes a limit, Section 415(m) allows PERA to use a replacement benefit arrangement (RBA) to provide relief for a member who is subject to this 415(b) limit. PERA has adopted an RBA. The governing document is contained in this booklet. It may be amended from time to time to comply with future changes in the federal tax laws or their interpretations. Procedures Prior to retirement, you may estimate whether your benefit may be affected by this 415(b) limit as follows: 1. Request a retirement estimate from PERA. Provide PERA with your best assumptions and estimates for your retirement date, salary until retirement, etc. 2. Compare the estimated Option 1 amount (single life option) to the amount in the enclosed table for your anticipated age at retirement. If you plan to select Option 2 or 3 (joint life options) at retirement and name your spouse as your cobeneficiary, then compare the Option 2 or 3 amount to the enclosed table for your anticipated age at retirement. 3. If your estimated benefit, using step 2 above, is less than the table amount, you are not subject to the 415(9) limit and PERA will pay you the entire amount of your benefit directly. 4. If your estimated benefit, using step 2 above, is more than the table amount, you may be subject to the 415(b) limit. If step 4 applies to you, further analysis by PERA's actuary is required to determine if your actual benefit at retirement exceeds the 415 @) limit. The actuary must determine the portion of your benefit resulting from tax -paid contributions and tax -paid purchases of service. The tax -paid portion is added to the 415(b) limit for your retirement age and becomes the new limit. Given the cost of such actuarial analysis and the need for federal tax purposes to do the analysis with actual retirement information, PERA waits until it has received all of your final retirement information before paying PERA's actuary to do this analysis. At retirement, PERA will have its actuary determine whether your benefit exceeds the 415(b) limit. If your benefit does not exceed this limit, PERA will pay you the entire amount of your benefit directly. If PERA's actuary determines that your benefit exceeds the 415(b) limit at retirement, PERA will pay you directly the maximum amount permitted by the tax limit. Also, PERA will work with your previous employer to establish an RBA with that employer. After the previous employer agrees to participate in the RBA, PERA will pay your previous employer the difference between your benefit amount (as determined under state law), without regard to the 415(b) tax limit and the 415(b) limit; your previous employer then will pay you this difference. The RBA requires the cooperation of your employer who will need to sign an RBA Adoption Agreement, which is included in this booklet. Shortly before you decide to retire, make certain you have a current retirement estimate and also the most current information about the RBA. You may direct your questions to a PERA Benefits Counselor at 303 -832 -9550 or 1 -800- 759 -7372. PERA also urges you to consult with your own tax adviser who is familiar with your own particular facts and circumstances, including any plans other than PERA - sponsored plans in which you may have participated. PERMS Qualified Replacement Benefit Arrangement The purpose of this Arrangement is to provide additional payments to the Benefit Recipients of PERA when the benefits paid under the Pension Plan are reduced due to the limitations imposed by Section 415 of the Internal Revenue Code of 1986, as amended. This Arrangement is intended to constitute a qualified governmental excess benefit arrangement as that term is defined in Code Section 415(m). The Arrangement shall be effective as of January 1, 1999, and shall apply to Members of PERA who retire with an effective date of retirement or who die on or after January 1, 1999. The 415(b) process considers cost of hving mere ses to be made without Jeopardizing your benefits, This booklet provides general information about the effect of lntemal Revenue Code Section 415(b) limits on Colorado PERA benefits. Your rights, benefits, and obligations as a PERA nrernber are governed by Title 24, Article 51 of the Colorado Revised Statutes, and the Rules of the Colorado Public Etnployees' Retirement Associatiar, which take precedence over any Interpretations in this fact sheet. Article 1— Definitions (Note: C.R.S. refers to Colorado Revised Statutes.) 1.01 "Arrangement" means PERA's Qualified Replacement Benefit Arrangement, as set forth herein and as amended from time to time. 1.02 "Association" or "PERA" means the Public Employees' Retirement Association, as established under the provisions of Article Si of Title 24, C.R.S. 1.03 "Benefit Recipient" means any individual who is a benefit recipient under Section 24 -51- 101(8), C.R.S. 1.04 "Benefit" means a benefit under the Pension Plan, as that term is defined under the provisions of Article 51 of Title 24, C.R.S. 1.05 "Board" means the Board of Trustees of PERA as established under the provisions of Article 51 of Title 24, C.R.S. 1.06 "Code" means the Internal Revenue Code of 1986, as amended (and corresponding provisions of any subsequent federal tax laws) and the regulations thereunder. 1.07 "Effective Date" means January 1, 1999. 1.08 "Eligible Member" means a Member who retires with an Effective Date of retirement on or after the Effective Date, or who dies on or after the Effective Date. 1.09 "Employer" means an Employer with respect to its employees who are Members of PERA and with respect to Benefits paid by PERA under the provisions of Article 51 of Title 24, C.R.S.; provided that the employer signs an adoption agreement in the form specified by the Board. 1.10 "Restricted Benefit" means the maximum Benefit permitted to be paid to a Benefit Recipient from the Pension Plan, as limited by Code Section 415, in accordance with Section 24.51 -611, C.R.S. 1.11 "Member" means any individual who is a Member of PERA, as that term is defined under the provisions of Article 51 of Title 24, C.R.S. 1.12 "Participant" means any Benefit Recipient who is eligible to participate in the Arrangement in accordance with Section 2.01. 1.13 "Pension Plan" means the defined benefit plan for PERA Members established under the provisions of Article 51 or Title 24, C.R.S., and qualified under Code Section 401. 1.14 "Retiree" means any individual who is a retiree under Section 24- 51- 101(39), C.R.S. 1.15 "Unrestricted Benefit" means the benefit that would be payable to a Benefit Recipient from the Pension Plan if the limits of Code Section 415 were not applicable in accordance with Section 24 -51 -611, C.R.S. Article 2— Eligibility and Payments 2.01 Eligibility to Receive Payments If, at the time an Eligible Member becomes a Retiree or dies or at any time thereafter, the Unrestricted Benefit of the Benefit Recipient under the Pension Plan exceeds the Restricted Benefit payable to the Benefit Recipient at that time, the Benefit Recipient shall become a Participant and shall be entitled to receive payments under this Arrangement, in accordance with the terms hereof. 2.02 Amount of Payments A Participant shall receive payments under this Arrangement equal to the difference between his Unrestricted Benefit and his Restricted Benefit, provided that the amount of payments so determined shall be subject to change and to such adjustments as PERA deems appropriate, from time to time. 2.03 Form and Timing of Payments Payments under this Arrangement shall be paid by the applicable Employer to each Participant at the same time and in the same form and manner as Benefits are provided to such Participant under the Pension Plan. Any election made by an Eligible Member with regard to the distribution of Benefits under the Pension Plan, including the designation of a cobeneficiary or a named beneficiary, as defined in Section 24 -51- 101(10) and (33), C.R.S., shall be equally applicable to and binding on such Eligible Member in connection with payments under this Arrangement. 2.04 Effect on Pension Plan Any Benefit payable under the Pension Plan shall be paid solely in accordance with the terms and provisions thereof and shall be subject to the Section 415 and other applicable tax limitations; nothing in this Arrangement shall operate or be construed in any way to modify, amend or affect the Benefits payable thereunder. 2.05 Tax Withholding All payments under this Arrangement shall be subject to and reduced by applicable federal, state and local income, payroll and estate tax withholding requirements and all other applicable deductions required by this Arrangement or by law. Article 3— Administration 3.01 Administrator PERA shall be the Administrator of the Arrangement and shall be responsible for the supervision and control of the operation and administration of the Arrangement, except as otherwise provided herein. PERA shall have the exclusive right and full discretion to construe and interpret the Arrangement and to decide any and all questions of fact, actuarial valuation, interpretation, definition or administration arising thereunder or in connection with the administration of the Arrangement. The interpretation and construction of any provisions of the Arrangement by the Administrator and its exercise of any discretion granted under the Arrangement shall be binding and conclusive on all persons who at any time have or claim to have any interest whatever under this Arrangement. 3.02 Contributions and Payments (a) As soon as administratively feasible following the receipt of Employer contributions, PERA shall segregate from each Division's contributions the portion of the contributions necessary to make the payments due to Benefit Recipients in that Division for the next payment period and any applicable expenses under this Arrangement. Notwithstanding the foregoing, if PERA determines, in its sole discretion, that the allocation of contributions to the Arrangement would jeopardize the actuarial soundness of the Pension Plan, PERA shall cease to 2 ® Replacement BenerrtArrangement segregate contributions for the Arrangement and shall notify the participating Employers and affected Benefit Recipients. (b) Contributions segregated for payments and expenses under the Arrangement shall be separately accounted for and shall be used exclusively for payments and expenses under the Arrangement. (c) Within a reasonable period of time before each payment date, PERA shall distribute to each participating Employer the gross amount necessary, as determined by PERA, to satisfy such Employer's liability for amounts due on such payment date under the Arrangement. (d) The Employer from whom the Eligible Member retired or who employed the Eligible Member at his death shall be solely responsible for paying any amounts received from PERA and due to the Benefit Recipient under the terms of the Arrangement. PERA shall have no obligation to pay any amounts due under the terms of the Arrangement. (e) The Employer shall be responsible for satisfying all tax withholding, payroll tax payments, other applicable tax payments and reporting requirements applicable to the Arrangement, if any, and shall be responsible for administering all payments due under the Arrangement. 3.03 Plan Unfunded The payments under this Arrangement shall not be funded. Nothing contained herein shall be construed as providing for assets to be held in trust for the Participants. PERA reserves the right in the future to establish and fund one or more trusts for the purpose of paying some or all of the amounts promised to Participants under the Arrangement. 3.04 Appeal Procedure If a dispute involving the interpretation of this Arrangement arises, the Administrator's decision shall be final, conclusive and binding unless it is appealed and resolved in accordance with the administrative review procedures set forth in the Board rules. Article 4— Amendment and Termination 4.01 Amendment and Termination The Board reserves the right to amend or terminate the Arrangement at any time and from time to time. Such amendment or termination may be retroactive to the extent that the Board deems such action necessary, in its sole discretion, to maintain the tax - qualified status of the Pension Plan or the status of this Arrangement as a qualified excess benefit arrangement as defined in Code Section 415(m) or to avoid jeopardizing the actuarial soundness of the Pension Plan. In addition, the Arrangement may be amended or terminated to eliminate all payments with respect to any Member or other individual who has not become eligible to participate in the Arrangement as of the date of such amendment or termination by reason of retirement or death in accordance with Section 2.01. Article 5— General Provisions 5.01 Applicable Law All questions pertaining to the validity, construction and administration of the Arrangement shall be determined in conformity with the laws of the State of Colorado, except to the extent federal law preempts state law. 5.02 Construction (a) The titles and headings of the Articles and Sections in this instrument are for convenience only. In case of ambiguity or inconsistency, the text rather than such titles or headings shall control. (b) If any provision of the Arrangement or the application thereof to any circumstance or person is invalid, the remainder of the Arrangement and the application of such provision to other circumstances or persons shall not be affected thereby. 5.03 Nonalienation Benefits under this Arrangement shall not be subject to alienation or legal process, except to the extent permitted under Section 24 -51 -212, C.R.S. 5.04 No Enlargement of Employment Rights The establishment of the Arrangement shall not confer any legal rights upon any employee or other person for a continuation of employment, nor shall it interfere with the rights of the Employer to discharge any employee and to treat the employee without regard to the effect which that treatment might have upon the employee as a Participant in the Arrangement. 5.05 Information Required By Arrangement Benefit Recipients, other individuals and Employers shall furnish to the Administrator such evidence, data and information as the Administrator considers necessary or desirable for the purpose of administering the Arrangement. Replacement Benefit Arrangement® 3