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