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HomeMy WebLinkAbout08430ORDINANCE NO. 8430 AN ORDINANCE AMENDING CHAPTER 3 OF TITLE II OF THE PUEBLO MUNICIPAL CODE RELATING TO THE PUEBLO POLICEMEN RETIREMENT PLAN AND PROVIDING TECHNICAL AMENDMENTS TO MAINTAIN THE TAX QUALIFIED STATUS OF THE PLAN WHEREAS, the City of Pueblo, Colorado (the "City") maintains the Pueblo Policemen Retirement Plan (the "Plan") for members employed by the City prior to April 8, 1978; WHEREAS, the City has amended the Plan various times to make technical amendments to the Plan as necessary to maintain the tax qualified status of the Plan; and WHEREAS, the City wishes to amend the Plan to accommodate technical changes requested by the IRS in response to a determination letter request filed February 2, 2009. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO, that: (brackets indicate matter being deleted, underscoring indicates new matter being added) SECTION 1. Subsection 2-3-1(b) of Chapter 3, Title II of the Pueblo Municipal Code, as amended, is hereby amended to read as follows: Section 2-3-1. Plan established. . . . (b) Notwithstanding any other provisions hereof or any other amendment hereto to the contrary, at no time shall assets of the Pension Accumulation Fund revert to, or be recoverable by, the City or be used for, or diverted to, purposes other than for the exclusive benefit of members, retirants or their beneficiaries under the plan and the payment of the plan expenses except such funds which upon termination of the plan are in excess of the amount required to fully fund the plan and are due to erroneous actuarial . In the event of a full or partial termination of the plan, the calculations rights of affected members to benefits accrued to the date of such termination or partial termination, to the extent then funded, shall be fully vested. SECTION 2. Subsection (a) of Section 2-3-19 of Chapter 3, Title II of the Pueblo Municipal Code, as amended, is amended to read as follows: Sec. 2-3-19. Regular, joint and survivor options. (a) Prior to the effective date of his or her retirement, but not thereafter, a member may elect to receive his or her pension provided for in Section 2-3-17(a) as a benefit payable throughout his or her life, called a regular pension, or he or she may elect to receive the actuarial equivalent, computed as of the effective date of his or her retirement, of his or her regular pension in a reduced pension payable throughout his or her life, and nominate a survivor beneficiary, in accordance with the provisions of Option A, B, C or D, as hereinafter set forth: (1) Option A. Joint and survivor pension. Upon the death of a retirant, his or her reduced pension shall be continued throughout the life of, and paid to, such person having an insurable interest in his or her life, as he or she shall have nominated by written designation duly executed and filed with the Board prior to the effective date of his or her retirement; (2) Option B. Modified joint and survivor pension. Upon the death of a retirant, one-half (½) of his or her reduced pension shall be continued throughout the life of, and paid to, such person having an insurable interest in his or her life, as he or she shall have nominated by written designation duly executed and filed with the Board prior to the effective date of his or her retirement; (3) Option C. Actuarially equivalent "Pop-Up" joint and survivor pension. Upon the death of a retirant, his or her reduced pension shall be continued throughout the life of, and paid to, such person having an insurable interest in his or her life, as he or she shall have nominated by written designation duly executed and filed with the Board prior to the effective date of his or her retirement; provided, however, that if the member's designated beneficiary predeceases the member, the member's pension shall increase to the amount of the member's regular pension computed in accordance with Section 2-3-17(a), effective the first day of the month next following the date of death of the member's designated beneficiary; or (4) Option D. Actuarially equivalent "Pop-Up" 50% joint and survivor pension. Upon the death of a retirant, one-half (½) of his or her reduced pension shall be continued throughout the life of, and paid to, such person having an insurable interest in his or her life, as he or she shall have nominated by written designation duly executed and filed with the Board prior to the effective date of his or her retirement; provided, however, that if the member's designated beneficiary predeceases the member, the member's pension shall increase to the amount of the member's regular pension computed in accordance with Section 2-3- 17(a), effective the first day of the month next following the date of death of the member's designated beneficiary. Members retired under the former plan shall have the right for ninety (90) days after November 2, 1971, to elect an option under this Section. Surviving spouses of deceased members who retired under the former plan shall be classed and In computing the actuarial equivalent receive benefits under Option B above. pension under Options A, B, C, and D, the following actuarial assumptions shall be used: 1994 Group Annuity Mortality Table, 8% interest and 4% rank escalation . . . . SECTION 3. Subsection (a) of Section 2-3-39 of Chapter 3, Title II of the Pueblo Municipal Code, as amended, is amended to read as follows: Sec. 2-3-39. Benefits and distributions limitations. (a) Effective January 1, 1987, in any event, notwithstanding any provision of this plan to the contrary, pursuant to Section 401(a)(9) of the Internal Revenue Code, payment of benefit to any member shall commence not later than the later date of April 1 of the calendar year following the calendar year in which the member attains age seventy and one-half (70½) or terminates Effective January 1, 1987 to and until December 31, 2001, employment. [] benefit Benefit payments will be determined and made in accordance with Internal Revenue Code Section 401(a)(9) and the regulations thereunder, as applicable to governmental plans, including the minimum distribution incidental Effective January 1, 2002, distributions from the death benefit requirement. plan will be made in accordance with the requirements of internal revenue code section 401 (a)(9) as applicable to a governmental plan, including the incidental death benefit requirement of internal revenue code section 401 (a)(9)(G) and final treasury regulations sections 1.401 (a)(9)-1 through 1.401(a)(9)-9, all as applicable to a governmental plan. The foregoing sentence overrides any distribution options in the plan that are inconsistent with internal revenue code section 401 (a)(9) as applicable to a governmental plan. . . . SECTION 4. This Ordinance shall become effective upon passage and approval; provided, however, that the modifications to the Pueblo Policemen’s Retirement Plan set forth in Sections 1 through 3, inclusive, of this Ordinance shall not become effective until the day after the date when the Board of Directors of the Fire and Police Pension Association (“FPPA”) established pursuant to Section 31-31-201(1), C.R.S. (2009) shall decide to permit said modifications pursuant to Section 31-30.5-210(2), C.R.S. (2009); and upon its becoming effective, this Ordinance is intended to apply to and modify the Plan nunc pro tunc, as of January 1, 2002. For such purpose, on its effective date, this Ordinance shall constitute and be construed to be a request by the City to FPPA to so modify the Pueblo Policemen Retirement Plan. INTRODUCED December 12, 2011 BY: Leroy Garcia COUNCILPERSON PASSED AND APPROVED: December 27, 2011 Background Paper for Proposed ORDINANCE DATE: AGENDA ITEM # R-8 December 12, 2011 DEPARTMENT: Law Department Thomas J. Florczak, City Attorney Board of Trustees of the Pueblo Policemen Retirement Plan TITLE: AN ORDINANCE AMENDING CHAPTER 3 OF TITLE II OF THE PUEBLO MUNICIPAL CODE RELATING TO THE PUEBLO POLICEMEN RETIREMENT PLAN AND PROVIDING TECHNICAL AMENDMENTS TO MAINTAIN THE TAX QUALIFIED STATUS OF THE PLAN ISSUE: Should Council adopt an amendment to the old-hire Policemen Retirement Plan (“Plan”) to conform the Plan to Internal Revenue Service (“IRS”) regulations? RECOMMENDATION: Council should adopt the Ordinance. BACKGROUND: The enclosed Ordinance amends the so-called "old-hire" Policemen Retirement Plan for those uniformed employees of the City Police Department hired before April 8, 1978. The amendments do little to substantially modify the Plan terms and requirements, but are necessary to comply with federal law. Indeed, the attached favorable determination letter from the IRS indicates that the proposed amendments must be adopted “on or before the date prescribed by the regulations under Code section 401(b),” which is 90 days from the date of the letter. Failure to adopt the Ordinance would have an adverse effect upon both the employer and the Plan members. Pursuant to C.R.S. section 31-30.5-210(2), these modifications to the Plan do not require approval by the active and retired old hire members. FINANCIAL IMPACT: None anticipated. However, failure to comply with instruction from the IRS can result in revocation of the tax-deferred status of the Plan which would result in immediate tax consequences for employees covered under the Plan.