HomeMy WebLinkAbout7086RESOLUTION NO. 7086
A RESOLUTION ENGAGING THE FIRM OF WILLIAM M.
MERCER, INCORPORATED TO PREPARE AND FILE AN
APPLICATION FOR LETTER OF DETERMINATION OF TAX
QUALIFIED STATUS OF PUEBLO POLICEMEN RETIRE-
MENT PLAN
WHEREAS, William M. Mercer, Incorporated performs the actuary
studies and reports for the Pueblo Policemen Retirement Plan, the
City's pension plan for its "old hire" police officers, and is
qualified to file all applications and prepare all amendments with
respect to the tax exempt qualification of the Pueblo Policemen
Retirement Plan, and
WHEREAS, the City Council and the Board of Trustees of the
Pueblo Policemen Retirement Plan previously authorized the filing
of an application for letter of determination with the Internal
Revenue Services and such filing requires the engagement of quali-
fied experts who also are competent to provide actuary studies
with respect to any amendments necessary to qualify the Pueblo
Policemen Retirement Plan for tax exempt status; NOW, THEREFORE,
BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that:
SECTION 1
William M. Mercer, Incorporated is hereby engaged to prepare
and file all documents and applications with the Internal Revenue
Service for letter of determination of tax qualified status of
Pueblo Policemen Retirement Plan and §414(h) amendment thereto
(employer "pick -up ") in accordance with its letter of February 9,
1993 attached hereto.
SECTION 2
All costs and expenses for services of William M. Mercer,
Incorporated and application fee are hereby determined to be
proper administrative expenses of the Pueblo Policemen Retirement
Plan and shall be paid by the City and the City shall be reim-
bursed out of the assets of the Pueblo Policemen Retirement Plan.
INTRODUCED: February 22, 1993
By SAMUEL CORSENTINO
Councilperson
ATTEST:
APPROVED:
C1 c o "
l Presid t of the ity Council
TJ 65.43 -2-
WILLIAM M.
MERCER
IN( (*1
February 9, 1993
Thomas Jagger, Esq. VIA FAX
City Attorney F E B 1 2 3.;j62
City of Pueblo
P.O. Box 1427
Pueblo, CO 81002
Re: Proposal for IRS Submission of Pueblo Old Hire Police
Retirement Plan for a Determination of Tax- Qualified Status
Dear Mr. Jagger:
You have requested a fee estimate for applying for a letter of determination of
tax- qualified status. We suggest that the Plan be amended to include the 414(h)
pick -up prior to the IRS submission. The 414(h) amendment would have a
delayed effective date until the first payroll period subsequent to receipt of a
favorable IRS determination letter.
IRS Determination Letter
For submission, the IRS requires that the following be completed:
1. Form 5300 - Application for Determination for Employee Benefit
Plan;
2. Form 5302 - Employee Census;
3. Form 2848 - Power of Attorney;
4. Certification and Demonstrations. under, Revenue Procedure 91 -66,
as amended by Revenue Procedure 92.60; and
5. Form 8717 - User fee.
The IRS also requires that a Notice to Interested Parties (which meets the
provisions of Revenue Procedure 93 -6) be distributed to certain individuals.
Fee
Mercer's fee for completing the above forms (excluding Form 5302 - Employee
Census) and drafting the required Notice to Interested Parties ranges from $4,000
to $4,500 depending on the actual professional time required.
Orr Norw -t Center
17nn Linrnln S!rrrt Suite :,30n
D e CC) ?,0203
A I,' o ,c : h F„ I I :! , : , n-, -u. Com;)am:
M
MERCER
INCORPORATED
Thomas Jagger, Esq.
City of Pueblo
February 9, 1993
Page Two
Mercer's fee for completing the Form 5302 is $750 to $1,000. We have the data
necessary to complete this form as of December 31, 1991. If the IRS requests
more recent data, this fee could increase.
Mercer's fee for preparing the 414(h) amendment is $600.
Other Fees
For each plan submitted to the IRS there is a "user fee" payable to the IRS based
upon the number of participants in the plan. Because your Plan has fewer than
100 participants, the user fee is $700. (Our fee quote does not include the user
fee.)
If the IRS initiates any type of correspondence or requests any plan changes, there
would be additional fees based upon the time necessary to effect such changes
and /or to correspond with the IRS. We can give you a fee estimate for these
services at the time the IRS requests changes, if any.
Timing
Should you accept the terms of this letter, we will forward you the IRS forms for
your review in three to four weeks, but no earlier than March 15, 1993. The
actual application date for filing the forms with the IRS will turn on how quickly
you respond to our questions in the preliminary packet of forms we send you.
Payment of Expenses
You asked whether the Plan may cover the expenses of (1) obtaining a
determination letter from the IRS, (2) amending the Plan to comply with the IRS
changes and (3) amending the Plan to provide for Code Section 414(h) pickups.
1. Determination Letter
Generally, ERISA Sections 403(c)(1) and 404(a)(1)(A) prohibit a
nongovernmental employer from charging the cost of obtaining the initial
determination letter to a retirement plan. Specifically, the Department of
Labor has ruled that certain services provided in conjunction with the
WILLIAM M.
MERCER
INCORPORATED
Thomas Jagger, Esq.
City of Pueblo
February 9, 1993
Page Three
establishment, termination and design of a plan relate to the business
activities of an employer and, therefore, generally are not proper expenses
of a retirement plan. Although governmental plans are NOT subject to
these ERISA requirements, many governmental entities look to ERISA for
guidance.
2. IRS Changes
Whether IRS - requested changes are proper plan expenses will depend on
the nature of the changes. If the changes are such that would be required
for initial IRS approval, such changes would probably not be properly
charged to a nongovernmental plan. Again, although the Pueblo Old Hire
Police Retirement Plan is NOT subject to these ERISA requirements, many
governmental entities look to ERISA for guidance.
3. Code Section 414(h) Pick -Ups
Implementing a Code Section 414(h) feature to allow Plan participants to
contribute on a pre -tax basis is a plan design change. Therefore, the cost of
this change would not be properly payable from the Plan under ERISA.
Again, it is your decision as to whether or not these expenses should be
charged to the Plan since it is not subject to these ERISA requirements.
If you have any questions, please call.
Sincerely,
Cindy S. Birley
Principal
CSB :RES:scb
PU2PL431.LB
cc: Mr. Donald E. Fuerst