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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