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Co� ��t- I <br /> `- "¢ " �"`- " �,�.���;,� '"� '� "�` � � . , <br /> .- ,. . , <br /> � �. . . '4:. � y .� S y +`" r ., .Y,�� � �` i . � . <br /> � Y "�..: ' ��F��� . <br /> REP�R.: � ��. ��� ���� �� . <br /> ,s_ '�.. : �.�� -�• z � .. � � : <br /> ,. .� <br /> �-�', ,� L - :k <br /> � > _<^'''' �r f. �6,: � <br /> . . � <br /> ._ � - : . _� ��y��.�_ �. �.� : To the Ho�orab1e Ma�o� anc��City Counc�l <br /> _ � ... , y ,� .��: <br /> � �� <br /> � From �ie.Ctty Manager <br /> ��,� <br /> December 9, 2002 <br /> Subject <br /> 401(a) (Defined Contribution) Deferred Compensation Plan for Department Head Employees <br /> Recommendation <br /> It is recommended that the City Council approve a resolution adopting the trust agreement <br /> and plan document to establish a 401(a) defined contribution retirement program for <br /> Council appointees, the Assistant to the City Manager, and department heads and a <br /> resolution specifying #he eligible positions. <br /> Background <br /> In the fall of 2001 the City Council agreed to provide a 2% employer contribution to a <br /> deferred compensation program on behalf of various City employees including department <br /> heads. Currently, the only deferred compensation program that the City offers is what is <br /> commonly referred to as a"457" plan. Under this plan, total contributions, regardless of <br /> whether they are made by the employer or employee, are limited to $11,000 per year, <br /> exclusive of "catch up" provisions for those within three years of retirement. Since a <br /> number of employees are currently contributing the maximum amount to this program, the <br /> 2% employer contribution will result in a 2% taxable salary increase. <br /> Since the Council's intention was to provide a 2% pre-tax contribution to a. deferred <br /> compensation program, staff began examining alternative deferred compensation plans <br /> and determined that a"401(a)" defined contribution plan would be a more suitable plan for <br /> this type of benefit. This plan will allow for pre-tax employer contributions and higher <br /> employee contributions than are permitted under the City's existing "457" plan. Staff met <br /> with and discussed this with the Council Finance Committee who directed staff to solicit <br /> proposals from qualified 401(a) providers and identify a recommended provider. The <br /> Finance Committee also expressed a desire that participation in a 401(a) plan be limited to <br /> � the City Manager and department heads. . <br /> The Finance Director, along with the Assistant to the City Manager, Public Works Services <br /> Director, Police Chief, and Human Resources Director issued a request for proposals to <br /> four firms - ICMA Retirement Corporation (ICMA), Phase II Systems, National Deferred <br /> Compensation, and Aetna Financial Services. Based on the written proposals, the review <br /> group elected to interview Phase II Systems and ICMA. After the interviews, the group <br /> unanimously decided that engaging Phase II Systems would be in the City's best interests. <br /> Phase I I Systems is a privately held firm located in Newport Beach, California that is in the <br /> business of designing, implementing, and maintaining 401(a) and 457 deferred <br /> compensation plans exclusively for public agencies. Phase II Systems currently maintains <br /> retirement plans and maintains the Public Agency Retirement System (PARS) Trust for <br /> over 200 public agencies in California. The overriding factor behind staff's <br /> recommendation to select Phase II Systems is their extensive public sector experience and <br /> 1 <br /> _ __ _ _. __ _ _ <br />