HomeMy WebLinkAboutMINUTES - 06262012 - SD.6RECOMMENDATION(S):
ADOPT Resolution No. 2012/298 approving an amendment to the Contra Costa County Deferred
Compensation Plan (I.R.C. §457) effective June 26, 2012.
1.
Authorize the Benefits Manager to take all necessary actions in implementing the County’s Deferred
Compensation Plan as amended.
2.
FISCAL IMPACT:
Cost neutral. Costs related to the origination and maintenance of loans are assessed to employees directly by The
Hartford during the term of the loan. Costs related to the payroll system set-up and maintenance are assessed to the
employee through payroll deduction by the Auditor-Controller.
APPROVE OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
Action of Board On: 06/26/2012 APPROVED AS RECOMMENDED OTHER
Clerks Notes:
VOTE OF SUPERVISORS
AYE:John Gioia, District I Supervisor
Candace Andersen, District II Supervisor
Mary N. Piepho, District III Supervisor
Karen Mitchoff, District IV Supervisor
Federal D. Glover, District V Supervisor
Contact: Ted Cwiek, Human Resources
Director (925) 335-1768
I hereby certify that this is a true and correct copy of an action taken and entered on the
minutes of the Board of Supervisors on the date shown.
ATTESTED: June 26, 2012
David Twa, County Administrator and Clerk of the Board of Supervisors
By: June McHuen, Deputy
cc: Robert Campbell, Auditor-Controller, Christine Penkala, County Benefits Manager
SD. 6
To:Board of Supervisors
From:Ted Cwiek, Human Resources Director
Date:June 26, 2012
Contra
Costa
County
Subject:Resolution No. 2012/298 - Approving an Amendment to the County Deferred Compensation Plan (I.R.C. §457)
effective 6/26/12 - Allowing a Loan Program
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ATTACHMENT A
Effective June 26, 2012, the County’s Deferred Compensation Plan is amended as follows:
I. Section 8 is re-titled to read as follows:
SECTION 8. DISTRIBUTIONS, WITHDRAWALS AND LOANS
II. Section 8.9 Application for Benefits, is renumbered Section 8.10.
III. Section 8.9 Loans, is added to read as follows:
8.9 Loans.
(a) In General. The Administrator may make loans available to an eligible
Participant who is an Employee from his or her Account in accordance with
this section. The County will determine which Participants are eligible for
such a loan.
(b) Minimum Loan Amount. No loan may be made to any Participant from his
or her Account unless the amount of the loan requested is equal to at least
$1,000.00.
(c) Maximum Loan Number and Amount. A Participant may not at any time
have more than one outstanding loan under the Plan; a Participant who
receives a loan from his or her Account may not receive another loan under
the Plan until the outstanding loan is fully repaid. In addition, no loan may
be made to any Participant from his or her Account to the extent that such
loan, when added to the outstanding balance of all other loans to the
Participant from all other section 457(b) plans and qualified plans
maintained by the Employer or any Affiliate, exceeds the lesser of:
(1) $50,000, reduced by the excess, if any, of:
(A) the highest outstanding balance of loans to the Participant
from the Plan and all other section 457(b) plans and qualified
plans maintained by the Employer or any Affiliate during the
one-year period ending on the day before the date the loan is
approved (not taking into account any payments made during
such one-year period), over
(B) the outstanding balance of loans from the Plan and all other
section 457(b) plans and qualified retirement plans
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maintained by the Employer or any Affiliate to the Participant
on the date the loan is made; or
(2) 50% of the Participant's vested Account balance under the Plan and
under all other section 457(b) plans and qualified plans maintained
by the Employer or any Affiliate as of the day immediately preceding
the date on which such loan is approved.
(d) Evidence and Terms of the Loan. Any loan made to a Participant from his
or her Account must be evidenced by a written promissory note, which
promissory note must:
(1) specify the amount of the loan, including interest, the date of the
loan and the repayment schedule;
(2) require level amortization with repayments, not less frequently
than quarterly, over the term of the loan, except that the
Administrator may, upon the receipt of a Participant's written
election to do so, suspend the Participant's loan repayments for:
(A) a period, not to exceed one year, during which he or she is on
a Bona Fide Unpaid Leave of Absence, but only if (i) the loan,
including any accrued interest, must be repaid by the latest
date permitted under section 8.9(d)(2), and (ii) the amount of
the installments after the leave ends must not be less than
the amount required under the terms of the original
promissory note; or
(B) all or any portion of a period during which he or she is on a
leave of absence while performing service in the uniformed
services (as defined in 29 U.S.C. chapter 43), but only if
(i) loan repayments must resume upon completion of such
military service, and (ii) the loan, including any accrued
interest, must be repaid in full by amortization in substantially
level payments over a period that ends no later than the latest
date permitted under section 8.9(d)(2);
(3) Require that the loan be repaid within five years from the date of the
loan; and
(4) Provide for interest at a reasonable rate, as determined by the
Administrator, commensurate with interest rates charged by persons
in the business of lending money for loans which would be made
under similar circumstances.
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(e) Security. Any loan to a Participant under the Plan must be secured by the
pledge of the portion of the Participant's Account balance invested in such
loan.
(f) Default. In the event that a Participant fails to make a loan payment by the
last business day of the calendar quarter following the calendar quarter in
which the payment is due, a default on the loan will occur. In the event of
such default:
(1) All remaining payments on the loan will be immediately due and
payable;
(2) The Participant will not be allowed to initiate another loan from the
Plan until the defaulted amount is repaid;
(3) The Administrator will apply the portion of the Participant's interest in
the Plan held as security for the loan in satisfaction of the loan upon
his or her Severance From Employment;
(4) If the Participant defaults before his or her Severance From
Employment, the outstanding loan balance, including any accrued
interest, will be reported on an IRS Form 1099-R as a deemed
distribution.
(5) Notwithstanding anything elsewhere in this Section to the contrary,
in the event a loan is outstanding on the date of a Participant's
death, his or her estate will be his or her beneficiary as to the portion
of the interest in the Plan invested in such loan (with the beneficiary
or beneficiaries as to the remainder of his or her interest in the Plan
to be determined in accordance with otherwise applicable provisions
of the Plan).
(g) Repayment.
(1) The Participant will be required, as a condition to receiving a loan, to
enter into an irrevocable agreement authorizing the County to make
payroll deductions from the Participant's compensation as long as
the Participant has an outstanding loan or as long as the Participant
is an employee (with an outstanding loan) and to transfer such
payroll deduction amount to the loan administrator in payment of
such loan plus interest. Repayments of a loan will be made by
payroll deduction of equal amounts (comprised of both principal and
interest) from the paycheck on or about the tenth of each month,
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with the first such deduction to be made as prescribed by the loan
agreement.
(2) Notwithstanding paragraph (1) of this subsection, a Participant may
prepay the entire outstanding balance of the loan at any time,
provided that the prepayment shall not change the payment
schedule or the interest rate on the loan.
(3) If any payroll deductions cannot be made in full because a
Participant is on an un unpaid leave of absence and the loan
suspension provision is not in effect or the Participant's must pay
directly to the loan administrator the full amount that would have
been deducted from the Participant's paycheck, with such payment
to be made by the last business day of the calendar month in which
the amount would have been deducted.
(h) Severance From Employment. In the event a Participant has a Severance
From Employment, the outstanding balance of any loan will be due and
payable no later than the last day of the month in which the Participant
receives their final compensation from the County. For the purpose of this
paragraph, "final compensation" includes any payments for unused accrued
leaves for which the Participant may be eligible.
(j) Loan fees. A loan initiation fee and a regularly scheduled loan
maintenance fee may, with the Administrator's approval, be deducted from
the Participant's Account or, alternatively, from the Participant's paycheck
by County Auditor-Controller's Office.
(k) Loan Procedures. The Administrator may establish such rules and
procedures with respect to the loan program as the Administrator deems
advisable, which procedures may include, but are not necessarily limited to:
(1) The identity of the person or positions authorized to administer the
loan program;
(2) A procedure for applying for loans;
(3) The basis on which loans will be approved or denied;
(4) The limitations, if any, on the types and amount of loans offered;
(5) The procedure under the program for determining a reasonable rate
of interest; and
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(6) The events constituting default and the steps that will be taken by
the Plan Administrator in the event of such default.
(l) Definitions.
(1) "Affiliate" means a member of a controlled group of corporations (as
defined in Code section 414(b)), a group of commonly controlled
trade or business (as defined in Code section 414(c)), or an affiliated
service group (as defined in Code section 414(m)) of which the
Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to Code section 414(o).
(2) "Bona Fide Unpaid Leave of Absence" means that the borrower has
completed Contra Costa County Form AK-14, it has been completed
by the Participant's Department Head, approved by the Director of
Human Resources and filed with the Human Resources Department
Personnel Services Unit. A bona fide leave of absence shall be only
for the time as documented on the Contra Costa County form AK-14,
and cannot exceed one year.
IV. SECTION 10. Direct Rollovers and Plan-to-Plan Transfers, Subsection 10.1 Definitions,
subpart (c) is amended by adding the following at the end thereof:
Effective for Plan Years beginning on or after January 1, 2010, Distributee also includes a
Participant’s non-spouse designated Beneficiary (as defined in Code section
401(a)(9)(E)). In the case of a non-spouse designated Beneficiary, the direct rollover
may be made only to an individual retirement account or annuity described in section
408(a) or 408(b) of the Code (“IRA”) that is established on behalf of the designated
Beneficiary and that will be treated as an inherited IRA pursuant to the provisions of
section 402(c)(11) of the Code. Also, in this case, the determination of any required
minimum distribution under section 401(a)(9) of the Code that is ineligible for rollover will
be made in accordance with Notice 2007 7, Q&A-17 and 18, 2007 5 I.R.B. 395 (or its
successor).
BACKGROUND:
On September 13, 2011, the Board of Supervisors referred to the Internal Operations Committee for review and
consideration a proposed amendment to the County Deferred Compensation Plan to include a loan provision for
plan participants.
On October 25, 2011, the Internal Operations Committee directed the Human Resources Department staff to
develop a proposal for implementing a loan provision for plan participants.
On February 13, 2012, the Internal Operations Committee reviewed and considered parameters for the loan
provision as recommended by the Deferred Compensation Plan Advisory Committee. The Internal Operations
Committee accepted the parameters of the loan provision and forwarded it to the Board of Supervisors for
consideration.
If approved, the following are the primary components of the loan provision:
Loan type: General Purpose Loans.
Loan term: 1 to 5 years.
Loan minimum: $1,000.
Loan maximum: The loan may not exceed the lesser of $50,000 or 50% of the participant’s vested account
balance.
Loan interest rate: Prime plus 1%. (See Attachment B, June 8, 2012 Loan Rate Information Fax Sheet.)
Loan Repayment: Occurs via payroll deduction on or about the 10th of each month.
Outstanding Loans: Each participant is limited to one active loan at a time.
The following labor organizations have been advised of the proposed loan program and have determined not to
exercise their right to meet and confer. Accordingly, members of these labor organizations will be eligible to
apply for loans through the Contra Costa County Deferred Compensation Program:
Deputy District Attorneys Association (DDAA).
Public Defenders (PDA).
Probation Peace Officers Association (PPOACCC).
Deputy Sheriffs Association (DSA).
California Nurses Association (CNA).
International Association of Fire Fighters (IAFF) Local 1230.
Physicians and Dentists of Contra Costa (PDOCC).
United Chief Officers’ Association (UCOA).
Professional & Technical Engineers-(IFPTE) Local 21, AFL-CIO.
District Attorney Investigators’ Association (DAIA).
The Human Resources Department will continue to meet and confer with the remaining labor organizations
representing employees of Contra Costa County to determine whether or not their members will be eligible to
apply for loans from the Contra Costa County Deferred Compensation Program. In addition, on June 26, 2012,
the Board will be asked to approve an amendment to the Management Resolution to provide for participation in
the loan program by unrepresented officers and employees.
If approved, the County Deferred Compensation Program, Section 10-Direct Rollovers and Plan-to-Plan
Transfers, also would be updated to comply with current IRS Regulations. Under the proposed amendment to
Section 10 a “Distributee” would also include a plan participant’s non-spouse designated beneficiary.
CONSEQUENCE OF NEGATIVE ACTION:
The County’s Deferred Compensation Plan will not include a loan program, and the Plan will not be amended for
consistency with Federal Law.
CLERK'S ADDENDUM
Speaker: Rollie Katz, Public Employees' Union, Local One.
ATTACHMENTS
Resolution No. 2012/298
Attachment A-Section 8 and 10
Attachment B-Loan Information Fax Sheet