CITY COUNCIL AGENDA ITEM NO.
Meeting Date: January 8, 2002
Subject/Title: Approve a Resolution to amend provisions of the ICMA Deferred Compensation Plan as allowed by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) effective January 1, 2002
Submitted by: Patti Standley, Human Resources Manager
Approved by: John Stevenson, City Manager
Approve a Resolution amending provisions to the ICMA Deferred Compensation Plan as allowed by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) effective January 1, 2002, as recommended by ICMA.
Effective February 10, 1998, the City Council approved Resolution 98-22 adopting amended Internal Revenue Code (IRC) required revisions of the ICMA Retirement Corporation 457 Plan and Trust Document, as well as establishing the City of Brentwood as Trustee for employer plan number 301344. As required by the amended IRC, the employer trust was established to ensure that the assets in a 457 plan are protected and used exclusively to pay benefits to plan participants and/or beneficiaries.
On June 7, 2001, President Bush signed the “Economic Growth and Tax Relief Reconciliation Act of 2001” (EGTRRA). This tax relief measure allows individuals to defer higher levels of salary to a qualified plan, thus reducing taxable wages. Additional features of EGTRRA include: portability provisions that allow for rollover of funds other than 457 funds into and out of 457 plans, rollover provisions for surviving spouses, new distribution provisions for election of funds upon retirement, plus many more. Staff recommends approving the attached resolution to comply with the new Federal law.
However, as of this date, the California state tax law does not conform to the retirement plan provisions of EGTRRA. Until the California State Legislature revises the state tax law, plan participants may not take advantage of the EGTRRA changes on a tax-favored basis for state tax purposes. Based on similar situations in the past, staff anticipates the California State Legislature to take action on this issue with a retroactive effective date of January 1, 2002. Until that time, staff will monitor contributions made by plan participants to ensure they do not exceed provisions currently allowed by the California state tax law.
No fiscal impact.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BRENTWOOD, CALIFORNIA (“EMPLOYER”) AMENDING PROVISIONS OF THE ICMA DEFERRED COMPENSATION PLAN NUMBER 301344 AS ALLOWED BY THE ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001 (EGTRRA) EFFECTIVE JANUARY 1, 2002
WHEREAS, the Employer has employees rendering valuable services; and
WHEREAS, the Employer has established a deferred compensation plan for such employees that serves the interest of the Employer by enabling it to provide reasonable retirement security for its employees, by providing increased flexibility in its personnel management system, and by assisting in the attraction and retention of competent personnel; and
WHEREAS, the Employer has determined that the continuance of the deferred compensation plan will serve these objectives; and
WHEREAS, amendments to the Internal Revenue Code have been enacted that require changes to the structure of and allow enhancements of the benefits of the deferred compensation plan.
NOW, THEREFORE BE IT RESOLVED that the City Council of the City of Brentwood hereby amends and restates the deferred compensation plan (the “Plan”) in the form of the ICMA Retirement Corporation Deferred Compensation Plan and Trust as attached hereto as Exhibit A and incorporated herein by this reference. Notwithstanding the foregoing, Plan provisions shall become effective once the appropriate body makes the necessary statutory or regulatory amendments permitting the provisions.
BE IT FURTHER RESOLVED that the assets of the Plan shall be held in trust, with the Employer serving as trustee (“Trustee”), for the exclusive benefit of Plan participants and their beneficiaries, and the assets shall not be diverted to any other purpose. The Trustee’s beneficial ownership of Plan assets held in VantageTrust shall be held for the further exclusive benefit of the Plan participants and their beneficiaries.
BE IT FURTHER RESOLVED that the Employer hereby agrees to serve as Trustee under the Plan.
PASSED, APPROVED AND ADOPTED by the City Council of the City of Brentwood at a regular meeting held January 8, 2002 by the following vote:
Michael A. McPoland, Sr.
Karen Diaz, CMC