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Home My WebLink AboutE-09 Staff Report for APPLE PlanCONSENT ITEM E-9 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL VIA: TROY L. BUTZLAFF, ICMA-CM, CITY MANAGER FROM: AMELIA AYALA, DIRECTOR OF HUMAN RESOURCES & RISK MANAGEMENT DATE: FEBRUARY 1, 2016 SUBJECT: ADOPT RESOLUTION NO. 2016-C17 FOR THE ACCUMULATION PROGRAM FOR PART-TIME AND LIMITED-SERVICES EMPLOYEES (APPLE) OF THE CITY SUMMARY: The City currently provides a Federal Insurance Contribution Act (FICA) alternative plan to part-time and temporary employees through the Public Agency Retirement Services (PARS). The City desires to continue providing a tax-qualified FICA alternative plan to part-time and temporary employees through a different plan option offered exclusively by Keenan & Associates. Known as the Accumulation Program for Part-Time and Limited Services Employees (APPLE) this plan option offers greater benefits and flexibility for our employees then the existing alternative plan. This action approves a resolution adopting the APPLE plan for part-time and limited services employees effective March 1, 2016. RECOMMENDATION: Staff recommends that the City Council take the following action: 1) Approve Resolution No. 2016-C17 adopting the Accumulation Program for Part-Time and Limited-Services Employees (APPLE) of the City of Azusa. DISCUSSION: For a number of years, the City has been providing a tax-qualified Federal Insurance Contribution Act (FICA) alternative plan to part-time and temporary employees through the Public Agency Retirement Services (PARS). After some research and meetings, the City has discovered that employees who are currently in the PARS plan are losing principal due to expenses out weighting current rates of return. The City desires to maintain a similar plan but with Keenan & Associates’ Accumulation Program for Part-Time and Limited-Services Employees (APPLE) plan. In addition to other services, this plan will offer part-time and temporary employees interest accrual, principal guarantee, and account information APPROVED COUNCIL MEETING 02/01/2016 Accumulation Program for Part-Time and Limited-Services Employees (APPLE) Plan February 1, 2016 Page 2 via the web. Approximately 30 days after approval, the funds in the current plan will be transferred to the APPLE plan. Employer and employee contributions will remain the same. In addition to adopting the APPLE plan the proposed resolution authorizes Keenan & Associates to provide ongoing administrative consulting services in connection with the operation of the APPLE Plan and to arrange funding of the Plan through American United Life (AUL). FISCAL IMPACT: There is no new fiscal impact associated with this item. The City pays 3.75% and the Part-Time Employees contribute 3.75% of their salary to this alternative retirement plan. Prepared by: Amelia Ayala Director of Human Resources & Risk Management Reviewed and Approved: Reviewed and Approved: Louie F. Lacasella Troy L. Butzlaff, ICMA-CM Management Analyst City Manager Attachments: 1) Resolution No. 2016-C17 ATTACHMENT 1 RESOLUTION NO. 2016-C17 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AZUSA FOR THE ACCUMULATION PROGRAM FOR PART-TIME AND LIMITED- SERVICE EMPLOYEES OF THE CITY OF AZUSA (APPLE PLAN) WHEREAS, California Government Code section 53216, et seq., authorizes a governmental employer to establish and fund a pension Plan covering its employees on a compulsory basis; and WHEREAS, Section 11332 of the Omnibus Budget Reconciliation ACT of 1990 (“OBRA ‘90”) extends Social Security retirement benefit coverage to employees of state and local governments who are not covered by a state or local retirement system and subjects the employer and employee to Federal Insurance Contributions Act (“FICA”) taxes on the employee’s wages; and WHEREAS, OBRA ’90 excludes from the requirement of Social Security coverage governmental employees who are covered by a compulsory retirement system of a state or local government; and WHEREAS, the City of Azusa (the “Employer”) currently provides a FICA alternative plan to part-time and temporary employees of the Employer through Public Agency Retirement Services (PARS) Plan and Trust; and WHEREAS, the Employer desires to continue in providing a tax-qualified FICA alternative plan for said employees, but to replace the existing PARS Plan and Trust with the Accumulation Program for Part-Time and Limited-Service Employees of the City of Azusa (“APPLE Plan”); and WHEREAS, the Council has reviewed and elected to adopt the Accumulation Program for Part-Time and Limited-Service Employees (APPLE) to cover the Employer’s part-time and temporary employees; NOW, THEREFORE, BE IT RESOLVED, that pursuant to the Employer’s authority under the existing PARS Plan to amend the plan, the Council does hereby adopt the Accumulation Program for Part-Time and Limited-Service Employees of the City of Azusa as an amendment to the existing PARS Plan, replacing the PARS Plan in full, effective March 1, 2016. FURTHER RESOLVED, that the Council hereby designates the Employer as the Plan Administrator of the APPLE Plan. FURTHER RESOLVED, that the City hereby terminates the Employers participation in the PARS Trust and removes US Bank the Trustee of the Plan. FURTHER RESOLVED, that Keenan & Associates will act as Broker for American United Life Insurance Company’s 3121 Alternative to Social Security program, and provide consultant and 2 broker services for the APPLE Plan as outlined in the Keenan & Associates Service Agreement. FURTHER RESOLVED, that the Council appoints the City of Azusa as Trustee of the APPLE Plan. FURTHER RESOLVED, that the Council hereby removes Public Agency Retirement Services (PARS) as Trust Administrator and appoints MidAmerica as Third Party Administrator of the APPLE Plan. FURTHER RESOLVED, that the Council directs the transfer of the plan assets held by U.S. Bank under the Public Agency Retirement Services (PARS) Plan and Trust to AUL, as custodian for the successor Trustee, the City of Azusa for the benefit of the City of Azusa APPLE Plan, to occur within 30 days after March 1, 2016, or a date mutually agreed upon by PARS and the City of Azusa. This will facilitate the ability of MidAmerica to process Plan distributions with minimal delays to Plan Participants. FURTHER RESOLVED, that the Council directs the transfer of plan participant’s account information from Public Agency Retirement Services (PARS) to MidAmerica, to occur within 30 days after March 1, 2016 or a date mutually agreed upon by PARS and the City of Azusa in order for MidAmerica to process Plan distribution with minimal delays. FURTHER RESOLVED, that the Council authorizes MidAmerica and/or Keenan & Associates to execute, on behalf of the Employer, the APPLE Plan and any other documents necessary to carry out the provisions of the APPLE Plan; to contract with Keenan & Associates to provide ongoing administrative consulting services in connection with the operation of the APPLE Plan; to arrange funding of the Plan through American United Life (AUL). FURTHER RESOLVED: SECTION 1. That, pursuant to Code section 414(h) (2), the Employer will continue to “pick up” employee contributions to the APPLE Plan on behalf of Plan participants. “Employee contributions” shall mean those contributions to the APPLE Plan, which are deducted from the salary of employees and are credited to individual employees’ accounts. SECTION 2. That the contributions made by the Employer to the APPLE Plan, although designated as employee contributions, will be paid by the Employer in lieu of contributions by the employees who are participants in the APPLE Plan. SECTION 3. That employees shall not have the option of choosing to receive the contributed amounts directly instead of having them paid by the Employer to the APPLE Plan. SECTION 4. That the Employer shall pay to the APPLE Plan the contributions designated as employee contributions from the same source of funds as used in paying salary. SECTION 5. That the amount of the contributions designated as employee contributions 3 and paid by the Employer to the APPLE Plan on behalf of an employee shall be the entire contributions required of the employee under the Plan. FURTHER RESOLVED, that the City’s City Manager is hereby authorized, empowered and directed, in the name and on behalf of the Employer, to execute such documents and instruments and to take all such other and further actions as may be necessary or appropriate to carry out the purpose and the intent of the foregoing resolution. PASSED, APPROVED and ADOPTED this 1st day of February, 2016. _____________________________________ Joseph Romero Rocha Mayor ATTEST: _____________________________________ Jeffrey L. Cornejo, Jr. City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES )ss. CITY OF AZUSA ) I HEREBY CERITFY that the foregoing Resolution No. 2016-C17 was duly adopted by the City Council of the City of Azusa at a regular meeting thereof, held on the 1st day of February, 2016, by the following vote of Council: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: _____________________________________ Jeffrey L. Cornejo, Jr., City Clerk APPROVED AS TO FORM: ____________________________________ Best Best & Krieger, LLP City Attorney