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HomeMy WebLinkAbout2011/11/15 Item 03CITY COUNCIL AGENDA STATEMENT -~ ~~ir~ ~ ` CHUL4 VISTA NOVEMBER 15, 2011 Item 3 ITEM TITLE: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AMENDMENT TO THE ADMINISTRATIVE SERVICES AGREEMENT WITH ICMA RETIREMENT CORPORATION TO INCLUDE ADMINISTRATIVE ALLOWANCE PROVISION RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AMENDMENT TO THE DEFERRED COMPENSATION PLAN ADMINISTRATIVE AGREEMENT WITH NATIONWIDE RETIREMENT SOLUTIONS, INC. TO PROVIDE FOR ADMINISTRATIVE EXPENSE REIMBURSEMENT RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AMENDMENT TO THE NATIONWIDE RETIREMENT SOLUTIONS, INC. GOVERNMENTAL MONEY PURCHASE PLAN AND TRUST (401(A) PLAN) REVISING SECTIONS E2 AND ES AND ADDING A FINAL PAY PROVISION SUBMITTED BY: DIRECTOR OF FINANCE/TREASURER .~ ~~ REVIEWED BY: CITY MANAGER ASSISTANT CITY ANAGER 5 4/STHS VOTE: YES ~ NO SUMMARY Nationwide Retirement Solutions Inc. (Nationwide) and ICMA Retirement Corporation are the plan administrators for the City's Deferred Compensation Plan. These amendments would add administrative expense reimbursement and administrative allowance provisions to their plan agreements respectively. In addition, a final pay provision would be added to the Nationwide Governmental Money Purchase Plan and Tnast (401(a) Plan). ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined 3-1 NOVEMBER 15, 2011 Item 3 Page 2 of 4 that the activity is not a "Project" as defined under Section 15378 (b)(4) of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary. RECOMMENDATION Council approve the resolutions. BOARDS/COMMISSION RECOMMENDATION Not applicable. DISCUSSION ICMA ICMA Retirement Corporation (ICMA) has been a plan administrator for the City's Deferred Compensation Plan since 1986. At that time, the contract with ICMA was established with an initial term of five years with an automatic renewal for each succeeding year unless there was a 60-day written notice provided by either party. The original Plan Administration Fee was set at 0.90% of the plan assets and over the years was reduced to 0.29% due to the increasing size of the City's plan assets. In November 2004, City Council approved the establishment of a five-year fixed term agreement with automatic renewals for two succeeding years in exchange for 0.00% Plan Administrative Fee thus yielding higher returns to employees participating in the plan. This agreement is set to expire next month. Staff is recommending approval of the proposed amendment to establish a new five-year fixed term agreement with an automatic renewal for each succeeding year which will not only keep the Plan Administrative Fee at 0% but also include an annual administrative allowance of $8,200 payable to the City. This is a flat amount and doesn't change with the value of the plan's assets. Under ERISA requirements, these funds can only be used to reimburse the City for staff time and other costs incurred to administer the deferred compensation plan. The payment would be paid to the City on a quarterly basis starting in January 2012 and would have no negative impact on the plan participants. Attached is the amendment to the Administrative Services Agreement outlining the administrative allowance (Attachment A). NATIONWIDE RETIREMENT SOLUTIONS Deferred Compensation Plan The City has offered a Deferred Compensation Plan through Great Western Savings (now known as Nationwide Retirement Solutions, Inc.) to employees since 1975. Staff is recommending that the City amend Nationwide Deferred Compensation Plan Agreement 3-2 NOVEMBER 15, 2011 Item 3 Page 3 of 4 to include administrative expense reimbursement which is similar to ICMA's administrative allowance described above. Annually, Nationwide would pay the City 0.004% of the value of the plan assets. Therefore the reimbursement would fluctuate as plan assets increase or decrease in value. These funds would have the same use restrictions as the ICMA funds and would have no negative impact to the plan participants. The only differences between the two companies are how they calculate the amount payable to the City, the frequency of the payment, and that Nationwide does not require afive-year fixed term agreement. Attached is the amendment to the Deferred Compensation Plan Agreement outlining the administrative expense reimbursement (Attachment B). Governmental Money Purchase Plan and Trust (401 (a) Plan) Staff is also recommending the inclusion of a final pay provision for all eligible participating employees. Upon an eligible employee's termination of employment, if there is accumulated vacation pay due to that employee, the City would contribute that accumulated vacation pay into the 401(x) Plan rather than paying it directly to the employee. Often, long time employees accumulate significant amounts of vacation time throughout their careers, and this provision would deposit the value of those many hours into atax-deferred program to be accessed by the employee at a later date. This inclusion would be at no cost to the City, and in fact there would be a slight savings as the 1.45% FICA tax would not be paid on the funds deposited into the 401(a) Plan. In addition, the amendment revises Sections E2 and ES of the agreement, so that it accurately reflects the current status of the Plan contributions. Attached is the amended Adoption Agreement for the Governmental Money Purchase Plan and Trust (401(a) Plan) outlining the final pay provision (Attachment C). DECISION MAKER CONFLICT Staff has reviewed the decision contemplated by this action and has determined that it is not site specific and consequently the 500 foot rule found in California Code of Regulations section 18704.2(a)(1) is not applicable to this decision. CURRENT FISCAL IMPACT The current fiscal impact of the administrative allowance and administrative expense reimbursement would be an increase of $21,900 in General Fund revenues to offset costs incurred in administering the Deferred Compensation Plan. The current fiscal impact of the final pay provision would be insignificant and difficult to determine as it would be based on the number of eligible employees separating from the City this year and the value of their accumulated vacation time. However, in any case it would be a savings to the City. ONGOING FISCAL IMPACT 3-3 NOVEMBER 15, 2011 Item~_ Page 4 of 4 The ongoing fiscal impact of the administrative allowance and administrative expense reimbursement would be an increase of $22,000 in General Fund revenues to offset costs incurred in administering the Deferred Compensation Plan. This amount is subject to change as Nationwide plan assets increase or decrease in value. The ongoing fiscal impact of the final pay provision would be insignificant and difficult to determine as it would be based on the number of eligible employees separating from the City this year and the value of their accumulated vacation time. However, in any case it would be a savings to the City. ATTACHMENTS A) Amendment to ICMA Administrative Services Agreement B) Amendment to Nationwide Deferred Compensation Plan Agreement C) Amendment to Adoption Agreement for Nationwide Governmental Money Purchase Plan and Ttvst (401 (a) Plan) Prepared by: Nadine Mandery, Senior Management Analyst, Finance Department 3-4 THE ATTACHED AGREEMENT HAS BEEN REVIEWED AND APPROVED AS TO FORM BY THE CITY ATTORNEY'S OFFICE AND WILL BE FORMALLY SIGNED UPON APPROVAL BY THE CITY COUNCIL ,. len R~ Go' s ~~~/Attorney Dated: ~ ~ ~ ~l ~ / J ~-~ ADMINISTRATIVE SERVICES AGREEMENT BETWEEN THE CITY OF CHULA VISTA, AND ICMA RETIREMENT CORPORATION FOR PLAN NUMBER 2438 3-5 ATTACHMENT A AMENDMENT TO THE Administrative Services Agreement for Plan Number 2438 This Amendment to the Administrative Services Agreements ("Agreement") for Plan number 302438 (the "Plan') is entered by and between City of Chula Vista ("Employer") and ICMA Retirement Corporation ("ICMA-RC"), effective as of the date of execution by the Employer below ("Execution Date"). WHEREAS, the Employer sponsors the Plan on behalf of its eligible employees and retirees; and WHEREAS, the Employer entered the Agreement to engage ICMA-RC to provide administrative services and investments for the Plan under the terms specified in the Agreement; and WHEREAS, the parties wish to amend the Agreement to provide for the continued elimination of the Plan Administration fee and Mutual Funds Fee under the Agreement for the Plan over the term of the Agreement contingent on the Employer's use of EZLink for enrollment and contribution processing over the term of the Agreement and contribution funds are submitted through wire transferor ACH; and WHEREAS, Section 10(a) of the Agreement provides that the Agreement may be amended pursuant to a written instrument signed by the parties; NOW, THEREFORE, the Agreement is hereby amended as follows FIRST Section 6 of the Agreement, titled "Compensation and Payment" is amended by replacing all subsections with the following: (a) There shall be no asset-based or per-participant fees charged under this Agreement. ICMA-RC's compensation under this Agreement shall be as set forth in subsection (b) below. (b) Compensation for Management Services to the Trust, Compensation for Advisory and other Services to The Vantagepoint Funds and Payments from Third-Party Mutual Funds. Employer acknowledges that in addition to amounts payable under this Agreement, ICMA-RC receives fees from the Trust for investment management services furnished to the Trust. Employer further acknowledges that certain wholly owned subsidiaries of ICMA-RC receive compensation for advisory and other services furnished to The Vantagepoint Funds, which serve as the underlying portfolios of a number of Funds offered 3-6 through the Trust. The fees referred to in this subsection are disclosed in the Retirement Investment Guide. These fees are not assessed against assets invested in the Trust's Mutual Fund Series. In addition, to the extent that third party mutual funds are included in the investment line-up for the Plans, ICMA-RC may receive payments from such third party mutual funds or their service providers, which may be in the form of 12b-1 fees, service fees, or compensation for sub- accounting or other services provided by ICMA-RC on behalf of the funds. (c) Administrative Allowance. ICMA-RC shall pay an annual administrative allowance of $8,200, which shall be paid quarterly to the Employer or to the Plan. Such payments reflect ICMA-RC's assumptions regarding the aggregate level of revenue received from funds offered by the Plan at the initiation of this Agreement. In the event that the Employer chooses to replace funds during the term of this Agreement, the revenue assumptions with respect to the new funds will be re-evaluated and the administrative allowance will be adjusted commensurately. Employer understands that the Plan administrative allowance is to be used only to pay for reasonable plan administrative expenses of the Plan or allocated to participant accounts under the Plan at the instruction of the Employer. (d) Redemption Fees. Redemption fees imposed by outside mutual funds in which Plan assets are invested are collected and paid to the mutual fund by ICMA-RC. ICMA-RC remits 100% of redemption fees back to the specific mutual fund to which redemption fees apply. These redemption fees and the individual mutual fund's policy with respect to redemption fees are specified in the prospectus For the individual mutual fund and referenced in the Retirement Investment Guide. (e) Payment Procedures. All payments to ICMA-RC pursuant to this Section 6 shall be paid out of the Plan assets held by the Trust and shall be paid by the Trust, to the extent not paid by the Employer. The amount of Plan assets held in the Trust shall be adjusted by the Trust as required to reflect such payments. In the event that the Employer agrees to pay amounts owed pursuant to this section 6 directly, any amounts unpaid and outstanding after 30 days of invoice to the Employer shall be withdrawn from Plan assets held by the Trust. The compensation and payment set forth in this section 6 is contingent upon the Employer's use of ICMA-RC's EZLink system for contribution processing and submitting contribution funds by ACH or wire transfer on a consistent basis over the term of this Agreement. Employer further acknowledges and agrees that compensation and payment under this Agreement shall be subject to re-negotiation in the event that the Employer chooses to implement additional mutual funds outside of the ICMA-RC Mutual Fund Alliance. 3-7 SECOND This Agreement shall be in effect and commence on the date all parties have signed and executed this Agreement ("Inception Date"). The term of this Agreement will commence on the Inception Date and extend five (5) years from that date. This Agreement will be renewed automatically for each succeeding year unless written notice of termination is provided by either party to the other no less than 60 days before the end of such Agreement year. The Employer understands and agrees that, in the event the Employer terminates this Agreement (or replaces the VantageTrust PLUS Fund as an investment option in its investment line-up), ICMA-RC retains full discretion to release Plan assets invested in the VantageTrust PLUS Fund in an orderly manner over a period of up to 12 months from the date ICMA-RC receives written notification from the Employer that it has made a final and binding selection of a replacement for ICMA-RC as administrator of the Plan (or a replacement investment option for the VantageTrust PLUS Fund). The fee amendment specified in section 6 of the Agreement will take effect following the Retirement Corporation's receipt of one fully-executed copy of this Amendment. In all other respects, the Agreement is hereby ratified and affirmed. IN WITNESS WHEREOF, Employer has caused this Amendment to be executed by its duly authorized officer this day of , 2011. CITY OF CHULA VISTA By: Print Name: Title: Section 9 of the Agreement, titled "Term" is amended to provide as follows: INTERNATIONAL CITY/COUNTY MANAGEMENT ASSOCIATION RETIREMENT CORPORATION 3-8 i,1~lr..,4~ I..TI sy Angela C. Montez Assistant Corporate Secretary 3-9 THE ATTACHED AGREEMENT HAS BEEN REVIEWED AND APPROVED AS TO FORM BY THE CITY ATTORNEY'S OFFICE AND WILL BE FORMALLY SIGNED UPON APPROVAL BY THE CITY COUNCIL ~_--~ tiL % ~l~ G~~n R. oogins ,~ ~~ty Attorney i Dated: I ~ ~ ~ ~i r AMENDED DEFERRED COMPENSATION PLAN AGREEMENT BETWEEN THE CITY OF CHi_II,A VISTA, AND NATIONWIDE RETIREMENT SOLUTIONS, INC. 3-10 ATTACHMENT B Amended Deferred Compensation Plan Agreement for the City of Chula Vista, CA This Amendment to the Deferred Compensation Plan Administration Agreement ("Agreement") is entered into and effective this day of , between the City of Chula Vista (hereinafter, "the EMPLOYER") and Nationwide Retirement Solutions, Inc., a wholly owned subsidiary of NFS Distributors, Inc., and a Delaware Corporation (hereinafter, "NATIONWIDE") RECITALS WHEREAS, the EMPLOYER desires to contract with NATIONWIDE to provide administrative services to the PLAN; and WHEREAS, NATIONWIDE desires to provide such services subject to the terms and conditions set forth herein; NOW, THERFORE, in consideration of the mutual promises contained herein the parties agree as follows: 1. The above recitals are expressly incorporated by reference and made a part of this Amendment. 2. ADMINISTRATIVE EXPENSE REIMBURSEMENT is added to the Agreement to read as follows: NATIONWIDE agrees to pav to the EMPLOYER 0.04 percent (4 basis points) on an annual basis on the EMPLOYER'S plan assets that are being administered by Nationwide as of September 30'" of that year, for as long as NATIONWIDE is both a 457 and 401(a) provider for the EMPLOYER. The EMPLOYER acknowledoes the purpose of the expense reimbursement is to be used solely for the exclusive benefit of the plan, its participants and/or their beneficiaries or as otherwise permitted pursuant to the terms of the plan document The EMPLOYER will indemnify and hold Nationwide harmless for the improper use of any reimbursement pavments. The annual reimbursement is payable at the end of September then annually thereafter All pavments will be made within thirty (301 days of September NATIONWIDE one-twelfth of the annual reimbursement for each month remaining in the year in which the agreement is terminated. 3-11 In all other respects, the Agreement shall remain the same. The Agreement, as hereby amended, is hereby ratified and confirmed and shall remain unmodified and in full force and effect except as herein expressly amended. IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year below. NATIONWIDE RETIREMENT SOLUTIONS, INC. By: Title: (Name Printed) Date: Chula Vista, CA By: Title: (Name Printed) Date: 3-12 ATTACHMENT C Amendment to Adoption Agreement for Nationwide Retirement Solutions Governmental Money Purchase Plan and Trust for The City of Chula Vista WHEREAS the City of Chula Vista (City/Employer) adopted the NRS Governmental Money Purchase Plan and Trust (Plan) effective Januazy 1, 2002; and WHEREAS, the Plan was most recently amended in 2009; and WHEREAS, the City now wishes to further amend the Plan as set forth below, NOW THEREFORE, the Plan is amended as follows: 1. Effective Date of this Amendment is: November 15, 2011. 2. This Amendment shall not apply to any Employee who severed employment before the effective date of this Amendment. The accrued benefit and vesting percentage of each Participant who is an Employee on the effective date of this Amendment shall be no less than before the Amendment. 3. Section E2 of the Adoption Agreement titled "FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION", subsection "FOR ANON-INTEGRATED PLAN" is hereby deleted and replaced as follows: "FOR ANON-INTEGRATED PLAN • Class One: The amount equal to 100% of the maximum 4571imit of the current plan year. • Class Two: Suspended. • Class Three: Suspended. • Class Four: The amount equal to 200% of the maximum 4571imit for the current plan year. • Class Five: 5% of the Participant's Compensation. 4. Section ES of the Adoption Agreement titled "PARTICIPATING EMPLOYEES' MANDATORY EMPLOYEE CONTRIBUTIONS" is hereby deleted and replaced as follows: "PARTICIPATING EMPLOYEES' MANDATORY EMPLOYEE CONTRIBUTIONS 3-13 Class One and Class Four: Subsequent to their Entry Date and on an annual basis, an eligible Employee shall contribute to the Plan the amount of their Compensation equal to 100% of the maximum 4571imit of the current plan year, but when added to the Employer's contribution, shall not exceed the maximum 4151imit Class Two and Three: Subsequent to their Entry Date and on an annual basis, an eligible Employee shall contribute 0% of their Compensation to the Plan. • Class Five: Subsequent to their Entry Date and on an annual basis, an eligible Employee shall contribute 5% of their Compensation to the Plan. In addition to the above contribution, upon an eligible Employee's termination of employment, if there is accumulated vacation pay due to that Employee, Employer shall contribute that accumulated vacation pay into the Plan, rather than paying it directly to the Employee. An "eligible Employee" is defined as a permanent employee who is actively participating in the 401(a) Plan. This contribution shall not exceed the 415 limit when combined with all other contributions from the 401(a) Plan. Note: The Mandatory Contribution shall be considered "picked up" by the Employer under Sections 414(h) of the Code. All Eligible Employees are required to make a Mandatory Contribution as a condition of employment." In Witness Whereof, the Employer, Trustee and Administrator hereby cause this Amendment to be executed. CITY OF CHULA VISTA NATIONWIDE RETIREMENT SOLUTIONS (NRS) Cheryl Cox Mayor Date: Attest: City Clerk TRUSTEE Maria Kachadoorian Date: Printed Name 3-14 Approved as to Form: City Attorney 3-15 RESOLUTION NO. 2011- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AMENDMENT TO THE ADMINISTRATIVE SERVICES AGREEMENT WITH ICMA RETIREMENT CORPORATION TO INCLUDE ADMINISTRATIVE ALLOWANCE PROVISION WHEREAS, ICMA Retirement Corporation (ICMA) has been a plan administrator for the City's Deferred Compensation Plan since 1986; and WHEREAS, at that time, the contract with ICMA was established with an initial term of five years with an automatic renewal for each succeeding year, unless there was a 60-day written notice provided by either party; and WHEREAS, the original Plan Administration Fee was set at 0.90% of the plan assets and over the years was reduced to 0.29% due to the increasing size of the City's plan assets; and WHEREAS, in November 2004, City Council approved the establishment of a five-year fixed term agreement with automatic renewals for two succeeding years in exchange fora 0.00% Plan Administrative Fee, thus yielding higher returns to employees participating in the plan; and WHEREAS, this agreement is set to expire next month; and WHEREAS, staff is recommending approval of the proposed amendment to establish a new five-year fixed term agreement, with an automatic renewal for each succeeding year, which will keep the Plan Administrative Fee at 0% and will include an annual administrative allowance of $8,200 payable quarterly to the City; and WHEREAS, administrative allowance is a flat amount that will not change with the value of the plan's assets; and WHEREAS, under ERISA requirements, these funds can only be used to reimburse the City for staff time and other costs incurred to administer the deferred compensation plan; and WHEREAS, the payment would be paid to the City on a quarterly basis starting in January 2012 and would have no negative impact on the plan participants. 3-16 Resolution No. Page 2 NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista does hereby approve the Amendment to the Administrative Services Agreement with ICMA Retirement Corporation to include an administrative allowance provision, a copy of which is on file in the Office of the City Clerk. Presented by Maria Kachadoorian Director of Finance/Treasurer 3-17 RESOLUTION NO.2011- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AMENDMENT TO THE DEFERRED COMPENSATION PLAN ADMINISTRATIVE AGREEMENT WITH NATIONWIDE RETIREMENT SOLUTIONS, INC. TO PROVIDE FOR ADMINISTRATIVE EXPENSE REIMBURSEMENT WHEREAS, the City has offered a Deferred Compensation Plan through Great Western Savings (now known as Nationwide Retirement Solutions, Inc.) to employees since 1975; and WHEREAS, staff is recommending that the City amend the Nationwide Deferred Compensation Plan Agreement to include an administrative expense reimbursement; and WHEREAS, annually, Nationwide would pay the City 0.004% of the value of the plan assets, to reimburse the City for its expenses and costs incurred in administering the plan; and WHEREAS, the reimbursement would fluctuate as plan assets increase or decrease in value; and WHEREAS, these funds would have use restrictions, and would have no negative impact to the plan participants; and WHEREAS, Nationwide does not require afive-year fixed term agreement. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista does hereby approve the Amendment to the Deferred Compensation Plan Administrative Services Agreement with Nationwide Retirement Solutions, Inc. to include an administrative expense reimbursement provision, a copy of which is on file in the Office of the City Clerk. Presented by Maria Kachadoorian Director of Finance/Treasurer Ap roved as to form by ~ Gfe' R. Goo'ins City Attorney 3-18 RESOLUTION NO. 2011- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AMENDMENT TO THE NATIONWIDE RETIREMENT SOLUTIONS, INC. GOVERNMENTAL MONEY PURCHASE PLAN AND TRUST (401(A) PLAN REVISING SECTIONS E2 AND ES AND ADDING A FINAL PAY PROVISION WHEREAS, Staff is recommending that the City's Governmental Money Purchase Plan (401(a) Plan) be amended to include a final pay provision for all eligible employees who are actively participating in the Plan; and WHEREAS, the proposed provision requires that, for any employee who is actively participating in the 401(a) Plan when the employee separates from employment with the City, the City shall contribute the employee's accrued vacation payout to the 401(a) Plan; and WHEREAS, for those employees to which the proposed final pay provision would apply, the provision would mean that the employees' accumulated vacation pay would be paid into a tax-deferred program, rather than paid directly to the employees; and WHEREAS, the it is not anticipated that the City would incur any costs as a result of the proposed final pay provision and, in fact, there may be a slight savings because the 1.45% FICA tax would not be paid on the funds deposited into the 401(a) Plan; and WHEREAS, staff is also recommending that Sections E2 and ES of the 401(a) Plan be amended to accurately reflect the current status of the plan contributions. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista does hereby approves the Amendment to the Nationwide Retirement Solutions, Inc. Governmental Money Purchase Plan and Trust (401(a) Plan), a copy of which is on file in the Office of the City Clerk. Presented by Maria Kachadoorian Director of Finance/Treasurer Approved as to form by 1 Q,~~~ ~ ~Gle .~ e g~ns -~C1C Attorney 3-19