HomeMy WebLinkAbout15-Human Resources
CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
Date:
MAY18.2000R\G\NAl
Subject: RESOLUTION OF THE
MAYOR & COMMON COUNCIL OF
THE CITY OF SAN BERNARDINO
AUTHORIZING THE ADOPTION OF
THE PUBLIC AGENCY RETIREMENT
SYSTEM (PARS) SEPARATION
INCENTIVE PROGRAM (SIP)
MICC Meeting Date: JUNE 7, 2004
From: LINN LIVINGSTON
Dept: HUMAN RESOURCES
Synopsis of Previous Council Action:
No previous Council action.
Recommended Motion:
Adopt Resolution.
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Signature .
Contact person:
Linn Livinaston
Phone:
384-5161
Supporting data attached:
Yes
Ward:
FUNDING REQUIREMENTS: Amount:
Source: (Acct. No.)
(Acct. Description)
Finance:
Council Notes:
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Agenda Item No. /5
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CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
Staff Report
Sublect:
Resolution authorizing the Mayor and Conunon Council to adopt the Public Agency Retirement
System (PARS) Separation Incentive Program (SIP) and appoint the Mayor or hislher designee
as the Plan Administrator.
Backeround:
The City of San Bernardino is carefully analyzing its workforce and potential cost saving
measures due to the budget deficit. Adoption of this Resolution is the first step in establishing a
Separation Incentive Program, which could be utilized to achieve savings.
The City is a member of the Public Agency Retirement System (PARS). PARS is the
administrator for both the Retirement Enhancement Plan and Accumulated Leave Plan the City
currently provides for Police Safety and Management/Confidential employees. PARS is used by
more than 235 public agencies with over 220,000 participants in California.
The PARS SIP is a program that gives public agencies the ability to locally design and
implement separation programs that complement and enhance the existing PERS retirement
system. The PARS SIP allows for flexibility in offering separation packages without the strict
statutory requirements imposed by the CalPERS Golden Handshake program and also allows
employees to separate from service without retiring. Specifics of the plan can be designed by the
City, which can include more flexible distribution options for the employee(s) (lump-sum
payment, IRA rollover, Fixed Terms Payments, Joint and 100% Survivor payment) as well as
selection of classifications or individuals to participate in a separation incentive. In addition the
City has the option of funding the program to provide maximum flexibility in establishing
funding (e.g., self-funding, annuities).
PARS staffperforms the ongoing administration of the SIP. This includes retirement counseling
with the participants and meeting federal and state reporting requirements. Staff believes the
SIP's flexible design will ultimately result in significant salary savings for the City through
workforce reductions to address budgetary limitations.
Once the Mayor and Conunon Council have adopted the PARS SIP, the Plan Administrator
would have the authority to offer the SIP to employees. The Plan Administrator may customize
packages for eligible employees, based on what would be in the best interest of the City and the
employee.
Staff reconunends that the Mayor or hislher designee be the Plan Administrator. The Plan
Administrator will approve all requests for utilization of the PARS SIP based upon the analysis
of the City Administrator. The decision of the Plan Administrator would be final and the
execution of the proposed SIP would be initiated upon that decision.
Therefore, staff requests the Mayor and Common Council to adopt the Public Agency
Retirement System (PARS) Separation Incentive Program (SIP) and appoint Mayor or hislher
successor or hislher designee as the Plan Administrator effective July I, 2004.
Financial Imnact:
There is no financial impact associated with the adoption of this Resolution. Savings to the City
would occur from a reduction in the workforce. The financial impact will occur once a
determination is approved for an employee(s). At that time, PARS administrative expenses will
be five and one-half percent (5.5%) of all contributions made by the City on behalf of
participants. PARS fees will be billed to the Trustee as the City makes contributions or lump sum
payments, and those fees will be paid from the assets of the plan. In addition, the PARS Trustee
has a trustee fee of .12% of contributions and there is a one-time $700 application fee for the
Internal Revenue Service to issue a letter of determination.
Recommendation:
Adopt Resolution.
HRIAgenda Items:SR.PAR8.SIP.A
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ResolutiO~-6f-Y
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RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY b
SAN BERNARDINO AUTHORIZING THE ADOPTION OF THE PUBLIC AGENC
RETIREMENT SYSTEM (PARS) SEPARATION INCENTIVE PROGRAM (SIP)
APPOINT THE MAYOR OR HISIHER DESIGNEE AS THE PLAN ADMINISTRATOR
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WHEREAS, the City is member of the Public Agency Retirement System (PARS) for th
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purpose of providing tax qualified retirement benefits; and
7 WHEREAS, it is determined to be in the best interest of the City and its employees t
8. provide a Separation Incentive Program (SIP) to eligible employees; and
WHEREAS, the PARS Trust has made available a Separation In.centive Pro
supplementing the California Public Employees Retirement System (CaIPERS) and qualifyin
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under the relevant sections of the Internal Revenue Code and the California Govermnent Code.
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NOW THEREFORE, BE IT RESOLVED BY THE MAYOR AND COMMO
COUNCIL OF THE CITY OF SAN BERNARDINO, AS FOLLOWS:
SECTION 1: That the above recitations are true and correct.
SECTION 2: The Mayor and Common Council, being a member of the PARS Trust, doe
hereby adopt the PARS Separation Incentive Program, as part of the City Retirement Program
effective July 1, 2004.
SECTION 3: The Mayor and Common Council hereby appoint the Mayor, or hislhe
designee as the City's Plan Administrator for the Separation Incentive Program.
SECTION 4: The City's SIP Administrator is hereby.authorized to execute the PAR
legal and administrative service documents on behalf of the City to implement a PAR
supplemental plan to CaIPERS. In addition, if the City's SIP Administrator finds that the PAR
supplement plan benefit must be limited under Section 415 of Internal Revenue Code, then th
Plan Administrator will implement replacement benefit programs at no additional cost to th
City.
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RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY 0
SAN BERNARDINO AUTHORIZING THE ADOPTION OF THE PUBLIC AGENC
RETIREMENT SYSTEM (PARS) SEPARATION INCENTIVE PROGRAM (SIP)
APPOINT THE MAYOR OR HIS/HER DESIGNEE AS THE PLAN ADMINISTRATOR
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I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Commo
Council of the City of San Bernardino at a meeting thereof, held on th
day of , 2004 by the following vote, to wit:
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NA YES
ABSTAIN
ABSENT
AYES
COUNCILMEMBERS:
ESTRADA
LONGVILLE
MC GINNIS
DERRY
KELLEY
JOHNSON
MC CAMMACK
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Rachel G. Clark, City Clerk
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The foregoing resolution IS hereby approved this
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Judith Valles, Mayor
City of San Bernardino
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Approved as to form and
21 Legal content:
22 JAMES F. PENMAN,
City Attorney
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INTRODUCTION
The City of San Bernardino ("Employer") has adopted this tax qualified governmental
defined benefit plan for the benefit of its eligible employees to provide supplemental retirement
benefits to eligible employees of the Employer in addition to the benefits employees will receive
from the California Public Employees' Retirement System ("PERS").
It is intended that this plan and the trust established to hold the assets of the plan shall be
qualified under section 401(a) and tax-exempt under Section 501(a) of the Internal Revenue
Code of 1986, together with any amendments thereto (the "Code"). It is further intended that
this plan and the trust established hereunder shall meet the requirements of a pension trust under
California Govemment Code sections 53215 - 53224, or their successor sections (the "Act"). At
any time prior to the satisfaction of all liabilities with respect to members and their beneficiaries
C under the trust created pursuant to the this plan, the trust assets shall not be used for, or diverted
to, purposes other than the exclusive benefit of members or their beneficiaries, as prescribed in
Section 401 (a)(2) ofthe Code.
It is intended that the plan satisfy the requirement of the applicable provisions of the
Uruguay Round Agreements Act, the Small Business Job Protection Act, the Taxpayer Relief
Act of 1997 and the Uniformed Services Employment and Reemployment Rights Act of 1994
(commonly referred to as the "GUST" amendments), and that the provisions of this plan
reflecting the GUST amendments are hereby made effective as of the dates required by the
legislation referred to in this sentence.
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ARTICLE I
PARTICIPATION
Elil!ibilitv for Benefits.
An Employee shall be eligible to receive Retirement Benefits under this Plan ifhe or she:
(a) has been designated by the Plan Administrator as an Eligible Employee for this Plan
as set forth in Schedule A; and
(b) has terminated employment with the Employer; and
(c) has applied for benefits under this Plan.
1.2 Commencement of Benefits.
1.1
Benefits shall commence as of the first day of the first month after an Employee meets
the eligibility requirements of Section 1.1.
1.3 Participation.
An Employee will be credited with one Year of Participation for any year during which
the Employee is an Employee of the Employer.
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ARTICLE II
BENEFITS
2.1
Retirement Benefits.
The Retirement Benefit commencing pursuant to Section 1.2 shall be paid in the Normal
Form of Benefit and in an amount determined by the Plan Administrator as set forth in Schedule
A with respect to each Eligible Employee. The benefit may be subject to an annual cost ofliving
adjustment as determined by the Employer at the time of separation.
2.2 Desienation of Beneficiarv.
(a) Each Member shall have the right to designate a Beneficiary to receive the death
benefits, if any, that are payable to a Beneficiary from this Plan. Such designation does not
permit the Member to change a person identified under another provision of the Plan as being
eligible to receive a benefit. Such designation must be evidenced by a written instrument filed
with the Employer, on a form prescribed by the Employer, and signed by the Member.
(b) The Beneficiary for a married Member shall be the Member's spouse at the date of
death, unless the written consent of such spouse is provided upon a form acceptable to the
Employer. Each such designation for death benefits must be evidenced by a written instrument
filed with the Employer, on a form prescribed by the Employer, and signed by the Member. If
no such designation is on file with the Employer at the time of the death of the Member, or if for
any reason at the sole discretion of the Employer, such designation is defective, then the spouse
of such Member shall be conclusively deemed to be the Beneficiary designated to receive such
benefit.
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(c) The signature of the Member's spouse shall be required on a designation of
beneficiary form or an application for a benefit under the Plan if the spouse is not the
beneficiary, unless the Member declares in writing that one of the following conditions exists:
(I) The Member is not married;
(2) The Member does not know, and has taken all reasonable steps to determine,
the whereabouts ofthe spouse;
(3) The spouse is incapable of executing the acknowledgment because of an
incapacitating mental or physical condition;
(4) The Member and spouse have executed a marriage settlement agreement that
makes the community property laws inapplicable to the marriage; or
(5) The current spouse has no identifiable community property interest in the
benefits.
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ARTICLE III
VESTING
3.1
Vestin2.
A Member will be fully vested in his Retirement Benefit upon meeting the requirements
of Section 1.1.
3.2 Full or Partial Termination.
Notwithstanding the vesting schedule, upon the complete discontinuance of Employer
contributions to the Plan or upon any full or partial termination of the Plan, the Member's
Retirement Benefit shall become one hundred percent (100%) Vested.
3.3 Attainment of Normal Retirement A2e.
A Member shall be fully vested in his Retirement Benefit upon attainment of Normal
Retirement Age.
3.4 Effect ofVestin2.
Vesting shall entitle a Member to payment during his lifetime of the Retirement Benefit
at the times and upon the conditions specified herein, and shall entitle the Member's survivor or
Beneficiary to any death benefits provided herein. Any unpaid Retirement Benefits are forfeited
upon the Member's death.
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ARTICLE IV
DISTRIBUTIONS
4.1
Normal Form of Benefit.
Unless the Member elects an optional form of benefit as described under Section 4.2,
payments to a Member of a Retirement Benefit shall be made in the form of a one-time lump
sum payment commencing pursuant to Section 1.2 and in the amount specified in Section 2.1.
This form of payment shall be the "Normal Form of Benefit."
4.2 Optional Forms of Benefit.
In lieu of the Normal Form of Benefit, a Member may elect a form of benefit payment of
Actuarial Equivalent value to the Normal Form of Benefit in one of the following forms:
(a) Lifetime Benefit. Under this form of payment the Member receives monthly
payments commencing pursuant to Section 1.2 and ending on the first day of the month
in which the Member's death occurs.
(b) Joint and 100% Survivor Pavout. Under this form of payment:
(1) The Member receives a reduced monthly benefit, and if the Member
predeceases the Beneficiary, the Beneficiary will receive a monthly payment for the life
of the Beneficiary equal to 100% of such reduced monthly benefit.
(2) If the beneficiary predeceases the Member, the Member's reduced monthly
payment will not increase.
(3) The Member's designation of a Beneficiary shall become irrevocable upon a
date selected by the Employer prior to commencement of benefits if electing this form of
payment.
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(c) Fixed-Term Pavout. Under this form of payment:
(I) The Member receives a benefit paid over a designated period of time (not
to exceed the member's life expectancy) that is actuarially equivalent to the Normal Form
of Benefit. The Plan Administrator shall determine the term of the payment.
(2) Any remaining payments in the fixed-term payout schedule shaH continue
to the Beneficiary or subsequent Beneficiaries in the event of the Member's death.
(d) Other Forms ofPavout. Under this form of payment:
(I) At the option of the Member, and with agreement of the Plan Administrator,
and upon completion of a form provided by the Plan Administrator, the benefit shall be
paid in any other form that is actuarially equivalent to the Normal Form of Benefit.
(e) Limitations. In the case of a Member who attains age 70Y2, distribution of such
Member's entire interest must commence not later than the first day of April following the later
of the calendar year in which such Member attains age 70Y2 or the calendar year in which the
Member retires. A Member who previously commenced benefits upon attainment of age 70Y2
may elect to stop receiving such distributions until the April I following the calendar year in
which the Member retires. In all cases, distributions shall be made in amounts deteimined in
accordance with Code Section 401 (a)(9) and the regulations thereunder.
If the Member designates anyone other than the Member's spouse as Beneficiary under
any optional form of benefit, the optional form of benefit elected by the Member must provide
for distributions to the Member which, as of the Member's required beginning date as defined
above, will provide for payments that satisfy the minimum distribution incidental benefit
requirements of Section 401 (a)(9) of the Code and the regulations thereunder.
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4.3 Actuarial Equivalence.
Actuarial Equivalence for any optional form of benefit under this Plan shall be
determined by the 1994 GAR and current annuity rates issued by a life insurance company
selected by the Plan Administrator.
4.4 Direct Rollovers.
This section applies to all distributions made on or after January I, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise limit a
distributee's election under this Plan, a distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a direct rollover.
(a) Definitions.
(I ) Elicible Rollover Distribution. An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of the distributee, except that
an eligible rollover distribution does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than annually) made for the life
(or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified period of ten
years or more; any distribution to the extent such distribution is required under Section
401(a)(9) of the Internal Revenue Code, any hardship distribution, and the portion of any
distribution that is not includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer securities).
(2) Elil!ible Retirement Plan. An eligible retirement plan is an individual
retirement account described in Section 408(a) of the Code, an individual retirement
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annuity described in Section 408(b) of the Code, or a qualified trust described in Section
401 (a) of the Code that accepts the distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement plan, individual retirement account, or an
individual retirement annuity.
A distributee includes an Employee or former Employee in addition, the
Employee's or former Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(P) of the Code, are distributees with
regard to the interest ofthe spouse or former spouse.
(3) Direct Rollover. A direct rollover is a payment by the Plan to the eligible
retirement plan specified by the distributee.
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ARTICLE V
ADMINISTRATION AND AMENDMENT OF PLAN
Member's Ril!hts Not Subiect To Execution.
The right of a Member to a benefit under this Plan is not assignable and is not subject to
execution or any other process whatsoever, except to the extent permitted by the Code of Civil
5.1
Procedure and the Family Code of the State of California. Any payment hereunder required
under the California Family Code to a person other than the Member must not alter the form or
amount of benefits hereunder, except that to the extent provided in a valid court order, an
Actuarially Equivalent payment may be made to the spouse or child of a beneficiary pursuant to
a qualified domestic relations order (as defined in Code Section 414(P)) prior to the Member's
retirement.
Rules and Rel!ulations.
The Employer has full discretionary authority to supervise and control the operation of
this Plan in accordance with its terms and may make rules and regulations for the administration
5.2
of this Plan that are not inconsistent with the terms and provisions hereof. The Employer shall
determine any questions arising in connection with the interpretation, application or
administration of the Plan (including any question of fact relating to age, employment,
compensation or eligibility of Employees) and its decisions or actions in respect thereof shall be
conclusive and binding upon any and all persons and parties.
The Employer shall have all powers necessary to accomplish its purposes, including, but
not by way oflimitation, the following:
(a) To determine all questions relating to the eligibility of Employees to participate;
(b) To construe and interpret the terms and provisions of the Plan;
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(c) To compute, certify to, and direct the Trustee with regard to the amount and kind
of benefits payable to the Members and their Beneficiaries;
(d) To authorize all disbursements by the Trustee from the Trust;
(e) To maintain all records that may be necessary for the administration of the Plan
other than those maintained by the Trustee; and
(f) To appoint a plan administrator or, any other agent, and to delegate to them or to
the Trustee such powers and duties in connection with the administration of the Plan as it may
from time to time prescribe, and to designate each such administrator or agent as a fiduciary with
regard to matters delegated to him.
With respect to management and control of investments, the Employer shall have the
power to direct the Trustee in writing with respect to the investment of the Trust assets or any
part thereof. Where investment authority, management and control of Trust assets have been
delegated to the Trustee by the Employer, the Trustee shall be a fiduciary with respect to the
investment, management and control of the Trust assets contributed by the Employer and
Members with full discretion in the exercise of such investment, management and control.
Where investment authority, management and control of Trust assets is not specifically delegated
to the Trustee, the Trustee shall be subject to the direction of the Employer.
Expenses and fees in connection with the administration of the Plan and the Trust shall be
paid from the Trust assets to the fullest extent permitted by law, unless the Employer determines
otherwise.
5.3 Amendment and Termination.
The Employer shall have the right to amend, modify or terminate this Plan at any time.
o In the event of the complete discontinuance of this Plan, the entire interest of each Member
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affected thereby shall immediately become 100% vested. The Employer shall not be liable for
the payment of any benefits under this Plan and all benefits hereunder shall be payable solely
from the assets of the Trust. After all liabilities of this Plan to Members and their Beneficiaries
have been satisfied, any residual assets of this Plan shall be used for such purposes as determined
by the Employer, including a distribution of the assets to the general funds of the Employer.
5.4 Militarv Service.
Effective December 12, 1994 and notwithstanding any provision of this Plan to the
contrary, contributions, benefits, and service credit with respect to qualified military service will
be provided in accordance with section 414(u) of the Code.
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ARTICLE VI
DEFINITIONS
6.1
Definitions.
Whenever the following terms are used in the Plan, with the first letter capitalized, they
shall have the meanings specified below.
"Act" means the California Government Code.
"Anniversary Date" means July 1.
"Beneficiary" means the person, persons, trust or trusts designated by a Member, or, in
the absence of a designation, entitled by will or the laws of descent and distribution, to receive
the benefit specified under this Plan if the Member dies and means the Member's executor or
administrator if no other beneficiary is designated and able to act under the circumstances.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Compensation" means, for Plan Years beginning after December 31, 1995 or 90 days
after the opening of the first legislature session on or after January 1, 1996, all compensation for
that portion of the Plan Year during which the Employee was a Member, paid in cash by the
Employer to the Member for personal services. Compensation in excess of $150,000 shall be
disregarded. Such amount shall be adjusted for increases in the cost ofliving in accordance with
Code Section 401(a)(17), except that the dollar increase in effect on January 1 of any calendar
year shall be effective for the Plan Year beginning with or within such calendar year. For any
short Plan Year the Compensation limit shall be an ainount equal to the Compensation limit for
the calendar year in which the Plan Year begins multiplied by a ratio obtained by dividing the
number of full months in the short Plan Yearby twelve (12).
"Effective Date" means, unless otherwise indicated herein, EFFECTIVE DATE.
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"Eligible Employee" means an Employee who fulfills the requirements of Section 1.1.
"Employee" means an employee of the Employer.
"Employer" means the City of San Bernardino, which has adopted this Plan.
"Member" means an Employee eligible to receive benefits under this Plan.
"Normal Form of Benefit" is the form ofbei1efit described in Section 4.1.
"Normal Retirement Age" shall be age fifty (50).
"Plan" means the City of San Bernardino PARS Separation Incentive Plan.
"Plan Administrator" means the individual or position designated by the Employer to
act on behalf of the Employer in matters relating to this Plan. If no designation is made, the
Employer shall be the Plan Administrator. If a Plan Administrator has been appointed the word
"I;:mployer" as used in this Plan shall mean Plan Administrator unless the context indicates a
different meaning is intended.
"Plan Year" means the consecutive twelve-month period beginning on July I and ending
on June 30.
"PERS" means the California Public Employees Retirement System.
"Public Agency" means an employer authorized under California Government Code
Article 1.5, sections 53215 through 53224 to establish a pension trust.
"Regulations" means the regulations adopted or proposed by the Department of
Treasury from time to time pursuant to the Code.
"Retirement Benefits" means the benefits payable to the Member following retirement,
as described in Article II.
"Trust" means the trust established as part of the Public Agency Retirement Trust to
hold the assets of the Plan.
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"Trustee" means the trustee of the Trust.
"Vested" means the nonforfeitable portion of any account maintained on behalf of a
Member.
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APPENDIX A
ANNUAL ADDITIONAL LIMITS
A.I
Definitions.
As used In this Appendix A, the following terms shall have the meamngs
specified below.
"Affiliated Company" means a company required to be aggregated with the
Employer for Purposes of Code Sections 4l4(b) and (c), provided, however, the determination
under Section 4l4(b) and (c) of the Code shall be made as if the phrase "more than 50 percent"
were substituted for the phrase "at least 80 percent" each place it is incorporated into Section
4l4(b) and (c) of the Code.
"Annual Benefit" means a benefit payable annually in the form ofa straight life
C annuity (with no ancillary benefits) under a plan to which Employees do not contribute and
under which no rollover contributions are made, or to which assets have been transferred from a
qualified plan that was not maintained by the Employer. If the benefit is payable in a form other
than a straight life annuity, such form must be adjusted actuarially to the equivalent of a straight
life annuity before applying the limitations of Section A.2(a). The actuarial adjustment to the
equivalent of a straight life annuity will apply to all Plan benefits, including any benefits accrued
before the RPA'94 Freeze Date (the Plan is electing to apply the new Section 4l5(b)(2)(E)
requirements (as provided in the Uruguay Round Agreements Act) to all benefits accrued under
the Plan, including any benefits accrued before the RPA'94 Freeze Date). The Plan is not
making the election provided in Section E on page 19 ofLRM 40 and will not provide any Old
Law Benefits. The actuarial adjustment shall be equal to the greater of (x) an adjustment based
o on 5% and the mortality table specified in Section 4l5(b)(2)(E) of the Code or (y) an adjustment
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based on the factors specified in the Plan to adjust the applicable form of benefits. No actuarial
adjustment is required for the following: qualified joint and survivor annuity benefits, pre-
retirement disability benefits, preretirement death benefits, post-retirement medical benefits, and
the value of post-retirement cost-of-living increases made in accordance with the Code and
Treas. Reg. Section 1.415-3(c)(2)(iii).
"Average 415 Compensation" means the average Section 415 Compensation
during a Member's high three years of service, which period is the actual number of consecutive
calendar years (or, the actual number of consecutive years of employment for those Employees
who are employed for less than three consecutive years with the Employer) during which the
Employee had the greatest aggregate Section 415 Compensation from the Employer.
"Defined Contribution Fraction" means for any Limitation Year: (a) the sum
of the annual additions to the Member's account under the defined contribution plans maintained
by the Employer as of the close of the Limitation Year, divided by: (b) the sum of the lesser of
the following amounts determined for the Limitation Year and for each prior year of his service
for the Employer: (i) the product of 1.25, multiplied by the dollar limitation determined under
Sections 415(b) and (d) of the Code in effect under Section 415(c)(I)(A) of the Code for the
Limitation Year (determined without regard to Section 415(c)(6) of the Code), or (ii) the product
of 1.4, multiplied by an amount equal to 25% of the Member's Section 415 Compensation for the
Limitation Year.
Notwithstanding the foregoing, the numerator of the Defined Contribution Plan
Fraction shall be adjusted pursuant to Treas. Reg. Section 1.415-7(d)(I), Questions T-6 and T-7
of Internal Revenue Service Notice 83-10, and Questions Q-3 and Q-14 of Internal Revenue
Service Notice 87-21.
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"Defined Benefit Fraction" means for any Limitation Year:
The Projected Annual Benefit of the Member under this Plan and any Related
Plan determined as of the close of the Limitation Year, divided by the lesser of: (a) the product
of 1.25, multiplied by the dollar limitation determined for the Limitation Year under Sections
415(b) and (d) of the Code and in accordance with Section A.2(b) in effect under Section
415(b)(I)(A) of the Code for the Limitation Year, or (b) the product of 1.4, multiplied by 100%
of the Member' s Average Section 415 Compensation, including any adjustments under Section
415(b) of the Code.
If the Employee was a Member as of the first day of the first Limitation Year
beginning after December 31, 1986, in one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the denominator of this fraction will not be
less than 125% of the sum of the Annual Benefits under such plans which the Member had
accrued as of the close of the last Limitation Year beginning before January 1, 1987,
disregarding any changes in the term and conditions of the Plan after May 5, 1986. The
preceding sentence applies only if the defined benefit plans individually and in the aggregate
satisfied the requirements of Section 415 of the Code for all Limitation Years beginning before
January 1,1987.
"Employer" means the Employer and any Affiliated Company that adopts this
Plan.
"Limitation Year" means a twelye-consecutive month period beginning on the
Anniversary Date. If the Limitation Year is amended to a different 12-consecutive month period,
the new Limitation Year must begin on a date within the Limitation Year in which the
amendment is made.
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"Old Law Benefits" means benefits to which the new Section 41S(b)(2)(E)
changes are not applied.
"Related Plan" means any other defined benefit plan (as defined in Section
41S(k) of the Code) maintained by the Employer.
"RPA'94 Freeze Date" means the earlier of (i) the later of the date a plan
amendment adopting the Section 41S(b)(2)(E) changes is adopted or made effective; or (ii) the
first day of the first limitation year beginning after December 31, 1999.
"Section 415 Compensation" means a Member's eamed income, wages, salaries,
fees for professional service and other'amounts received (without regard to whether an amount is
paid in cash) for personal services actual1y rendered in the course of employment with an
Employer maintaining the Plan to the extent that the amounts are includable in gross income
(including, but not limited to, commissions paid salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, reimbursements, and expense al1owances) and excluding the fol1owing: (a) Employer
contributions to a plan of deferred compensation to the extent contributions are not included in
gross income of the Employee for the taxable year in which contributed, or on behalf of an
Employee to a simplified employee pension plan to the extent such contributions are deductible
under Section 219(b )(2) of the Code, and any distributions from a plan of deferred compensation
whether or not includable in the gross income of the Employee when distributed; (b) amounts
realized from the exercise of a nonqualified stock option, or when restricted stock (or property)
held by an Employee becomes freely transferable or is no longer subject to a substantial risk of
forfeiture; (c) amounts realized from the sale, exchange or other disposition of stock acquired
under a qualified stock option; and (d) other amounts which receive special tax benefits, or
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contributions made by the Employer (whether or not under a salary reduction agreement)
towards the purchase of a 403(b) annuity contract under Section 403(b) of the Code (whether or
not the contributions are excludable from the gross income of the Employee), contributions made
by the Employer for medical benefits (within the meaning of Section 401(h) or 419A(f)(2) of the
Code) which is otherwise treated as an annual addition, or any amount otherwise treated as an
annual addition under Section 415(1)(1) or 419A(d)(2) of the Code. Effective January I, 1998,
"Section 415 Compensation" shall include elective deferrals as defined in Section 402(g)(3) of
the Code and any amount which is contributed or deferred by the Employer at the election of the
Employee and which is not includable in the gross income of the Employee by reason of Code
Section 125, 132(f)(4) or 457. Section 415 Compensation for any Limitation Year is the Section
415 Compensation actually paid or includable in gross income during such Limitation Year.
"Social Security Retirement Age" shall mean the age used as the retirement age
for the Member under Section 216( I) of the Social Security Act, except that such section shall be
applied without regard to the age increase factor and as if the early retirement age under Section
216(1)(2) of such Act were 62.
"Year of Participation" means the employee shall be credited with a Year of
Participation for each year in which helshe is an Employee of the Employer. An Employee who
is permanently and totally disabled within the meaning of Section 415(c)(3)(C)(i) of the Code for
an accrual computation period shall receive a Year of Participation with respect to that period.
In addition, for an employee to receive a Year of Participation for an accrual computation period,
the Plan must be established no later than the last day of such accrual computation period. In no
event will more than one Year of Participation be credited for any 12-month period.
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A.2 Limitation on Benefits.
Notwithstanding any other provision of the Plan:
(a) the Annual Benefit payable with respect to a Member under the Plan for
any Limitation Year shall not exceed an amount equal to the lesser of: (i) $90,000, (or, such
other dollar limitation determined for the Limitation Year by automatically adjusting the $90,000
limitation by the cost of living adjustment factor prescribed by the Secretary of the Treasury
under Section 415( d) of the Code in such manner as the Secretary shall prescribe); or (ii) only for
Limitation Years commencing on or before December 31,1994,100% of the Member's Average
Section 415 Compensation. The new dollar limitation shall apply to Limitation Years ending
within the calendar year of the date of the adjustment.
(b) If the Member has less than ten Years of Participation with the Employer,
the dollar limitation in Section A.2(a) shall be reduced by multiplying it by a fraction, the
numerator of which is the Member's full and partial Years of Participation, and the denominator
of which is ten. To the extent provided in regulations or in other guidance issued by the Internal
Revenue Service, the preceding sentence shall be applied separately with respect to each change
in the benefit structure of the Plan. If the Member has less than ten years of service with the
Employer, the compensation limitation in Section A.2(a) shall be reduced by it by a fraction, the
numerator of which is the Member's full and partial years of service. For Limitation Years
commencing after December 31,1994, the reductions provided in this paragraph do not apply to
payments made to the Member ifhis payments commence after he has become disabled (within
the meaning of Code Section 415(b)(2XI)), and do not apply to payments made on account of the
Member's death.
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(c) If the Annual Benefit ofa Member commences prior to age 62, the dollar
limitation in Section A.2(a) shall not apply and the dollar limitation shall be the actuarial
equivalent of an Annual Benefit beginning at age 62, reduced for each month by which benefits
commence before the month in which the Member attains age 62. To determine actuarial
equivalence, the adjustment is the greater of (x) an adjustment based on 5% and the mortality
table specified in Section 4l5(b )(2)(E) of the Code or (y) the early retirement factors specified in
the Plan that are applicable to the Member's benefit. Any decrease in the dollar limit determined
in accordance with this Section A-2(c) shall not reflect the mortality decrement to the extent that
benefits will not be forfeited upon the death of the Member. The reduction provided in this
Subsection A.2(c) shall not reduce the limitation of Subsection A.2(a) below (x) $75,000 if
benefits begin after age 55, or (y) if the benefit begins before age 55, the equivalent of the
$75,000 limit at age 55. Furthermore, the reduction in this Subsection A.2(c) shall not apply for
a Member who is a "qualified participant," as defined in Code Section 4l5(b )(2)(H).
(d) If the Annual Benefit of a Member commences after age 65, the dollar
limitation in Section A.2(a) as reduced in Section A.2(b), if necessary, shall be increased so that.
it is the actuarial equivalent of an Annual Benefit of such dollar limitation beginning at age 65.
To determine actuarial equivalence, the adjustment is the lesser of (x) an adjustment based on
5% and the mortality table specified in Section 4l5(b)(2)(E) of the Code or (y) the late
retirement factors specified in the Plan that are applicable to the Member's benefit. Any increase
in the dollar limit determined in accordance with this Section A-2( d) shall not reflect the
mortality decrement to the extent that benefits will not be forfeited upon the death of the
Member.
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(e) If the benefit the Member would otherwise accrue in a Limitation Year
would produce an Annual Benefit in excess of the limitation under Section A.2(a), the rate of
accrual will be reduced so that the Annual Benefit will equal the limitation under Section A.2(a).
(f) The limitation in Section A.2(a) is deemed satisfied if the Annual Benefit
payable to a Member is not more than $1,000 multiplied by the Member's number of years of
service or parts thereof (not to exceed ten) with the Employer, and the Employer has not at any
time maintained a defined contribution plan, a welfare benefit plan as defined in Section 419(e)
of the Code, or an individual medical account as defined in Section 415(1)(2) of the Code in
which such Member participated.
(g) If the Employer maintains, or has ever maintained, one or more defined
contribution plans covering an Employee who is also a Member in this Plan, a welfare benefit
fund as defined in Section 419( e) of the Code, or an individual medical account as defined in
Section 415(1)(2) of the Code, the sum of the Defined Contribution Plan Fraction and the
Defined Benefit Plan Fraction, cannot exceed 1.0 for any Limitation Year commencing before
January I, 2000.
For the purpose of this Section A.2(g), Employee contributions to a qualified
defined benefit plan are treated as a separate defined contribution plan. In addition, all defined
contribution plans of the Employer are to be treated as one defined contribution plan and all
defined benefit plans of the Employer are to be treated as one defined benefit plan, whether or
not such plans have been terminated.
If the sum of the Defined Contribution Plan Fraction and the Defined Benefit Plan
Fraction exceeds 1.0, the sum of the fractions will be reduced to 1.0 as foIlows: (i) voluntary
nondeductible Employee contributions made by a Member to this Plan which constitute an
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Annual Addition to a defined contribution plan, to the extent they would reduce the sum of the
fractions to 1.0, will be returned to the Member; (ii) if additional reductions are required for the
sum of the fractions to equal 1.0, voluntary nondeductible Employee contributions made by a
Member to the defined contribution plans which constitute an Annual Addition to a defined
contribution plan, to the extent they would reduce the sum of the fractions to 1.0, will be returned
to the Member; (iii) if additional reductions are required for the sum of the fractions to equal 1.0,
the Annual Benefit of a Member under this Plan will be reduced (but not below zero and not
below the amount of the Member's Accrued Benefit to date) to the extent necessary to prevent
the sum of the fractions, computed as of the close of the Limitation Year from exceeding 1.0;
and (iv) if additional reductions are required for the sum of the fractions to equal 1.0, the
reductions will then be made to the Annual Additions of the defined contribution plans.
If the Employer maintains one or more defined benefit plans, in addition to this
Plan, covering an Employee who is also a Member in this Plan,the sum of the Annual Benefits
of all the plans will be treated as a single benefit for the purposes of applying the limitations of
Section A.2(a). If these benefits exceed, in the aggregate, the limitations of Section A.2(a), the
Normal Retirement Benefits under this Plan will be reduced (but not below zero) until the sum of
the benefits of the Related Plan(s) satisfy the limitations. In the case of an individual who was a
Member in one or more defined benefit plans of the Employer as of the first day of the first
Limitation Year beginning after December 31, 1986, the application of the limitations of this
Section A.2 shall not cause the Limitation under Section A.2(a) for such individual under all
such defined benefit plans to be less than the individual's Current Accrued Benefit. The
preceding sentence applies only if such defined benefit plans met the requirements of .
Section 415 of the Code, for all Limitation Years beginning before May 6, 1986. For purposes
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fifth anniversary of the Member's (or, if applicable, surviving spouse's) death. If neither the
Member nor Beneficiary makes an election under this paragraph, distributions will be made in
accordance with Sections C.2(b) or C.5 of this Appendix C.
C.4. Requirements For Annuity Distributions That Commence Durin!! Member's
Lifetime.
(a) Joint Life Annuities Where the Beneficiary Is Not the Member's Spouse. If the
Member's interest is being distributed in the form of a joint and survivor annuity for the joint
lives of the Member and a nonspouse Beneficiary, annuity payments to be made on or after the
Member's Required Beginning Date to the Designated Beneficiary after the Member's death
must not at any time exceed the applicable percentage of the annuity payment for such period
that would have been payable to the Member using the table set forth in Q&A-2 of Section
1.401(a)(9)-6T of the Treasury Regulations. If the form of distribution combines a joint and
survivor annuity for the joint lives of the Member and a nonspouse Beneficiary and a period
certain annuity, the requirement in the preceding sentence will apply to annuity payments to be
made to the Designated Beneficiary after the expiration of the period certain.
(b) Period Certain Annuities. Unless the Member's spouse is the sole Designated
Beneficiary and the form of distribution is a period certain and no life annuity, the period certain
. for an annuity distribution commencing during the Member's lifetime may not exceed the
applicable distribution period for the Member under the Uniform Lifetime Table set forth in
Section 1.401(a)(9)-9 of the Treasury Regulations for the calendar year that contains the annuity
starting date. If the annuity starting date precedes the year in which the Member reaches age 70,
the applicable distribution period for the Member is the distribution period for age 70 under the
Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations plus the
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excess of 70 over the age of the Member as of the Member's birthday in the year that contains
the annuity starting date. If the Member's spouse is the Member's sole Designated Beneficiary
and the form of distribution is a period certain and no life annuity, the period certain may not
exceed the longer of the Member's applicable distribution period, as determined under this
Section C.4(b), or the joint life and last survivor expectancy of the Member and the Member's
spouse as determined under the Joint and Last Survivor Table sel forth in Section 1.401(a)(9)-9
of the Treasury Regulations, using the Member's and spouse's attained ages as of the Member's
and spouse's birthdays in the calendar year that contains the annuity starting date.
(c) Election to Allow Designated Beneficiary Receiving Distributions Under S-Year
Rule to Elect Life Expectancy Distributions. A Designated Beneficiary who is receiving
payments under the 5-year rule may make a new election to receive payments under the life
expectancy rule until December 31, 2003, provided that all amounts that would have been
required to be distributed under the life expectancy rule for all Distribution Calendar Years
before 2004 are distributed by the earlier of December 31,2003 or the end of the 5-year period.
C.S. Requirements For Minimum Distributions Wbere Member Dies Before Date
Distributions Be2in.
(a) Member Survived by Designated Beneficiary. Except as otherwise provided, if the
Member dies before the date distribution of his or her interest begins and there is a Designated
Beneficiary, the Member's entire interest will be distributed, beginning no later than the time
described in Section C.2(b)(i) or C.2(b)(ii), over the life of the Designated Beneficiary or over a
period certain not exceeding:
(i) unless the annuity starting date is before the first Distribution Calendar Year, the
life expectancy of the Designated Beneficiary determined using the Beneficiary's age as of the
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Beneficiary's birthday in the calendar year immediately following the calendar year of the
Member's death; or
(ii) if the annuity starting date is before the first Distribution Calendar Year, the life
expectancy of the Designated Beneficiary determined using the Beneficiary's age as of the
Beneficiary's birthday in the calendar year that contains the annuity starting date.
(b) No Designated Beneficiary. If the Member dies before the date distributions begin and
there is no Designated Beneficiary as of September 30 of the year following the year of the
Member's death, distribution of the Member's entire interest will be completed by December 31
of the calendar year containing the fifth anniversary of the Member's death.
(c) Death of Surviving Spouse Before Distributions to Surviving Spouse Begin. If the
Member dies before the date distribution of his or her interest begins, the Member's surviving
spouse is the Member's sole Designated Beneficiary, and the surviving spouse dies before
distributions to the surviving spouse begin, this Section C.5 will apply as if the surviving spouse
were the Member, except that the time by which distributions must begin will be determined
without regard to Section C.2(b )(i) .
C.6. Definitions.
(a) Designated Beneficiary. The individual who is designated as the Beneficiary consistent
with the terms of the Plan and is the Designated Beneficiary under Section 401 (a)(9) of the Code
and Section 1.401 (a)(9)-4, Q&A-4, of the Treasury Regulations.
(b) Distribution Calendar Year. A calendar year for which a minimum distribution is
required. For distributions beginning before the Member's death, the frrst Distribution Calendar
Year is the calendar year immediately preceding the calendar year which contains the Member's
Required Beginning Date. For distributions beginning after the Member's death, the first
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Distribution Calendar Year is the calendar year in which distributions are required to begin under
Section C.2(b).
(c) Life Expectancy. Life expectancy as computed by use of the Single Life Table in
Section 1.401(a)(9)-9 of the Treasury Regulations.
(d) Required Beginning Date. The April I of the calendar year following the later of either
the calendar year in which the employee attains age 70\1, or the calendar year in which the
employee retires.
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The City of San Bernardino
PARS Separation Incentive Plan
Effective
Defined Benefit Plan
NO. ;S083S8.9
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TABLE OF CONTENTS
Page
INTRODUCTION
PARTICIPATION
1.1 Eligibility for Benefits ........................................................................................... 2
1.2 Commencement of Benefits................................................................................... 2
1.3 Participation........................................................................................................... 2
BENEFITS
2.1 Retirement Benefits ...............................................................................................3
2.2 Designation of Beneficiary ....................................................................................3
VESTING
3.1 Vesting .................... ............................................................................................... 5
3.2 Full or Partial Termination..................................................................................... 5
3.3 Attainment of Normal Retirement Age.................................................................. 5
3.4 Effect of Vesting ................... ........................................................................ ......... 5
DISTRIBUTIONS
4.1 Normal Form of Benefit.......................................................... ...............................6
4.2 Optional Forms of Benefit ..................................................................................... 6
4.3 Actuarial Equivalence ................................................ .... ........................................ 8
4.4 Direct Rollovers ..................................................................................................... 8
V ADMINISTRATION AND AMENDMENT OF PLAN
5.1 Member's Rights Not Subject To Execution....................................................... 10
5.2 Rules and Regulations.......................................................................................... 10
5.3 Amendment and Termination. ............................................................................. 11
5.4 Military Service ...................................................................................................12
VI DEFINITIONS
1
II
III
IV
6.1 Definitions.............................................................................. .............................. 13
APPENDIX A ANNUAL ADDITIONAL LIMITS.............................................................. A-I
APPENDIXB GOOD FAITH EGTRRA COMPLIANCE................................................... B-1
APPENDIX C MINIMUM DISTRIBUTION REQUIREMENTS ....................................... C-I
SCHEDULE A
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