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HomeMy WebLinkAboutR-2005-17 adopt Public Agency Retirement Services (PARS) 457 Trust e Resolution No. J.lXJS ~ J'" CITY OF LA PORTE H~SCOUNTY,TEXAS WHEREAS it is to be determined to be in the City's best interest and its employees to provide a Qualifying Retirement System for all its employees not currently eligible for such a Qualifying Retirement System (','Deferred Compensation FICA Alternative Plan"), thereby meeting the requirements of Section 11332 of the Omnibus Budget Reconciliation Act (OBRA 90) and Section 3l2l(b)(7)(F) of the Internal Revenue Code (IRC); and WHEREAS the Public Agency Retirement System (PARS) has made such a system available to the City and its eligible employees and qualifies under OBRA 90 Section 11332, IRC Sections 3l2l(b)(7)(F) and 457(b), and meets the meaning of the term "retirement system" as given by Section 2l8(b)(4) of the Federal Social Security Act. NOW, THEREFORE, BE IT RESOLVED THAT: 1. The City Council hereby adopts the PARS 457 Trust, including the PARS Section 457 FICA Alternative Retirement Plan, effective ~ ~, the Effective Date for the benefit of employees on that date and hired thereafter; and 2. The City Council hereby appoints the Citv Manauer ,or his/her successor or his/her designee as the City's Plan Administrator for the Public Agency Retirement System; and 3. The City's Plan Administrator is hereby authorized to implement the plan(s), execute the PARS legal documents on behalf of the City and to take whatever additional actions are necessary to maintain the City's participation in PARS and to maintain PARS compliance of any relevant regulation issued or as may be issued; therefore, authorizing himlher to take whatever additional actions are required to administer the City's PARS plan(s). AYES: q NOES: 0 ABSENT: o ABSTAIN: 0 e e REQUEST FOR CITY COUNCIL AGENDA ITEM Agenda Date Requested: 9-12-05 ~ Bude:et Requested By: Cynthia Alexander Source of Funds: Department: Finance Account Number: Report: Resolution: Ordinance: Amount Budgeted: Exhibits: Resolution! Agreement Amount Requested: Exhibits: PARS Interoffice Memo Budgeted Item: YES NO Exhibits PARS Information Sheet SUMMARY & RECOMMENDATION Public Agency Retirement Services (PARS) - Saves City money and is better for part-time employees. Currently the City contributes 6.2% into the federally mandated Social Security System. PARS allows the City to contribute to an Alternative Retirement System for part-time employees (ARS) with a lower City contribution rate of 1.3%. The benefits to employees from enrollment in the PARS versus Social Security are as follows: I. PARS plans participants are fully vested in their individual accounts from day one, This compares to social security which requires contributions for a minimum of 40 (forty) calendar quarters (10 years total) before the employee is eligible for any Social Security retirement benefits. 2. In the event of the participant's separation from the City, the participant may receive the contributed funds, including the City portion and interest accrued. 3. PARS contributions are pre-tax dollars. The result is additional take home pay for the emolled employees. 4. Contributions to the PARS plan increase account balances without limit With Social Security, once the limit is met, additional contributions do not result in any higher benefits for the contributing participant. We are recommending that the City enter into a contract with PARS, Action Required bv Council: ~ Approve resolution adopting the PARS 457 Trust and authorize the City Manager to sign. contract. Approved for City Council Ae:enda De~F~e~~~~ f -{p r{)!J- Date e CITY OF LA PORTE FINANCE DEPARTMENT ACCOUNTING DIVISION e To: Cynthia Alexander, Assistant City Manager From: Michael Dolby, Assistant Finance Director Re: PARS (Alternative Retirement System for Part-time Employees) Date: August 11, 2005 RECOMMENDATION: City Council to consider approving a resolution authorizing the City Manager to execute an agreement with Public Agency Retirement Services (PARS) to provide an altemate retirement system for part-time employees. BACKGROUND: The City of La Porte is required to contribute an amount equal to 6.2% of each part-time employee's salary to social security and the employee is required to contribute a similar amount for total contribution of 12.4%. In 1990 Congress adopted the Omnibus Budget Reconciliation Act (OBRA). OBRA mandated that employees not covered at the time by a retirement program should be enrolled in social security or an alternate retirement program, which meets the statutory requirements of the act. Public Agency Retirement Services (PARS) offers an Alternate Retirement System (ARS) that meets these requirements. The ARS program provides certain benefits to both the employee and the City. The legislation requires a minimum contribution to the alternate plan of 7.5%. The employee's contribution will, therefore, remain the same as it is under social security - 6.2%. This deduction can, however, be taken from pretax dollars and this will actually result in an increase in take home pay for the contributing employees. The City will contribute the remaining 1.3% for a total of 7.5%. The reduced rate of contribution by the City (1.3% versus 6.2%) results in estimated first year savings of approximately $20,000. This level of savings will continue each year with the amount varying depending on the total number of part-time employees and the hours worked. The benefits to employees from enrollment in the ARS versus Social Security are as follows: 1. PARS plans pAipants are fully vested in their i.e,idual accounts from day one. This is the same as immediate ownership of the invested funds. This compares to social security which requires contributions for a minimum of 40 calendar quarters (10 years total) before the employee is eligible for any social security retirement benefit. 2. In the event of the participant's separation from the City, the participant may receive the contributed funds as follows: (a) Distributed as a lump sum for the participant; or (b) Rolled over to an IRA or other qualified plan that accepts rollovers. 3. PARS contributions are pre-tax dollars. Social Security contributions are post-tax dollars (income tax). The result is additional take home pay for the enrolled employees. 4. Contributions to the PARS plan increase account balances without limit. With Social Security, once the limit is met, additional contributions do not result in any higher benefits for the contributing participant. Attached is a sample Resolution and Agreement for Administrative Services for City Manager review. Representatives from PARS are available to attend the Council Meetings for additional information, and will be happy to respond to questions. Staff recommends approval..