An important fringe benefit currently available to City employees is the supplemental deferred compensation retirement savings plan. The basic plan is operated under Section 457(b) of the IRS Code and is generally similar to a 401(k) plan for private sector employees. Employees participating in this optional benefit can select between two providers, ICMA-Retirement Corporation (ICMA-RC) and Nationwide Retirement Solutions (NRS). Both companies offer similar investment options, account fees and member services, including on-line account access and financial statements.
After two years of service with the City, full-time employees are eligible to receive a contribution from the City of up to 3% of their base salary, on a dollar-for-dollar matching basis, when they participate in the supplemental retirement plan. When this plan was initially established, employee’s personal contributions (made through payroll deductions) along with the City matching contributions were deposited into an individual 457(b) tax deferred account. The IRS establishes annual limits on the amount of contributions that can be made into individual 457(b) accounts. In 1999, the City also adopted a 401(a) plan to allow employees the option to contribute or defer even more of their personal income each pay period into their 457(b) account by having the City’s 3% matching contribution deposited into a 401(a) plan.
On May 23, 2011 the City of Brentwood Board of Commissioners approved Resolution 2011-28, adopting an amendment to both the ICMA-RC and Nationwide Retirement Solutions (NRS) 401(a) Money Purchase Retirement Plans. This resolution basically established that future employee matching contributions would be separated and deposited into an individual 401(a) plan. The advantage of this change to the City was that deposits into a 401(a) account are exempt from the employer’s portion of the Social Security (FICA) tax. Based on the level of City contributions to employee deferred compensation accounts at that time, the City estimated saving approximately $15,000 annually with no reduction in contributions to the employees. An additional benefit to plan participants was that they would be able to better identify the City’s commitment of matching contributions because these funds would be accumulated in a separate account and not combined with tax deferred withholdings made directly by the employee to the 457(b) account.
The IRS has a six-year review schedule for the type of 401 plan documents Nationwide Retirement Solutions (NRS) makes available to plan sponsors, including the City of Brentwood. To ensure the City's plan remains in compliance with the Pension Protection Act of 2006 (PPA 06) we are now required to submit a signed restated adoption agreement. The documents incorporate amendments for legislative and regulatory changes enacted since the prior restatement. In the past, we have utilized a negative election adoption process in an effort to streamline the plan document adoption and restatement process. This time, however, per instructions from the IRS, each plan sponsor using the NRS plan document is required to execute a new adoption agreement to ensure our plan remains in compliance with IRS and applicable regulatory requirements.
The restated adoption agreement does not include any plan design changes made since last adopted in 2011. Thus, this action is considered administrative in nature and is necessary for the reasons describe above.
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