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Brentwood City Commission Agenda

Meeting Date:	09/10/2018
Resolution 2018-70 - Recommendation to Contribute to a Tax Deferred Retirement Plan
Submitted by:	Mike Worsham, Human Resource
Department:	Human Resource

Information

Subject

Resolution 2018-70 - Recommendation to Contribute to a Tax Deferred Retirement Plan

Background

Resolution 2018-70 is a companion to Resolution 2018-68 authorizing the creation of an Internal Revenue Code Section 401(k) Plan sponsored by the Treasurer of the State of Tennessee and administered by Empower. Resolution 2018-70 specifically addresses the City of Brentwood’s contributions to the 401(k) plan in addition to the contributions it makes to TCRS.

State law provides that all tax deferred retirement plans established by public employers participating in the Tennessee Consolidated Retirement System (“TCRS”), wherein employer contributions are made, must be approved by the TCRS director. State law further provides that the total combined employer contributions to all such additional tax deferred retirement plans made on behalf of a single employee, other than those made pursuant to a salary reduction agreement, cannot exceed three percent (3%) of the employee’s salary, unless the political subdivision has adopted the hybrid plan. In the event the political subdivision has adopted the hybrid plan, the total combined employer contributions made by the political subdivision to the defined contribution plan component of the hybrid plan and to any one or more additional tax deferred compensation or retirement plans on behalf of single employee cannot exceed seven percent (7%) of the employee’s salary, or lower amount as required by the Internal Revenue Code.

In a separate agenda item on the September 10, 2018 meeting of the Brentwood Board of Commissioners, staff recommends the adoption of the TCRS Hybrid Plan for future employees hired after an effective date approved by the TCRS Board of Directors, projected as January 1, 2019. Please see Resolution 2018-67 for a detailed explanation of the TCRS Hybrid Plan.

Upon approval by the Board of Commissioners to adopt the TCRS Hybrid Plan as recommended, the City will have two separate pension plans offered to eligible employees - the Legacy Plan offered to current full time employees and the Hybrid Plan, which will be offered to future full time employees. On behalf of eligible employees in both plans, the City makes contributions to individual employee retirement accounts in various amounts. This resolution establishes the level of contributions and vesting schedule for both plans.

In accordance with State Law described above, the City contributes to deferred compensation plans for participants in both the Legacy Plan and the Hybrid Plan at two different levels.

Current Legacy Plan Participants: After two years of continuous full-time City employment, the City matches dollar-for-dollar the employee's voluntary contributions to one of these supplemental retirement plans up to a maximum of 3% of the employee’s base compensation. These contributions are immediately vested to the participant.

Future Hybrid Plan Participants: The City will match dollar-for-dollar participants’ elective deferrals into their 401(k) accounts up to 2% of their base compensation. These City matching contributions will be vested to the participant after two years of City employment.

As required by the design of the Hybrid Plan, the City will also make non-matching contribution of 5% of participants’ compensation to their individual 401(k) accounts. These non-matching contributions are vested to the participant immediately.

Staff Recommendation

Staff recommends approval of Resolution 2018-70 establishing the City’s contributions to a tax deferred 401(k) retirement plan.

Fiscal Impact

Attachments
Resolution 2018-70
Signed Resolution