HomeMy WebLinkAbout11_Amend the Adoption Agreement for the District's 401a Plan
ACTION ITEM #11Agreement for the District’s 401(a) PlanConsideration to Amend the Adoption Agreement for the District’s 401(a) PlanConsideration to Amend the Adoption April 6, 2016
Amend the Adoption Agreement for the District’s 401(a) Plan All District employees are eligible to participate •Plans are supplemental to the CalPERS pension defined benefit •The plans
provide retirement security to employees of the District •Plans are administered by ICMA Retirement Corporation and CalPERS•401(a) Plan and two 457 PlansThe District currently maintains
several retirement plans, including a •BACKGROUND / HISTORY Amend the Adoption Agreement for the District’s 401(a) Plan
Amend the Adoption Agreement for the District’s 401(a) Plan District matching contribution to their 457 accountsAs a result, PEPRA members contribute a percentage of pay and receive
a •In 2013 the District and union agreed to minimize financial inequality •to the benefits provided to CalPERS PEPRA membersCalPERS Classic members receive pension benefits that are
superior •PEPRA” members (Hired after Jan 2013)“CalPERS •CalPERS “Classic” members (Hired before Jan 2013)•Employees are considered:•Employees’ Pension Reform Act (PEPRA)In 2013, the
District was required to implement the California Public •BACKGROUND / HISTORY Amend the Adoption Agreement for the District’s 401(a) Plan
Amend the Adoption Agreement for the District’s 401(a) Plan IRS limits may be exceeded•tax deferral; and-elective preAs a result, PEPRA employees are unable to maximize their individual
•adjusted cap ($18,000 for 2016)contributions the same, and both combined are limited to an annually The 457 Plan IRS contribution limit treats employee and employer •tax contributions
-Both allow employees to save for retirement through pre•lans are similar p401(a) and 457 retirement •BACKGROUND / HISTORY Amend the Adoption Agreement for the District’s 401(a) Plan
NEW INFORMATION Amend the Adoption Agreement for the District’s 401(a) PlanAmend the Adoption Agreement for the District’s 401(a) Plan 457 contributions are not exempt•employer contributions
are exempt from Social Security (FICA) Tax Amending the Plan also provides cost savings to the District, as 401(a) •contributions The District can restate and amend the Plan to allow
employer •contributionsThe District’s 401(a) was originally designed not to accept employer •deferral as IRS limits for 457 Plans and 401(a) Plans are independent tax -Doing so would
allow employees the ability to increase their pre•401(a) Plan rather than into the 457 PlanThe District can choose to deposit the District contributions into the •
FISCAL IMPACT Amend the Adoption Agreement for the District’s 401(a) PlanAmend the Adoption Agreement for the District’s 401(a) Plan There is no fiscal impact to the District’s employees•The
District will save 7.65% on all employer contributions •action There is no additional cost to the District associated with the proposed •
RECOMMENDATION Amend the Adoption Agreement for the District’s 401(a) PlanAmend the Adoption Agreement for the District’s 401(a) Plan contributionsAgreement for the District’s 401(a)
plan, to permit fixed employer 06 to amend and restate the Adoption -Approve Resolution 2016•
Backup Slides Amend the Adoption Agreement for the District’s 401(a) PlanAmend the Adoption Agreement for the District’s 401(a) Plan
Backup Information Amend the Adoption Agreement for the District’s 401(a) PlanAmend the Adoption Agreement for the District’s 401(a) Plan 10% early withdrawal penalty could apply •Hardship
withdraws are only permitted in the 457•Employees will have two accounts instead of one•Disadvantages of the 401(a) Plan as compared to the 457:•Employer contributions exempt from FICA,
will save 7.65%•tax contribution capability for employee contributions -Increased pre•Plan as compared to the 457:401(a) Advantages of the •Plans offer online access •Plans provide
the employee full control •Plans provide 100% vesting•Loans are available •Similarities between the 401(a) Plan and 457 Plan:•