HomeMy WebLinkAboutAgenda Report - August 16, 2006 K-03AGENDA ITEM K" 3
CITY OF LORI
COUNCIL COMMUNICATION
TM
AGENDA TITLE: Approve Resolution to Adopt an Alternative Retirement System for Part Time,
Seasonal, and Temporary Employees
MELTING DATE: August 16, 2006
PREPAIWD BY: Kirk J. Evans, Risk Manager
RECOMINEMDED ACTION: 1) Adopt the resolution to participate in the Public Agency Retirement
System (PARS) as an alternative retirement plan in lieu of Social
Security for part-time, seasonal, and temporary employees effective the
first full pay period in September 2006.
2) Approve the funding and contribution split whereby the City will pay
administration costs and employees pay a 7.5% contribution rate.
3) Authorize the City Manager to sign the agreement for Administrative
Services (Exhibit B).
BACKGROUND DIFOIRMATMN: At the Shirtsleeve Session of Tuesday, May 9'h, 2006, the Deputy
City Manager presented an overview of the Alternate Retirement System to the City Council. He
promised to return to a regular City Council meeting with the necessary documents required to implement
a defined contribution system and for hiring a trustee to administer the plan.
In 1990, the Federal government mandated through enactment of the Omnibus Budget Reconciliation Act
(OBRA 90) that in addition to retirement programs offered to regular, full-time employees, public agencies
must also provide for retirement benefits for its part-time seasonal and temporary employees (PST's).
After the passage of OBRA, the City chose to enroll its part-time, seasonal and temporary employees in
Social Security.
For PST's, the City of Lodi participates in the federal Social Security System - FICA, and contributes
12.4% of an employee's annual salary (6.2% employer contribution and an additional 6.2% on behalf of
the employees). The City of Lodi has approximately 300 currently active PST's. In FY 2005-06
payroll for those PST's enrolled in Social Security totaled approx. $964,500.
Staff has researched the Alternate Retirement System concept and determined the benefits for the City
and affeclied employees to participate in an alternative plan. We have contacted the City's three deferred
compensation providers to determine whether they are capable or interested in providing an alternative
retirement plan and not received an enthusiastic response. Staff is recommending that the City Council
consider the Public Agency Retirement System (PARS) as an alternative pian in lieu of Social Security
for PST's. PARS, founded in 1990, provides an alternative retirement plan that satisfies federal
requirements and includes 145 participating public agencies in California. The PARS plan will
significantly reduce costs for the City of Lodi.
APPROVED: !
BldhkWng, City Manager
There are several benefits for PST's associated with participation in the PARS retirement program as an
alternative to Social Security. Specifically:
1) PARS contributions are pre-tax. Social Security is post -tax and requires that the employee make
contributions after taxes are paid. This results in greater net take home pay for the employee.
2) PARS plan participants are fully vested in their individual accounts. All employee contributions are
held in Trust and cannot be accessed by creditors of the Trustee or the City.
3) In the event of the participants termination of employment, assets in his/her account may be (a)
distributed as a lump -sum to the participant, (b) rolled over to an IRA or other qualified retirement
{plan that accepts rollovers, or (c) used to purchase PERS service credits, if the employee is
eligible.
4) Employees can reenter the PARS program at anytime if they are rehired by the City (i.e. PST's
who skip a summer of employment but expect to return the following summer/season). At the
employee's election, their contributions may remain in an account until the plan administrator is
notified of final termination.
5) Of course, a major benefit of PARS is the elimination of uncertainty. Once an employee is eligible
and decides to access their PARS account, the money will be there. With Social Security there is
no such guarantee.
The financial benefits that PARS provides for the City are described further under "Fiscal Impact" below.
Social Security requires a contribution of the equivalent of 12.4% of salary; however, OBRA requires a
7.5% contribution to a fully vested retirement account. The City determines the contribution split between
the employee and employer. There are three basic forms of contribution split:
e .i.4 77
ph
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Yi
<..-<. t.. ,. .. a .. ,
Scenario 1 1.30% 6.20%
Scenario 2 3.75% 3.75%
Scenario 3 0.00% 7.50%
Other participating agencies recently joining PARS have decided upon the split represented in Scenario 3
- 7.50% employee and 0% employer. Staff recommends that the City of Lodi implement Scenario 3.
Even with the additional 1.3% contribution rate, from 6.2 to 7.5%, the net effect of using pre-tax dollars
will result in additional take home pay to the employee.
Trarwitigoing.iEft PARS
There are three approaches whereby current PST's could be transitioned into participation in the PARS
plan:
1) Erroll all PST's immediately into PARS effective the first full pay period in September 2006 (in the
carie of new employees, enrollment in PARS would be effective their first day on the job).
2) Allow PST's to select whether they wish to participate in Social Security or PARS.
3) Enroll all PST's immediately into PARS, but allow those with greater than 30 quarters to decide
whether to remain in Social Security until they become vested in Social Security or join PARS
immediately.
It takes 40 quarters to become vested in Social Security. Currently there are only two PST's who
have earned greater than 30 quarters while employed by the City. It is possible other PST's may
have earned greater than 30 quarters via a combination of City of Lodi employment and other
agency employment, but it is impossible to know without asking each person.
The following table provides a breakdown of the City's 300 currently active PST's:
Exhibit A attached provides a more detailed breakdown of current active PST's ages, Social Security
quarters earned through employment with the City, and earnings since 1998.
Staff recommends that the City implement the third transitioning approach. This will allow those
PST's who may have a reasonable chance of reaching the 40 quarter mark to do so if they wish.
FISCAL IMPACT:
1. With an employee contribution rate of 7.50%, the City will save at least $56,198 per year. Greater
savings will be realized as PST salaries and staffing levels increase in the future should the City's
fiscal heatth improve. This savings is a permanent reduction to annual payroll costs.
... •aY. .(�. Sd<"' BEC �ffii e...
PST Employees 300 300
Annual Payroll Contribution $964,484 $964,484
Employer Contribution Rate x6.2% x 0%
Retirement benefit Cost to City $59,798 none
PARS Administrative Fee - +$3,600
Total Cost to City $59,798 $3,600
Social Security Cost $59,798
Less PARS Admin. Fee $3,600
Ssvilnos to City of Lodi $56,198
2. The PARS plan is a turn -key administration. The Trust Administrator, Phase II Systems (PARS),
handles all personnel and participant inquiries, performs monthly valuations of participant
accounts, administers the distribution process, ensures reporting requirements, and assures
government compliance.
e.:i�,;:�g::°�:'
Zero quarters
183
61
Zero to 20 quarters
105
35
20 to 30 quarters
10
3.3
30 quarters or more
2
0.7
Total
300
100
Exhibit A attached provides a more detailed breakdown of current active PST's ages, Social Security
quarters earned through employment with the City, and earnings since 1998.
Staff recommends that the City implement the third transitioning approach. This will allow those
PST's who may have a reasonable chance of reaching the 40 quarter mark to do so if they wish.
FISCAL IMPACT:
1. With an employee contribution rate of 7.50%, the City will save at least $56,198 per year. Greater
savings will be realized as PST salaries and staffing levels increase in the future should the City's
fiscal heatth improve. This savings is a permanent reduction to annual payroll costs.
... •aY. .(�. Sd<"' BEC �ffii e...
PST Employees 300 300
Annual Payroll Contribution $964,484 $964,484
Employer Contribution Rate x6.2% x 0%
Retirement benefit Cost to City $59,798 none
PARS Administrative Fee - +$3,600
Total Cost to City $59,798 $3,600
Social Security Cost $59,798
Less PARS Admin. Fee $3,600
Ssvilnos to City of Lodi $56,198
2. The PARS plan is a turn -key administration. The Trust Administrator, Phase II Systems (PARS),
handles all personnel and participant inquiries, performs monthly valuations of participant
accounts, administers the distribution process, ensures reporting requirements, and assures
government compliance.
FUNDING AVAILABLE: N/A — the funding source used to pay Social Security contributions for
PST's will be reduced by the savings described above.
Auby sta, Financial Services Manager
Jarb#s Krueger
Efe�uty City Manager
Attachments
Social
Earnings
Security
since
Department Age
Mrs
1998
1
Police
40.1
28
102,332
2
Electric Utility
67.1
8
90,778
3
Parks & Recreation
38.8
28
72,436
4
Parks & Recreation
70.9
32
60,938
5
Library
36.2
16
53,008
6
Parks & Recreation
20.6
24
51,386
7
Library
59.0
24
50,431
mean
47.5
22.9
1
Parks & Recreation
24.2
16
44,061
2
Parks & Recreation
53.7
16
43,686
3
Parks & Recreation
28.6
20
41,984
4
Parks & Recreation
23.5
16
41,869
5
Parks & Recreation
22.5
16
39,433
6
Parks & Recreation
41.5
32
39,316
7
Police
22.3
16
37,313
8
Parks & Recreation
24.1
20
37,247
9
Parks & Recreation
54.9
24
36,574
10
Parks & Recreation
38.0
24
35,452
11
Administration
24.2
8
34,571
12
Parks & Recreation
34.4
16
33,601
13
Library
55.3
16
33,466
14
Public Works
69.5
16
30,899
15
Public Works
46.8
16
30,377
16
Parks & Recreation
69.8
20
30,336
17
Community Developm
46.3
4
29,899
18
Library
24.1
12
29,748
19
Administration
29.3
8
29,666
20
Library
70.7
20
29,248
21
Parks & Recreation
21.4
12
28,728
22
Parks & Recreation
28.0
12
28,618
23
Parks & Recreation
67.9
8
26,549
24
Library
19.8
16
25,559
mean
39.2
16.0
1
Parks & Recreation
23.7
8
24,025
2
Parks & Recreation
34.5
12
22,867
3
Parks & Recreation
33.0
4
22,663
4
Parks & Recreation
31.4
8
22,366
5
Administration
73.2
12
21,609
6
Administration
50.5
8
20,744
7
Administration
71.2
8
20,138
8
Parks & Recreation
18.6
8
19,298
9
Library
44.6
4
19,289
10
Parks & Recreation
21.4
12
19,272
11
Administration
21.9
12
18,978
12
Administration
24.2
8
18,722
13
Parks & Recreation
82.4
12
18,667
14
Parks & Recreation
21.2
8
18,244
15
Parks & Recreation
43.9
4
18,013
16
Parks & Recreation
53.3
8
17,537
17
Parks & Recreation
17.7
4
17,385
18
Parks & Recreation
21.8
8
17,306
19
Parks & Recreation
21.7
8
17,040
20
Administration
23.1
8
16,916
Social
Earnings
Security
since
Department Age
Mrs
1998
21
Public Works
65.8
4
16,545
22
Parks & Recreation
72.8
0
15,923
23
Parks & Recreation
20.2
12
15,884
24
Parks & Recreation
21.1
8
15,574
25
Parks & Recreation
52.8
8
15,533
26
Administration
66.4
12
15,326
27
Parks & Recreation
65.3
0
14,850
28
Parks & Recreation
23.8
8
14,776
29
Parks & Recreation
21.2
8
14,516
30
Public Works
21.5
4
14,004
31
Library
4
13,479
32
Parks & Recreation
20.3
8
13,186
33
Parks & Recreation
23.9
8
13,112
34
Parks & Recreation
22.5
4
12,888
35
Parks & Recreation
25.8
4
12,860
36
Parks & Recreation
17.6
8
12,622
37
Library
49.9
8
12,502
38
Parks & Recreation
24.9
4
12,416
39
Library
18.7
4
11,843
40
Library
18.0
4
11,653
41
Administration
20.5
0
11,498
42
Parks & Recreation
25.5
0
11,496
43
Administration
21.4
0
11,272
44
Library
53.2
0
11,265
45
Administration
21.2
4
11,154
46
Parks & Recreation
42.9
0
11,130
47
Parks & Recreation
19.0
4
11,115
48
Library
20.5
8
11,016
49
Parks & Recreation
53.9
4
11,011
50
Administration
20.9
0
10,941
51
Parks & Recreation
60.5
4
10,910
52
Parks & Recreation
19.9
4
10,710
53
Parks & Recreation
18.6
4
10,408
54
Public Works
24.6
4
10,356
55
Parks & Recreation
51.4
0
10,349
56
Parks & Recreation
23.4
4
10,307
57
Parks & Recreation
18.0
4
10,303
58
Parks & Recreation
41.3
0
10,252
59
Library
20.8
4
10,164
60
Parks & Recreation
20.2
0
10,111
61
Parks & Recreation
64.9
4
10,086
62
Parks & Recreation
18.3
4
10,043
63
Parks & Recreation
19.7
4
10,004
mean
33.6
5.5
1
Parks & Recreation
24.2
4
9,820
2
Parks & Recreation
46.0
0
9,763
3
Community Developm
41.7
4
9,539
4
Public Works
28.4
8
9,467
5
Administration
18.1
4
9,281
6
Library
0
9,242
7
Parks & Recreation
45.8
4
9,240
8
Parks & Recreation
18.7
4
9,168
9
Parks & Recreation
23.7
0
9,036
10
Parks & Recreation
18.6
4
8,942
11
Parks & Recreation
17.6
4
8,837
Social
Earnings
Security
since
Department Age
Mrs
1998
12
Parks & Recreation
58.8
0
8,783
13
Parks & Recreation
20.5
4
8,571
14
Library
21.2
4
8,448
15
Public Works
56.3
0
8,305
16
Parks & Recreation
21.6
4
8,161
17
Parks & Recreation
22.7
0
8,125
18
Parks & Recreation
19.9
0
8,055
19
Parks & Recreation
62.2
4
8,005
20
Administration
0
7,833
21
Parks & Recreation
30.1
4
7,724
22
Parks & Recreation
51.3
0
7,719
23
Library
54.9
4
7,567
24
Parks & Recreation
23.1
4
7,469
25
Parks & Recreation
18.5
0
7,456
26
Parks & Recreation
16.8
0
7,195
27
Parks & Recreation
48.8
4
7,029
28
Library
33.7
4
6,955
29
Parks & Recreation
35.5
4
6,909
30
Parks & Recreation
55.9
0
6,867
31
Administration
39.7
4
6,805
32
Administration
22.5
4
6,734
33
Parks & Recreation
23.0
4
6,681
34
Parks & Recreation
21.4
0
6,601
35
Parks & Recreation
58.9
4
6,587
36
Parks & Recreation
17.3
4
6,487
37
Parks & Recreation
18.5
4
6,457
38
Parks & Recreation
42.5
0
6,435
39
Parks & Recreation
26.1
0
6,382
40
Administration
44.4
0
6,346
41
Administration
52.7
4
6,328
42
Parks & Recreation
20.9
0
6,254
43
Parks & Recreation
17.2
4
6,245
44
Parks & Recreation
23.5
0
5,973
45
Administration
57.3
4
5,962
46
Parks & Recreation
22.4
0
5,952
47
Parks & Recreation
18.3
0
5,884
48
Parks & Recreation
18.9
0
5,731
49
Community Developm
52.6
0
5,661
50
Parks & Recreation
17.0
4
5,470
51
Parks & Recreation
18.2
4
5,359
52
Parks & Recreation
19.1
0
5,332
53
Parks & Recreation
17.1
0
5,292
54
Parks & Recreation
48.9
0
5,170
55
Parks & Recreation
20.2
0
5,143
56
Parks & Recreation
17.9
4
5,121
57
Parks & Recreation
42.5
0
5,089
58
Administration
51.3
0
5,069
59
Parks & Recreation
56.6
0
5,064
60
Library
32.0
4
5,025
mean
32.3
2.1
1
Parks & Recreation
64.2
0
4,911
2
Parks & Recreation
53.0
0
4,850
3
Parks & Recreation
50.4
0
4,849
4
Parks & Recreation
29.2
4
4,809
5
Parks & Recreation
56.9
0
4,804
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
Social
Earnings
Security
since
Department
Age
Mrs
1998
Administration
18.0
0
4,709
Parks & Recreation
19.2
0
4,686
Parks & Recreation
0
4,601
Parks & Recreation
31.0
4
4,470
Parks & Recreation
31.3
0
4,450
Parks & Recreation
56.0
0
4,424
Parks & Recreation
17.9
0
4,417
Parks & Recreation
17.6
0
4,347
Parks & Recreation
18.9
0
4,275
Parks & Recreation
19.8
4
4,166
Parks & Recreation
21.2
0
4,094
Parks & Recreation
18.8
0
4,067
Police
43.0
0
4,001
Parks & Recreation
55.5
0
3,933
Parks & Recreation
19.1
0
3,919
Parks & Recreation
18.1
0
3,879
Parks & Recreation
18.1
0
3,878
Parks & Recreation
21.8
0
3,862
Parks & Recreation
33.1
0
3,766
Parks & Recreation
18.8
0
3,726
Parks & Recreation
52.2
0
3,714
Library
24.4
0
3,678
Parks & Recreation
19.3
0
3,633
Parks & Recreation
0
3,589
Administration
59.6
0
3,582
Parks & Recreation
16.8
0
3,524
Administration
27.0
0
3,468
Administration
26.8
0
3,439
Parks & Recreation
51.5
0
3,428
Parks & Recreation
16.2
0
3,314
Parks & Recreation
0
3,305
Parks & Recreation
17.5
0
3,303
Parks & Recreation
0
3,233
Parks & Recreation
58.0
0
3,182
Parks & Recreation
17.8
0
3,166
Parks & Recreation
19.9
0
3,122
Parks & Recreation
26.1
0
3,111
Parks & Recreation
38.3
0
3,087
Library
19.7
0
2,945
Parks & Recreation
20.5
0
2,876
Parks & Recreation
32.6
0
2,852
Parks & Recreation
19.3
0
2,812
Parks & Recreation
19.6
0
2,789
Parks & Recreation
36.6
0
2,783
Parks & Recreation
17.7
0
2,742
Parks & Recreation
46.8
0
2,724
Parks & Recreation
24.8
0
2,717
Parks & Recreation
21.1
0
2,669
Parks & Recreation
18.3
0
2,669
Parks & Recreation
50.1
0
2,663
Parks & Recreation
20.0
0
2,629
Parks & Recreation
0
2,615
Parks & Recreation
19.3
0
2,593
Parks & Recreation
17.3
0
2,550
Parks & Recreation
0
2,532
Public Works
36.4
0
2,457
62
Administration
63
Parks & Recreation
64
Library
65
Parks & Recreation
66
Parks & Recreation
67
Parks & Recreation
68
Parks & Recreation
69
Parks & Recreation
70
Community Developm
71
Parks & Recreation
72
Parks & Recreation
73
Community Developm
74
Parks & Recreation
75
Parks & Recreation
76
Administration
77
Parks & Recreation
78
Parks & Recreation
79
Parks & Recreation
80
Library
81
Parks & Recreation
82
Parks & Recreation
83
Parks & Recreation
84
Parks & Recreation
85
Community Developm
86
Parks & Recreation
87
Parks & Recreation
88
Community Developm
89
Parks & Recreation
90
Parks & Recreation
91
Administration
92
Parks & Recreation
93
Parks & Recreation
94
Parks & Recreation
95
Parks & Recreation
96
Parks & Recreation
97
Parks & Recreation
98
Administration
99
Parks & Recreation
100
Parks & Recreation
101
Community Developm
102
Parks & Recreation
103
Library
104
Parks & Recreation
105
Parks & Recreation
106
Parks & Recreation
107
Parks & Recreation
108
Parks & Recreation
109
Parks & Recreation
110
Parks & Recreation
111
Parks & Recreation
112
Parks & Recreation
113
Parks & Recreation
114
Parks & Recreation
115
Parks & Recreation
116
Parks & Recreation
117
Parks & Recreation
118
Parks & Recreation
16.9
119
Parks & Recreation
17.9
120
Parks & Recreation
19.6
121
Parks & Recreation
19.4
122
Library
51.2
123
Administration
20.9
124
Parks & Recreation
19.0
125
Parks & Recreation
18.1
126
Parks & Recreation
17.7
127
Parks & Recreation
17.2
128
Parks & Recreation
45.6
129
Community Developm
130
Parks & Recreation
20.2
131
Parks & Recreation
18.2
132
Parks & Recreation
17.0
133
Parks & Recreation
18.8
134
Parks & Recreation
18.9
135
Parks & Recreation
17.0
136
Parks & Recreation
23.8
137
Community Developm
138
Parks & Recreation
18.1
139
Parks & Recreation
18.4
140
Parks & Recreation
18.6
141
Parks & Recreation
17.2
142
Parks & Recreation
18.5
143
Parks & Recreation
17.2
144
Parks & Recreation
59.9
145
Parks & Recreation
57.1
mean
27.8
0.1
Earnings
since
1998
470
461
458
432
429
412
404
398
368
342
311
300
271
256
256
241
240
233
204
195
140
138
132
108
69
60
59
51
AGREEMENT FOR ADMINISTRATIVE SERVICES
This agreement ("Agreement") is made this day of , 2006, between
Phase II Systems, a corporation organized and existing under the laws of the State of
California, doing business as Public Agency Retirement Services (hereinafter "PARS")
and the City of Lodi ("Agency").
WHEREAS, Agency has adopted the City of Lodi PARS Section 457 FICA Alternative
Retirement Plan (the "Plan") effective , 2006, and is desirous of
retaining PARS, as Trust Administrator to the PARS Trust, to provide administrative
services;
NOW THEREFORE, the parties agree:
1. Services. PARS will provide the services pertaining to the Plan as described in
the exhibit attached hereto as "Exhibit 1" ("Services") in a timely manner, subject to the
further provisions of this Agreement.
2. Fees for Services. PARS will be compensated for performance of the Services as
described in the exhibit attached hereto as "Exhibit 2".
3. Payment Terms. Payment for the Services will be remitted directly from Plan
assets unless the Agency chooses to make payment directly to PARS. In the event that
the Agency chooses to make payment directly to PARS, it shall be the responsibility of
the Agency to remit payment directly to PARS based upon an invoice prepared by PARS
and delivered to the Agency. If payment is not received by PARS within thirty (30) days
of the invoice delivery date, the balance due shall bear interest at the rate of 1.5% per
month. If payment is not received from the Agency within sixty (60) days of the invoice
delivery date, payment plus accrued interest will be remitted directly from Plan assets,
unless PARS has previously received written communication disputing the subject
invoice that is signed by a duly authorized representative of the Agency.
4. Fees for Services Beyond Scope. Fees for services beyond those specified in this
Agreement will be billed to the Agency at the rates indicated in the PARS standard fee
schedule in effect at the time the services are provided and shall be payable as described
in Section 3 of this Agreement. Before any such services are performed, PARS will
provide the Agency with written notice of the subject services, terms, and an estimate of
the fees therefore.
5. Information Furnished to PARS. PARS will provide the Service contingent
upon the Agency's providing PARS the information specified in the exhibit attached
hereto as "Exhibit 3" ("Data"). It shall be the responsibility of the Agency to certify the
accuracy, content and completeness of the Data so that PARS may rely on such
information without further audit. It shall further be the responsibility of the Agency to
deliver the Data to PARS in such a manner that allows for a reasonable amount of time
for the Services to be performed. Unless specified in Exhibit 1, PARS shall be under no
duty to question Data received from the Agency, to compute contributions made to the
Plan, to determine or inquire whether contributions are adequate to meet and discharge
liabilities under the Plan, or to determine or inquire whether contributions made to the
Plan are in compliance with the Plan or applicable law. In addition, PARS shall not be
liable for non performance of Services if such non performance is caused by or results
from erroneous and/or late delivery of Data from the Agency. In the event that the
Agency fails to provide Data in a complete, accurate and timely manner and pursuant to
the specifications in Exhibit 3, PARS reserves the right, notwithstanding the further
provisions of this Agreement, to terminate this Agreement upon no less than ninety (90)
days written notice to the Agency.
6. Suspension of Contributions. In the event contributions are suspended, either
temporarily or permanently, prior to the complete discharge of PARS' obligations under
this Agreement, PARS reserves the right to bill the Agency for Services under this
Agreement at the rates indicated in PARS' standard fee schedule in effect at the time the
services are provided, subject to the terms established in Section 3 of this Agreement.
Before any such services are performed, PARS will provide the Agency with written
notice of the subject services, terms, and an estimate of the fees therefore.
7. Records. Throughout the duration of this Agreement, and for a period of five (5)
years after termination of this Agreement, PARS shall provide duly authorized
representatives of Agency access to all records and material relating to calculation of
PARS' fees under this Agreement. Such access shall include the right to inspect, audit
and reproduce such records and material and to verify reports furnished in compliance
with the provisions of this Agreement. All information so obtained shall be accorded
confidential treatment as provided under applicable law.
8. Confidentiality. Without the Agency's consent, PARS shall not disclose any
information relating to the Plan except to duly authorized officials of the Agency, subject
to applicable law, and to parties retained by PARS to perform specific services within
this Agreement. The Agency shall not disclose any information relating to the Plan to
individuals not employed by the Agency without the prior written consent of PARS,
except as such disclosures may be required by applicable law.
9. Independent Contractor. PARS is and at all times hereunder shall be an
independent contractor. As such, neither the Agency nor any of its officers, employees or
agents shall have the power to control the conduct of PARS, its officers, employees or
agents, except as specifically set forth and provided for herein. PARS shall pay all
wages, salaries and other amounts due its employees in connection with this Agreement
and shall be responsible for all reports and obligations respecting them, such as social
security, income tax withholding, unemployment compensation, workers' compensation
and similar matters.
10. Indemnification. PARS and Agency hereby indemnify each other and to hold the
other harmless, including their respective officers, directors, employees, agents and
attorneys, from any claim, loss, demand, liability, or expense, including reasonable
attorneys' fees and costs, incurred by the other as a consequence of PARS' or Agency's,
as the case may be, acts, errors or omissions with respect to the performance of their
respective duties hereunder.
11. Compliance with Applicable Law. The Agency shall observe and comply with
federal, state and local laws in effect when this Agreement is executed, or which may
come into effect during the term of this Agreement, regarding the administration of the
Plan. PARS shall observe and comply with federal, state and local laws in effect when
this Agreement is executed, or which may come into effect during the term of this
Agreement, regarding Plan administrative services provided under this Agreement.
12. Applicable Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California. In the event any party institutes legal proceedings
to enforce or interpret this Agreement, venue and jurisdiction shall be in any state court
of competent jurisdiction.
13. Force Majeure. When a party's nonperformance hereunder was beyond the control
and not due to the fault of the party not performing, a party shall be excused from
performing its obligations under this Agreement during the time and to the extent that it
is prevented from performing by such cause, including but not limited to: any incidence
of fire, flood, acts of God, acts of terrorism or war, commandeering of material, products,
plants or facilities by the federal, state or local government, or a material act or omission
by the other party.
14. Ownership of Reports and Documents. The originals of all letters, documents,
reports, and data produced for the purposes of this Agreement shall be delivered to, and
become the property of the Agency. Copies may be made for PARS but shall not be
furnished to others without written authorization from Agency.
15. Designees. The Plan Administrator of the Agency, or their designee, shall have the
authority to act for and exercise any of the rights of the Agency as set forth in this
Agreement, subsequent to and in accordance with the written authority granted by the
Governing Board of the Agency, a copy of which writing shall be delivered to PARS.
Any officer of PARS, or his or her designees, shall have the authority to act for and
exercise any of the rights of PARS as set forth in this Agreement.
16. Notices. All notices hereunder and communications regarding the interpretation of
the terms of this Agreement, or changes thereto, shall be effected by delivery of the
notices in person or by depositing the notices in the U.S. mail, registered or certified
mail, return receipt requested, postage prepaid and addressed as follows:
(A) To PARS: PARS; 5141 California Avenue, Suite 150; Irvine, CA 92617;
Attention: President
(B) To Agency: City of Lodi; 221 West Pint Street, Lodi, CA 95241-1910; Attention:
(Plan Administrator)
Notices shall be deemed given on the date received by the addressee.
17. Term of Agreement. This Agreement shall remain in effect for the period beginning
, 2006 and ending , 2009 ("Term"). This
Agreement will continue unchanged for successive twelve month periods following the
Term unless either party gives written notice to the other party of the intent to terminate
prior to ninety (90) days before the end of the Term.
18. Amendment. This Agreement may not be amended orally, but only by a written
instrument executed by the parties hereto.
19. Entire Agreement. This Agreement, including exhibits, contains the entire
understanding of the parties with respect to the subject matter set forth in this Agreement.
In the event a conflict arises between the parties with respect to any term, condition or
provision of this Agreement, the remaining terms, conditions and provisions shall remain
in full force and legal effect. No waiver of any term or condition of this Agreement by
any party shall be construed by the other as a continuing waiver of such term or
condition.
20. Attorneys Fees. In the event any action is taken by a party hereto to enforce the
terms of this Agreement the prevailing party herein shall be entitled to receive its
reasonable attorney's fees.
21. Counterparts. This Agreement may be executed in any number of counterparts, and
in that event, each counterpart shall be deemed a complete original and be enforceable
without reference to any other counterpart.
22. Headings. Headings in this Agreement are for convenience only and shall not be
used to interpret or construe its provisions.
23. Effective Date. This Agreement shall be effective on the date first above written, and
also shall be the date the Agreement is executed.
AGENCY:
BY:
TITLE:
DATE:
PARS:
BY:
TITLE: Senior Vice President
DATE:
(Plan Administrator)
EXHIBIT 1
SERVICES
PARS will provide the following services for the City of Lodi PARS Section 457 FICA
Alternative Retirement Plan:
1. Plan Installation Services:
(A) Meeting with appropriate Agency personnel to discuss plan provisions,
implementation timelines, benefit communication strategies, data reporting and
contribution submission requirements;
(B) Providing the necessary analysis and advisory services to finalize these elements of
the Plan;
(C) Providing for review by Agency legal counsel the documentation needed to establish
the Plan;
2. Plan Administration Services:
(A) Monitoring the receipt of Plan contributions made by the Agency to the trustee of the
PARS Trust Program ("Trustee"), based upon information received from the Agency and
the Trustee;
(B) Performing periodic accounting of Plan assets, including the allocation of employer
and employee contributions, distributions, investment activity and expenses (if
applicable) to individual Plan participant ("Participant") accounts, based upon
information received from the Agency and/or Trustee;
(C) Acting as ongoing liaison between the Participant and the Agency in regard to
distribution payments, which shall include use by the Participants of toll-free telephone
communication to PARS;
(D) Coordinating the processing of Participant distribution payments pursuant to
authorized written Agency certification of distribution eligibility, authorized direction by
the Agency, and the provisions of the Plan, and, to the extent possible, based upon
Agency -provided Data;
(E) Directing Trustee to liquidate Plan assets (if necessary) and make Participant
distribution payments, and producing required tax filings regarding to said distribution
payments;
(F) Notifying the Trustee of the amount of Plan assets available for further investment
and management, or, the amount of Plan assets necessary to be liquidated in order to fund
Participant distribution payments;
(G) Coordinating actions with the Trustee as directed by the Plan Administrator within
the scope this Agreement;
(H) Preparing and submitting periodic reports of non-contributing Participants to the
Agency;
(I) Preparing and submitting a monthly report of Plan activity to the Agency, unless
directed by the Agency otherwise;
(J) Preparing and submitting an annual report of Plan activity to the Agency;
3. PARS is not licensed to provide and does not offer tax, accounting, legal, investment
or actuarial advice. In providing the services specified above, PARS will retain qualified
professional service providers at its cost as it deems necessary if the service lies outside
its area of expertise.
EXHIBIT 2
FEES FOR SERVICES
1. PARS will be compensated for performance of Services, as described in Exhibit 1
based upon the following schedule:
(A) A distribution fee equal to $12.00 per terminated Participant ("Distribution Fee"),
which shall be deducted solely from the terminating Participant's account;
(B) An annual asset fee paid [by the Agency] [from Plan Assets] based on the following
schedule:
For Plan Assets from: Annual Rate:
$1 to $500,000 2.00%
$500,001 to $2,500,000 1.50%
$2,500,001 to $5,000,000 1.25%
$5,000,001 to $10,000,000 1.00%
$10,000,001 and above 0.75%
Annual rates are prorated and paid monthly. The annual asset fee shall be calculated
by the following formula [Annual Rate divided by 12 (months of the year)
multiplied by the Plan asset balance at the end of the month]. Asset based fees are
subject to a $300.00 monthly minimum. The total Asset Fees due in a given month
shall be allocated proportionately among Participants of the Agency's Plan in that
month, based on account balance. Trustee and Investment Management Fees are not
included.
(C) A fee equal to the out of pocket costs charged to PARS by an outside contractor for
formatting contribution data on to a suitable magnetic media, charged only if the
contribution data received by PARS from the Agency is not on readable magnetic
media ("Data Processing Fee").
EXHIBIT 3
DATA REQUIREMENTS
PARS will provide the Services under this Agreement contingent upon receiving the
following information:
1. Contribution Data — readable magnetic media containing the following items of
employee information related to the covered payroll period:
(A) Agency name
(B) Employee's legal name
(C) Employee's social security number
(D) Payroll date
(E) Employer contribution amount
(F) Employee contribution amount
2. Distribution Data — written Plan Administrator's (or authorized Designee's) direction
to commence distribution processing, which contains the following items of
Participant information:
(A) Agency name
(B) Participant's legal name
(C) Participant's social security number
(D) Participant's address
(E) Participant's phone number
(F) Participant's birthdate
(G) Participant's condition of eligibility
(H) Participant's effective date of eligibility
(I) Signed certification of distribution eligibility from the Plan Administrator, or
authorized Designee
3. Executed Legal Documents:
(A) Certified City Council Resolution
(B) Adoption Agreement
(C) Plan Document
(D) Trustee Investment Forms
4. Other information requested by PARS
RESOLUTION NO. 2006-161
A RESOLUTION OF THE LODI CITY COUNCIL APPROVING AND
AUTHORIZING PARTICIPATION IN THE PUBLIC AGENCY RETIREMENT
SYSTEM AS AN ALTERNATIVE RETIREMENT SYSTEM FOR PART TIME,
SEASONAL, AND TEMPORARY EMPLOYEES; AND FURTHER
APPROVING FUNDING AND CONTRIBUTION SPLIT
WHEREAS, it has been 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
QuaNying Retirement System ("Deferred Compensation Federal Insurance Contributions Act
(FICA) Alternative Plan"), thereby meeting the requirements of Section 11332 of the Omnibus
Budget Reconciliation Act (OBRA 90) and Section 3121(b)(7)(F) of the Internal Revenue Code;
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 3121(b)(7)(F) and 457(b), and meets the meaning of the term "retirement system"
as given by Section 218(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 November 1, 2006, the Effective Date for the
benefit of employees on that date and hired thereafter; and
2. The City Council hereby appoints the City Manager or his/her successor or his/her
designee as the City's Plan Administrator for PARS; 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
him/her to take whatever additional actions are required to administer the City's PARS
plan(s).
4. The City Council hereby approves the funding and contribution split whereby the City will
pay administration costs and employees pay a 7.5% contribution rate.
Dated: August 16, 2006
I hereby certify that Resolution No. 2006-161 was passed and adopted by the Lodi City
Council in a regular meeting held August 16, 2006, by the following vote:
AYES: COUNCIL MEMBERS — Beckman, Hansen, Johnson, Mounce
and Mayor Hitchcock
NOES: COUNCIL MEMBERS — None
ABSENT: COUNCIL MEMBERS — None
ABSTAIN: COUNCIL MEMBERS — None
J NiFE Art. PERIN
teri;r� City Clerk
2006-161
0
2) Allow PST's to select whether they wish to participate in Social Security or PARS.
3) Enroll all PST's immediately into PARS, but allow those with greater than 30 quarters to decade
whether to remain in Social Security until they become vested in Social Security or join PARS
immediately.
It takes 40 quarters to become vested in Social Security. Currently there are only four PST's who
have earned greater than 30 quarters while employed by the City. It is possible other PST's may
have earned greater than 30 quarters via a combination of City of Lodi employment and other
agency employment, but it is impossible to know without asking each person.
The following table provides a breakdown of the City's 300 currently active PST's:
1
Zero quarters
:.'d "..,.'> :�.;.."'.: f':,. t`"' -..'"e"
62
«t.4°,tE,Fa' a:5"t' e'c:'::T.'. t[q'.a`• •:� ° eS3;:i3d:"[s:i
8e
20.7
1 to 5 quarters
133
44.3
6 to 10 quarters
52
17.3
11 to 15 quarters
20
6.7
16 to 20 quarters
19
6.3
21 to 25 quarters
7
2.3
26 to 30 quarters
3
1.0
30 quarters or more
4
1.3
Total
300
100
Staff recommends that the City implement the third transitioning approach. This will allow those
PST's who may have a reasonable chance of reaching the 40 quarter mark to do so if they wish.
FISCAL IMPACT:
1. With an employee contribution rate of 7.50%, the City will save at least $56,198 per year. Greater
savings will be realized as PST salaries and staffing levels increase in the future should the City's
fiscal health improve. This savings is a permanent reduction to annual payroll costs.
3g
"Milo
}j p�1 4
��y( •tee
' M
PST Employees
300
300T
Annual Payroll Contribution
$964,484
$964,484
Employer Contributon Rate
x6.2%
x 0%
Retirement benefit Cost to City
$59,798
None
PARS Administrative Fee
-
+$3,600
Total Cost to City
$59,798
$3,600
Social Security Cost
$59,798
Less PARS Admin. Fee
$3,600
Savings to City of Lodi
$56,198
2. The PARS plan is a turn -key administration. The Trust Administrator, Phase II Systems (PARS),
handles all personnel and participant inquiries, performs monthly valuations of participant
accounts, administers the distribution process, ensures reporting requirements, and assures
government compliance.