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Home My WebLink AboutAGENDA REPORT 1991 0619 CC REG ITEM 11G`7G.G(G) ITEM MOORPARK 799 Moorpark Avenue Moorpark, California 93021 TO: HONORABLE CITY COUNCIL: FROM: RICHARD HARE, DEPUTY CLTY MANAG DATE: June 14, 1991 SUBJECT: PART -TIME EMPLOYEES RETIREMENT PLAN BACKGROUND (805) 529 -6864 .. Council � ._ of i • The Omnibus Budget Reconciliation Act of 1990 (COBRA) requires Social Security coverage of pubic employees not covered by an employer - provided retirement plan unless an alternative "retirement system" is adopted for non - covered employees prior to 7/1/91. Part -time employees could be covered under the Public Employees Retirement System like full -time employees or the City could establish a separate retirement 11_an for part -time employees. The FY 1991 -1992 budget anticipates the social security deduction for part -time employees at 6.2% ai payroll. Participation in PERS would cost 70 of payroll. Cal- Surance which is under contract with the Southern California Joint Powers Insurance Authority as the Authority's insurance broker, ha::; proposed the establishment of a part -time employees retirement plan which would consist of employee contributions only and therefore the administration fees for the program would be the only cost tr. the City. The preliminary information on this plan was received this date and staff has requested a specific proposal prior to the June 19, 1991 City Council meeting. It is ant: c:ipated that we will be able to discuss the item at the meeting and continue the item to an adjourned meeting for further cons_deration prior to making a final selection of a retirement system -)r part: -time employees. RECOMMENDATION Staff recommends this item be con °inued to June 24, 1991. Attachment: Informational Materi_ s ('a pages) \HCCRPTS \PTRETIRE PAUL W LAWRASON JR. BERNARDO M PEREZ Mayor SCOTT MONT! -OME R' °' ROY E. TALLEY JR JOHN E. WOZNIAK Mayor Pro Tem CouncilmeF bet Councilmember Councilmember THE SOCIAL SECURITY REPLACEMENT PLAN An alternative to Social Security for >art time or temporary public employees. Etrecuti`ve Summa_ry The Omnibus Budget Reconciliation Act of 1990 (COBRA) requires Social Security coverage of public employees not covered by an employers- provided retirement plan unless an alternative "retirement system" is adopted for non - covered employees prior to 7/1/91. California Public Agencies may be able to s�we significantly by implementing an alternative plan in lieu of participating in Social Security. Summary Plan Details and Plan Design Eligibility: All employees not immediately covered by Social Security or an employer - provided plan must participate immediately upon employment Benefits: Vesting: Each participant must receive a contribution of 7.5 % of pay per year. This benefit may be funded entirely by the employer or made to be a mandatory contribution by the employee as a condition of employment. The funding of the benefit may also be shared by the employer and the employee. All contributions to the plan are immediately vested 100 %. Pay Definition: Pay for purposes of determining the benefit must include total W2 pay. Pay may be limited to the taxable Social Security tease each year. To adapt a Social Security Replacement Plan (SSRP) prior to 711191 the following steps must be completed: (A) Complete an application and service agreement and remit to The Principal Financial Group with a non - refundable application fee of $500. (Other charges will be billed on a quarterly basis.) (B) Complete a Board Resolution adopting an SSRP effective 7/1/'91. (C) The Principal and Cal- Surance will in urn provide: - A pension plan document. - Announcement materials for di tribution to affected employees. - Miscellaneous administrative forms. - A monthly reporting form for .contributions. - Participant enrollment forms THE SOCIAL SECURITY REPLACEMENT PLAN (SSRP) Cal - Surance Benefit Plans, Inc. in conjunction with The Principal Financial Group is prepared to implement an SSRP which will serve as an alternative to the otherwise mandatory Social Security coverage which becomes effective 7/1/91 for public employees not covered by an employer provided retirement plan or Social Security. Based upon the parameters outlined in the recent tax law changes Cal- Surance will assist you in plan design and implementation. The Principal Financial Group will provide recordkeeping, administrative, documentation and investment services. Compare the Cost Dif jffmce Between Social Security and a Social Security Replacement Plan. The regulations give employers a choice as to how to structure and fund the plan. On one extreme you can mandate that employees fund the majority of the cost of the plan themselves. On the other extreme you can fund the entire cost of the Ulan. Below we show a comparison of costs between (FICA) Social Security and various plan designs. Assumptions-- rUU Eligible Part- Iime/Temporary Employees - $1,500,000 Annual Payroll ($7500lee) FICA OPTION 1 OPTION 2 OPTION 3 OPTION 4 Employer Contribution $93,000 0 $19,500 $56,250 $112,500 Employee Contribution $93,000 $112,500 $93,000 $561250 0 Estimated Administrative Fees 0 $8,000 $8,000 $8,000 $8,000 TOTAL $186,000 $120,500 $120,500 $120,500 $120,500 PLAN DETAILS The plan -ill be funded through Principal Financial's F1A Croup Annuity contract (►n&dmwn annual deposit $25,000). Principal will: ► Enroll the participants ► Draft custom plan document. ► Provide an annual participant ;tnd employer fund statement. ► Provide annual government compliance services. ► Provide quarterly billing of fees Funds will be invested with The Principal Financial Group in a Group Annuity Investment contract which will provide a guarantee of principal and interest on all contributions. Distributions will be paid out upon termination of employment in cash unless an alternative form of payment is elected.