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Home My WebLink AboutAGENDA REPORT 1991 0626 CC ADJ ITEM 11GPARK 799 Moorpark S4rveP4" W_1erparVy6alifornia 93021 ACTION: By TO: HONORABLE CITY COUNCIL FROM: RICHARD HARE, DEPUTY CITY MANAG DATE: June 14, 1991 SUBJECT: PART -TIME EMPLOYEES RE'1IREMENT PLAN BACKGROUND Stu) ITEM�� • (805) 529 -6864 MOORPARK, CAIJFORNIA CI Council Meeting Of 1�1 A T►ON: C, By The Omnibus Budget Reconciliation Act of 1990 (COBRA) requires Social Security coverage of pub is employees not covered by an employer - provided retirement plan .inless an alternative "retirement system" is adopted for non- cov(.-ed employees prior to 7/1/91. Part -time employees could be co�,!red under the Public Employees Retirement System like full -tir: employees or the City could establish a separate retirement 1.ai for- part -time employees. The FY 1991 -1992 budget anticipat °s the social security deduction for part -time employees at 6.29 o; payroll. Participation in PERS would cost 7% of payroll. Cal- Suiince which is under contract with the Southern California Joint P(: e:rs Insurance Authority as the Authority's insurance broker, ha: proposed the establishment of a part -time employees retirement pl, i which would consist of employee contributions only and therefore -:he administration fees for the program would be the only cost tr t;!I.(� CJ , The preliminary information on th. y: -an was received this date and staff has requested a specific proposal prior to the June 19, 1991 City Council meeting. It is a,nt.�,ipated that we will be able to discuss the item at the meet-in and continue the item to an adjourned meeting for further c_)rn: ,deratl on prior to making a final selection of a retirement syst,-m 01!, Lax -time employees. RECOMMENDATION Staff recommends this item be +:or Lrrt,e(:J . o June 24, 1991. Attachment: Informational Mater, 1 ( pages) \HCCRPTS \PTRETIRE PAUL W. LAWRASON JR. BERNARDO M PEREZ SCOTT MON ,OMEHy ROY E_ TALLEY JR. JOHN E. WOZNIAK Mayor Mayor Pro Tem Co anum ibe Gouncilmember Councilmember THE SOCIAL SECJRM' REPLACEMENT PLAN An alternative to Social Security for pa, rims or temporary public employees. Executive Summary The Omnibus Budget Reconciliation Act of 1 dxy0 (COBRA) requires Social Security coverage of public employees not covered by an employer irovided retirement plan unless an alternative "retirement system" is adopted for non - coverer' employees prior to 7/1191. California Public Agencies may be able to sit,, significantly by implementing an alternative plan in lieu of participating in Social Security. Summary Plan Details and Plan Design Eligibility- All employees not immediately covert. J by Social Security or an employer - provided plan must participate immediately upon eel ployment. Benefits: Vesting: Each participant must receive a conti 1bution of 7.5% of pay per year. This benefit may be funded entirely by the employer or m.tde to be a mandatory contribution by the employee as a condition of employment. The " nding of the benefit may also be shared by the employer and the employee. All contributions to the plan are iniv + diately vested 100%. Pay Definition: Pay for purposes of determining the 'r cncfrt must include total W2 pay. Pay may be limited to the taxable Social Security `rase each vear. To adapt a Social Security Replacement Plan (SSRP) 1 ~nor tc 7/1191 the following steps must be completed: (A) Complete an application and service agreement and remit to The Principal Financial Group with a non - refundable applic,, ion fpx. of 5500. (Other charges will he billed on a quarterly basis.) (B) Complete a Board Resolution adopt ig an SSRP effective 7/1/91. (C) The Principal and Cal- Surance will i Lurn provi6ie - A pension plan document. - Announcement materials for distribution to affected employees. - Miscellaneous administrative. forme. - A monthly reporting form fe contrihutions. - Participant enrollment fov'rx 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 Difference 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 nlan �Pl-w WP c}�nu, p rnrnparisnn '?f cncts hetween (FICA I soc lai Security and various plan designs. Assumptions. 200 Eligible Pan- lime!lemporary Employees - S1,500,000Annual Payrou (,b7,.)Wlee) FICA OPTION 1 OPTION 2 OPTION 3 OPTION 4 Employer Contribution $93,000 0 $19,500 $56,250 $112,500 Employee Contribution $937000 $112,500 $93,000 $56,250 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 DI TAILS The plan will be funded through Principal Financial's FM G;ro, 4nn,iity contract (inininuun annual deposit $25,000). Principal will: ► Enroll the participants ► Draft custom plan document. ► Provide an annual participant ar j employer fund statement. ► Provide annual government con" ,iliance services. ► Provide quarterly billing of fees Funds will be invested with The Principal Fine racial Group in a Group Annuity Investment contract which will provide a guar ritee of principal and interest on all contributions. Distributions will be paid out upon terminattc, of t-�mployment in cash unless an alternative form of payment is elected.