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HomeMy WebLinkAbout1981-05-26; City Council; 6011-1; Revision of City's Deferred Compensation PlanCITY OF CARLSBAD 14 ) AGENDA BILL NO. p / / . ,Q _ �, Q� �. Initial: .__• Dept.H DATE::26; 1981 C. Atty. DEPARTMENT: Finance C. Mgr_ Subject: Revision of the City's Deferred Compensation Plan Statement of the Matter The City of Carlsbad established a Deferred Compensation Plan for all employees in November of 1979. This plan allows employees to defer income earned, and tax liabilities on that income, until retirement,or such time as they leave the City service. The current plan is administrated by Glendale Federal Savings and Loan. All deposits with this organization earn at an annual rate of 8.33%. In an effort to improve this plan, the city staff has worked with the participants of the present plan to review alternate deferred compensation programs. Six different plans offering varing investment options, rates of return and administration requirements have been reviewed. The following is a list .of these companies: Company ape of Plan National Plan Coordinators Various AETNA Insurance Company Various Standard Insurance of Oregon Annuity Glendale Federal Savings Savings ,,California Federal Savings Savings International City Managers Association - Retirement Corporation (ICMA-RC) Various Based upon -a review of the companies investment vehicles available, customer satisfaction, ease of administration, cost to the'employee,.and'rate.of,return; the members of the deferred compensation group and the Finance Director have selected a combined approach as being the best solution for Carlsbad. The AETNA clan, offering four investment vehicles, and the California Savings and Loan plan offering a basic treasury bill savings plan, will provide a wide variety of investment opportunities to the City employees with little administration effort and cost. In addition, the ICMA-RC plan can be offered as an additional option which is attractive to those city employees who may work for several cities.over the span of their careers. This plan is designed to allow a Darticipant the flexibility of moving from city to city without compromising his or her deferred compensation investment. The individual may deposit funds to this plan while employed by -any city who will offer this plan as an option. Rates of return under this combined approach will vary depending upon the option selected by the individual investing in the plan. In 1980, these plans experienced returns from as high as 25% to as low as 2%. page 1 of 2 CITY OF CILRUBAD e.. Initial: AGENDA BILL NO. � �, .Z Dept.Hd. DATE: May 26, 1981 C. Atty. DEPARTMENT: Finance C. Mgr_ Subject: Revision of the City's Deferred Comoensation Plan, (Con't.) Fiscal impact The cost of administering these plans will be primarily an increase in manhours required to process the bi-weekly payroll. An additional two to three hours per payroll period may be required if as many as 75 people join the proposed plan. This equates to about 80 hours or about $1,200 per year.. This is an indirect cost that will be absorbed within the payroll function. Exhibits Description of Deferred Compensation Plans Resolution No. IO S3 1 Ammending the City's Deferred Compensation Plan Resolution No. & SS Z Authorizing the Manager to execute an administrative agreement with AETNA Insurance Resolution No'. -.3 Autho~izing-the Manager to execute an administrative agreement with California Federal Savings and Loan Association Resolution No. JA.T 3Adopting the ICMA-RC Deferred Compensation Plan and authorizing the City Manager to execute an agreement" -Recommendations By minute motion - Direct City Manager to notify. Glendale Federal Savings & Loan Association of the City's intent to transfer funds to other investment vehicles Adopt Resolution No. L.3'3 -Amending the City's Deferred Compensation Plans Adopt Resolution Nos. 1693 Z G S3 3 and " 3 Authorizing the City Manager to execute administrative agreements with AETNA Insurance and'Annuity Company, California Federal Savings & Loan Association, and the .International City Managers Association - Retir'ement Corporation t 8P3_ROVED page 2 of 2 AETNX-1IFE INSURANCE CO. Investment Vehicles Proposed: AETNA has proposed a deferred compensation plan based on four funding vehicles. All directly controlled by AETNA: Common Stock Fund Money Market Fund Bond Fund Fixed .Investment Fund Rate of Return: AETNA has supplied rates of return for their four basic investment vehicles for the :past five years. The 1980 rates, are below: 1. Variable Fund '25.45% (Common Stock & Securities) 2: Encore' Fund- 10.47% (Money -Market Instruments) 3. Income Shares 1.97% (Bond' & =Debt Securities) 4. ,General Account 8.80% (Real Estate/Long Term Mortgages) Front End_Load (Cost to Invest Funds): The current AETNA plan has no front end fees. All investment options earn interest for the entire time invested. Account Maintenance Fees: AETNA charges an annual fee of $20 assessed to each member's account after the end of each year of participation. If more than $100,000 is invested in the plan, the charge drops to $15 annually per person. DEFERRED COMPENSATION PLANS INTERNATIONAL CITY MANAGERS ASSOCIATION RETIREMENT CORP. (ICMA-RC) ICMA-RC proposed a four option deferred compensation plan, similar to the AETNA approach. The four options are: Common Stock Fund Bond Fund Government Securities Fund Guaranteed Interest Fund ICMA-RC has furnished the following information on operations which reflects the earnings in each invest- ment option for 1980: 1. Balanced Fund 25% (Common Stock & Securities) 2. Bond Fund 7:76% (Bonds & Long Term Debts) 3. Gov't. Securities Fund 4.2% (US Gov't. Issues) 4. Guarantee Interest Fund 9.5% (Various Long Term Investments) CALIFORNIA FEDERAL SAVINGS & LOAN ASSOCIATION The Cal. Fed. plan offers a treasury bill type of plan yielding approximately the same rate as regular treasury bills for $10,000 or more invested for 26 weeks. The treasury bill rate of return is fixed each week by the US Treasury. The rate of return has varied -from as low as 9% to as high as 15% over the past year. Cal. Fed. pays slightly less than the treasury bill rate of return on deferred compensa- tion investments. 639 ICMA-RC assesses a 1.5% fr :t end There are no front end loadsassociated administrative fee on all funds with the Cal. Fed. plan. invested. The maintenance fee charged by ICMA-RC varies from 0.5% to 1% depending upon the investment vehicle selected by the employee. Theme are no administrative fees associated with the Cal. Fed, plan. 4 ' page 2 INTEPNATIONAL CITY MANAGERS ASSOCIATION CALIFORNIAL FEDERAL SAVINGS & LOAN AETNA-LIFE.INSURANCE CO. RETIREMENT CORP. (ICMA-RC) _ ASSOCIATION Withdrawal Fees: AETNA has a sliding scale of The ICMA-RC has no withdrawal fees. An There are no withdrawal fees withdrawal charges based upon employee may withdraw from the plan under associated with the Cal. Fed. plan the participant tirne in the plan: 'Less- three conditions: assuming the administrator does not that: 5 yrs. 5% 1. Emergency withdraw funds from• a certificate of 5 to 7 yrs._ 4% 2. Separation from the City deposit prior to the regular maturity ' ' 7 to 9 yrs. 3% 3. Retirement date. The usual treasury•rules 9 or, more, yrs-. 2% based.uooh the total investment pp y when funds are withdrawn prior , apply to maturity. ` amount. If withdrawals are spread over a 3 year period, no } penalty is,charged. I Administrative Services: AETNA provides bi-weekly state- ICMA-RC provides the usual range of Cal. Fed. provides all accounting and ments on each individual account administrative services including administrative services, A ndluding• A indicating the amount of money currently investing of funds, accounting and payout upon withdrawal and quarterly received, date these reporting to members of the plan. Reports reporting to the City acid par."ticipants monies were applied to the are prepared on an annual basis or on in the plan. participant's accounts, total a 'request basis. The City would require , amount received'to date, and at least quarterly reporting. = the total value of the ' participant's accounts. These reports are generally received 10 to 14 days after payroll period. Annual reports may also be provided as needed. AETNA provides all payout services for members with- } drawing -from the plan. Minimum -Participation: AETNA.requires a minimum of $25 per There is no minimum amount of participation Cal. Fed. requires�a $10 per month payroll period to qualify for partici- required by ICMA-RC, however, the City's minimum participation. However, the pation in the plan. The $25 may be deferred compensation plan requires a City's deferred compensation plan allocated to one or any combination minimum -of $25 per payroll period. requires a $25 per pay period of the four Investment options. minimum. AETNA LIFE INSURANCE CO. Users Satisfaction Survey: r, t A survey of five AETNA clients provided the following comments: 1. -Most cities are now .on the f plan currently offered to the City of Carlsbad. (4 options) 2. Participation,- 20% to 30% P Hof•eligible employees. i 3. General comments: A) Set -up -process relatively smooth. Takes about 2 to 3 ,- months from start. B) AETNA legal staff very helpful in _plan set-up. C) Generally high partici- pant .satisfaction. D) Very good reporting to . 'participants and city. Advantages• 1. Stableeorganization. Plan is backed by -a large insurance company. 2. Variety of investment options available -to each employee. a 3. Ability to move funds from one investment vehicle to another without penalty. 4. Good reporting and tracking system established. 5. -Provides administration of bene- fit payout, reporting and plan mngmt. 6. General user satisfaction appears to be high. INTERNATIONAL CITY MANAGERS ASSOCIATION RETIREMENT CORP. (ICMA-RC) 1. Users were pleased with the plan, administration and reporting, however,, special reports are sometimes difficult to obtain. 2. Several cities have dropped ICMA-RC due to the front end and administration costs. 3. ICMA-RC was at one time one of the only deferred compensation plans avail- able. 4. Plan is portable from city to city. 5. ICMA-RC rates are not -always competitive with other investment vehicles. d 1. Transportability. The ICMA-RC plan is offered at over 80 cities in California. 2. Variety of investment options available to each employee. 3. Stable organization. ICMA-RC is a large and well established group. 4. Provides all administration and benefit payout services, reporting and plan mgmt. 5. No local agents are involved, the City deals directly with ICMA-RC. page 3 CALIFORNIA FEOERAL,SAVINGS & LOAN ASSOCIATION T. Cal. Fed. is relatively new on the deferred compensation scene. The few users surveyed indicate that the program has worked well to date. 2. Reporting is adequate. 3. User satisfaction is generally high. 1. Provides -a safe competitive alternative to the employee for the investment of deferred income. 2. S & L accounts are insured u';o $1005000 against loss. 3. The savings & loan plan requires very little administrative effort. 71 ? AETNA.LIFE INSURANCE CO. Disadvantages: 1. Contact with AETNA would be made through local agents. Unless carefully selected, these agents Ray lack proper knowledge of tax shelter investments and necessary counseling skills. 2. To be a complete plan, the city should also offer a Savings & Loan option since the-AETNA plan does not include comparab z feature. f i { f t 1 rf P t lx page 4 INTERNATIONAL CITY MANAGERS ASSOCIATION CALIFORNIA FEDERAL SAVINGS & LOAN RETIREMENT CORP. (-ICMA-RC) ASSOCIATION 1. The plan requires various front 1. The Cal. Fed. plan is not offered end fees and administrative costs. by many cities and is therefore not 2. Rate of return on investment is very transportable. not always competitive with other plans. r F 1 S 5� t 1 I i It 2 4 5 611 8 9 10 11 12 13 14 '15 16 17 18 19 20 22 2' 24 2` 2E 2' 21 .4•. RESOLUTION N0. 6531 A RESOLUTION ON'THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AMENDING THE CITY'S DEFERRED COMPION PLAN_ Whereas, the City of Carlsbad has an existing Deferred Com- pensation Plan; and Whereas, it is necessary to•amend this plan to maintain consistancy with the deferred'compensation options offered through the plan; and Whereas the Deferred Compensation Plan must be amended by Council action; NOW THEREFORE BE IT RESOLVED, by the City Council of the City of Carlsbad, California, as follows' 1. That Section 4.2 of the City's Deferred Compensation Plan shall be amended to read as follows: "Each f articipation Agreement.shall specify the dollar amount, which is to be deferred pursuant to the Plan and to be withheld out of the Compensation -otherwise payable to the i d The amount deferred each Participant for each payroll per o . 25% of Partici- pant'syeai may not exceed the lesser of $7,500.00 or gross 'compensation. Such deferred amounts shall be ents totaling not less than twenty-five reasonable equal installm a dollars ($25.00) per payroll period." 2. That Section 6.7 of the City's Deferred Compensation Plan shall by amended to read as follows: "If the Plan provides for more than one type of invest - went vehicle, a Participant may request a change in preference of investment (as Provided in Section 4.4). Such request may ')e f 1 2 3 4 5 6 7 8 9 101 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 r- made only with respect to compensation not yet earned and de- ferred, unless the particular vehicle specifically allows the transfer of funds previous deposited between investment vehicles under the administrator's control. The Employer may, but is not required to, honor such request. The minimum investment in each type of investment shall be twenty five dollars ($25.00) per payroll period. Nothing contained in this Plan shall be con- strued as requiring the Employer to invest deferred amounts or as limiting the Employer's discretion with respect tp-making investments. PASSED,. APPROVED AND ADOPTED at a /re-guiardmeeting of the City Council of the City of Carlsbad held the 26th day of I&Y " " --, 1981, by the following vote, to wit: AYES: Council Meabers Packard, Anear, WAe & Kulchin NOES: None - ABSENT Council Member Casler RONALD C. PACKARD, Mayor ATTEST: ALETHA L. RA!lTENKR�Cityrk (SEAL) f } RESOLUTION NO. 6532 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF 'CARLSBAD, CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXECUTE AN ADMINISTRATIVE AGREEMENT WITH THE AETNA 4 LIFE INSURANCE AND ANNUITY COMPANY FOR THE PURPOSE OF PROVIDING'A DEFERRED COMPENSATION PLAN. 5 6 Whereas the City of Carlsbad -has established a Deferred 7 Compensation Investment Plan for all full-time City employees; 8 and t 9 Whereas this Plan authorized the City to select various 10 investment plans or vehicles for the•deposit of deferred earn- 11 ings; and 12 Whereas the Aetna Life Insurance and Annuity Company offers 13 such a plan; and 14 Whereas it is in the City's interest to offer the Aetna 15 'Plan to the City's employees; 16 NOW, THEREFORE, BE IT RESOLVED by the City Council of the 17 City of Carlsbad, that the City Manager is hereby Authorized to 18 enter into the attached agreement with the Aetna Life Insurance' 19 and Annuity company for the provision of deferred compensation 20 investment vehicles. The City Manager or his designee will act 21 as the City's Administrator in all deferred compensation 22 matters. 24 ///'/ 25 26 27 28 a 2 2 3 4 5 6 7 8 ' 9 10 11 1z 13 1 14 1 15 16 17 xs 19 20 { 21 22 23 24 25 26 27 28 adjourned PASSED, APPROVED AND ADOPTED at a/regular meeting of the City Council of,the City of Carlsbad held on the 26th day of Icy' 1981, by the following vote, to wit: AYES: Council Members Packard, Anear, Tewis and Kulchin NOES: None ABSENT: Council y=ber. Casler RONALD C. PACKARD, Mayor ATTEST: A E HA L. RAUTENKRANZ, City Cle k (SEAL) l P. 41 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 •K A-, RESOLUTION NO. ' ' 6'::r33 _ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF •CARLSBAD, CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXECUTE AN ADKINISTRATIVE AGREFkENT WITH THE CALIFORNIA FEDERAL SAVINGS AND LOIiN FOR THE PURPOSE OF PROVIDING A DEFERRLD COMFENSATION•PLAN. Whereas the City of Carlsbad has established a Deferred Compensation Investment Plan for all full-time City employees; and Whereas this Plan authorized the City to select various investment plans or vehicles for the.deposit of deferred earn- ings; and Whereas California Federal Savings and Loan offers such a plan; and Whereas it is in the-Cityts interest to offer the Calif- ornia Federal Savings and Loan Plan to the City's employees; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, that the City Manager is hezeby authorized to .enter into the attached agreement with California Federal Savings and Loan for the provision of deferred compensation investment vehicles. TY- City Manager or his designee will act as the City's Administrator in all deferred compensation matters. I E� ' 1 2 4 i 5 6 7 8 10 1T 12 4 13 14 15' 16 17 18 19 20 21 22 23 24 zF V 2S 2f adjourned PASSED, APPROVED AND ADOPTED at a/regular meeting of the ;,ity Council of the City of Carlsbad held on the 26th` day of y 1981, by the following vote, to wit: AYES: Council Members Packard, Anear, Lewis and Kul.chir_ NOE s : None ABSENT: Council Member Casler RONALD C. PACKARD, Mayor ATTEST: ALETHA L. +AU ENKRANZ, City Clerk (SEAL) 11 . l RESOLUTION NO. 6534 2 A RESOLUTION OF 'THE CITY COUNCIL OF THE CITY 0 3 CARLSBAD, CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXECUTE VARIOUS AGREEMENTS WITH THE INTERNATIONAL 4 CITY MANAGERS' ASSOCIATION — RETIREMENT COPORATION (ICMA—RC) FOR THE PURPOSE OF PROVIDING A DEFERRED 5 COMPENSATION PLAN AND INVESTMENT VEHICLES TO THE EMPLOYEES OF THE CITY OF'CARLSBAD. 6 7 Whereas the City of.Garlsbad has established a Deferred 8 Compensation Plan for all full=time employees; and 9 Whereas this Plan authorizes the City to select various 10 ,investment plans or vehicles for the deposit of deferred earn- ].1 ings; and 12 Whereas the ICMA-RC offers a deferral compensation plan and 13' investment vehicles which are consistent with the City's exist- 14 ing Deferred Compensation Plan; and 15 Whereas it is the City's interest to offer the ICMA-RC RlaP. 16 to the City's Employees; 17 NOW, THEREFORE, BE IT RESOLVED as follows: 18 1. The City Council does hereby adopt the ICMA—RC Deferred 3.9 Compensation Plan as attached to this resolution. This Plan is 20 to be administered by the City Manager when depositing funds to 21 the ICMA-RC investment vehicles. 22 2. That the City Manager is hereby authorized'to execute 23 the attached Deferred Compensation Agreement with the ICMA-RC. 24 The City Manager or his designee will act as the administrator 25 of this alter.native'in the City's Deferred Compensation Plan. 26 27 28 II. adjourned PASSED, APPROVED AND ADOPTED at a/regular meeting of the City Council of the City of Carlsbad held on the , 26th day of May'-:- 1981, by/the following vote, to wit: 4 5. AYES: Council Members Packard, Anear, Lewis and Kulchin 6 NOES: 140M 7 ABSENT: Council MeMbdr CASler 10 RONALD G. PACKARD' Mayor nATTEST: 12 13. ALETHA L. RAUTENKRANZ, City Clerk I 14 (SEAL) 15 16 18 19 20 21 R 2 23 24 25 26 27 28