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%.
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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
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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.
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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.
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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 '
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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.
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amount. If withdrawals are
spread over a 3 year period, no
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penalty is,charged.
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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.
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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.
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? 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.
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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.
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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
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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)
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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.
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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.
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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)
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P.
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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.
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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.
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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.
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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:
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5. AYES: Council Members Packard, Anear, Lewis and Kulchin
6 NOES: 140M
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ABSENT: Council MeMbdr CASler
10 RONALD G. PACKARD' Mayor
nATTEST:
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13. ALETHA L. RAUTENKRANZ, City Clerk
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