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HomeMy WebLinkAbout2012-07-10; City Council; 20947; Approve APPLE Plan Retirement BenefitsCITY OF CARLSBAD - AGENDA BILL AB# MTG. DEPT. 20.947 7/10/12 HR Approve the City of Carlsbad APPLE Plan to provide retirement benefits for hourly part-time employees in lieu of Social Security or the existing Lincoln Financial Advisors Plan. DEPT. HEi _ CITYATTY. CITY MGR. RECOMMENDED ACTION: Adopt Resolution No. 2012-151 approving the City of Carlsbad Accumulation Program for Part-Time and Limited-Service Employees (APPLE) Plan to provide retirement benefits for hourly part-time employees in lieu of Social Security or the existing Lincoln Financial Advisors Plan. ITEM EXPLANATION: As an employer, the City of Carlsbad is required to provide a retirement vehicle for all employees. All full time employees are enrolled in the CalPERS retirement plan. Currently, most hourly part-time employees are enrolled in Social Security. Until January 2005 the City offered a 457 plan provided by Lincoln Financial Advisors ("Lincoln") to hourly part-time employees as an alternative to Social Security. There are 65 hourly part-time employees who were "grandfathered" in and are contributing to the Lincoln 457 plan. Council can reduce retirement costs by establishing a new APPLE 457 plan to be used in lieu of Social Security. The table below shows the difference in cost between these plans. Social Security APPLE 457 City contribution (% of payroll) 6.20% 3.75% Employee contribution* (% of payroll) 4.20% 3.75% * In 2011 and 2012 there was a temporary reduction in ihe employee cost for social security. In 2013 it will return to 6.2%. In order to streamline administration ofthe retirement plan for hourly part-time employees, all Lincoln 457 plan participants would be transferred to the APPLE 457 plan. The City contribution to the Lincoln and APPLE 457 plans are the same (i.e., 3.75% of payroll). The APPLE 457 Plan would also be used in lieu of Social Security by council-appointed officials (e.g.. Planning Commissioners) and by elected officials who are not contributing to the CalPERS retirement plan. DEPARTMENT CONTACT: Debbie Porter 760-602-2441 debbie.porter@carlsbadca.gov FOR CITY CLERKS USE ONLY. COUNCIL ACTION: APPROVED • DENIED • CONTINUED • WITHDRAWN • AMENDED • CONTINUED TO DATE SPECIFIC CONTINUED TO DATE UNKNOWN RETURNED TO STAFF OTHER-SEE MINUTES COUNCIL RECEIVED THE REPORT/PRESENTATON Resolution Failed due to a lack of maioritv. SAA MiniitAS for riafails July 10. 2012 • • • Page 2 In order to allow 457 plan contributions to be made on a pre-tax basis, Internal Revenue Code section 414(h)(2) permits the City to "pick up" the employee contributions and to treat them as employer contributions. "Employee contributions" means those contributions to the 457 plan which are deducted from the salary of employees and are credited to individual employees' accounts. FISCAL IMPACT: Based on calendar year 2011 payroll, the estimated annual savings to the General Fund due to using the APPLE 457 plan in lieu of Social Security for hourly part-time employees is $60,000. This savings is appropriated in the Fiscal Year 2012-13 proposed operating budget. There is no fiscal impact related to replacing the Lincoln 457 plan with the APPLE 457 plan. ENVIRONMENTAL IMPACT: The proposed action does not qualify as a "project" under the California Environmental Quality Act (CEQA) per State CEQA Guidelines Section 15378 as it does not result in a direct or reasonably foreseeable indirect physical change in the environment. EXHIBITS: 1. Resolution No. 2012-151 2. APPLE Participation Agreement 3. APPLE Plan Administrative Services Agreement 4. Unallocated Fixed Contract Application, Acceptance & New Business Agreement 4 1 RESOLUTION NO. 2012-151 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, ADOPTING THE CITY OF ^ CARLSBAD ACCUMULATION PROGRAM FOR PART- TIME AND LIMITED-SERVICE EMPLOYEES (APPLE) PLAN TO PROVIDE RETIREMENT BENEFITS IN LIEU OF 5 COVERAGE UNDER SOCIAL SECURITY OR THE EXISTING LINCOLN FINANCIAL ADVISORS PLAN, AND 6 AUTHORIZING AND DIRECTING THE HUMAN RESOURCES DIRECTOR TO EXECUTE ALL 7 NECESSARY DOCUMENTS 8 WHEREAS, Section 11332 of the Omnibus Budget Reconciliation ACT of 1990 9 10 11 12 13 14 15 ("OBRA '90") extends Social Security retirement benefit coverage to employees of state and local governments who are not covered by a state or local retirement system and subjects the employer and employee to Federal Insurance Contributions Act ("PICA") taxes on the employee's wages; and WHEREAS, OBRA '90 excludes from the requirement of Social Security coverage governmental employees who are covered by a compulsory retirement 15 system of a state or local government; and 17 WHEREAS, California Government Code section 53216, et seq., authorizes a 18 governmental employer to establish and fund a pension Plan covering its employees on a compulsory basis; and WHEREAS, certain hourly part-time employees of the City of Carlsbad are not currently covered under any other retirement program through the City or the State of California in lieu of coverage under Social Security, as permitted by OBRA '90; and WHEREAS, the Council desires to adopt a compulsory retirement Plan, qualified under section 457 of the Internal Revenue Code of 1986 ("the Code"), for the hourly 20 21 22 23 24 25 25 part-time employees, council-appointed officials and elected officials in lieu of providing 27 coverage under Social Security, as permitted by OBRA '90; and 28 3 1 WHEREAS, the City of Carlsbad currently provides a PICA alternative plan to 2 certain hourly part-time employees through the Lincoln Financial Advisors; and ^ WHEREAS, the Council desires to continue to provide a tax-qualified PICA alternative plan for said employees, but to replace the existing Lincoln Financial Advisors Trust with the Accumulation Program for Part-Time and Limited-Service Employees ofthe City of Carlsbad ("APPLE Plan"); and WHEREAS, Code section 414(h)(2) permits the City to pick up the employee portion of contributions to a section 457 Plan and to treat them as employer IQ contributions; and 11 WHEREAS, such "picked up" contributions are not taxable to the employee until 12 distributed; and 13 WHEREAS, the Council has reviewed the Accumulation Program for Part-time and Limited-service Employees (the "APPLE Plan") provided by Keenan & Associates. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. ir 19 2. That the APPLE Participation Agreement, APPLE Plan Administrative Services 20 Agreement and Unallocated Fixed Contract Application, Acceptance & New 21 Business Agreement referred to in the recitals above are incorporated in this 22 resolution by reference. 3. That the Council hereby adopts the City of Carlsbad APPLE Plan to provide retirement benefits to hourly part-time employees of the City in lieu of coverage under Social Security and as an amendment to the existing Lincoln Financial Advisors Plan replacing the Lincoln Financial Advisors Plan in full, to be effective 14 15 16 17 23 24 25 26 27 28 1 as soon as administratively possible following adoption of this resolution except 2 that current hourly part time employees shall be given notice and a one-time ^ opportunity to elect to continue to participate in social security. The Human Resources Director shall be responsible to implement this provision. 4. That the Council hereby designates the City as the Plan Administrator of the APPLE Plan. 5. That the Council hereby designates the City as the Trustee of the APPLE Plan. 9 6. That the Council hereby authorizes MidAmerica Administrative Solutions 10 ("MidAmerica"), to execute, on behalf of the City, the APPLE Plan and any other 1 ^ documents necessary to carry out the provisions of the APPLE Plan. 7. That the Council hereby authorizes MidAmerica to execute, on behalf of the Employer, the APPLE Plan and any other documents necessary to carry out the provisions of the APPLE Plan; to enter into contracts with Keenan & Associates to provide ongoing administrative consulting services in connection with the operation of the Plan; to arrange funding of the Plan through American United 18 Life (AUL); to communicate the Plan to eligible employees of the City; and to 19 perform related services in connection with the APPLE Plan. 8. That the Council hereby terminates the City's participation in the Lincoln Financial Advisors Plan and removes Lincoln Financial Advisors as the Trustee ofthe Plan. 9. That Keenan & Associates will act as Broker for American United Life Insurance Company's 3121 Alternative to Social Security program, and provide consultant 12 13 14 15 16 17 20 21 22 23 24 25 26 27 28 3 1 and broker services for the APPLE Plan as outlined in the Keenan & Associates 2 Service Agreement. 10. That the Council hereby removes Lincoln Financial Advisors as Trust Administrator and appoints MidAmerica as Third Party Administrator of the APPLE Plan. 11. That the Council directs the transfer of the plan assets held by Lincoln Financial Advisors under the Lincoln Financial Advisors Plan and Trust to AUL, as 9 custodian for the successor Trustee, the City of Carlsbad for the benefit of the 10 City of Carlsbad APPLE Plan, to occur within 30 days after July 1, 2012, or a 11 date mutually agreed upon by Lincoln Financial Advisors and the City of Carlsbad. This will facilitate the ability of MidAmerica to process Plan distributions with minimal delays to Plan Participants. 12. That the Council directs the transfer of plan participant's account information from Lincoln Financial Advisors to MidAmerica, to occur within 30 days after July 1, 2012 or a date mutually agreed upon by Lincoln Financial Advisors and the 13 14 15 16 17 Ig City of Carlsbad in order for MidAmerica to process Plan distribution with minimal 19 delays. 20 13. That the Council has determined that it is appropriate for the City to "pick up" the employee portion of contributions to the APPLE Plan so that each participant of the Plan shall make contributions to the Plan on a pretax basis, as permitted under IRS Section 414 (h) (2). 14.That the City will implement the "pick-up" provisions of IRC Code section 414(h)(2) by making employee contributions to the Plan on behalf of its 22 23 24 25 26 2q employees who are participants in such Plan. "Employee contributions" shall 28 1 mean those contributions to the APPLE Plan, which are deducted from the salary 2 of employees and are credited to individual employees' accounts. 15. That the contributions made by the City to the APPLE Plan, although designated as employee contributions, will be paid by the Employer in lieu of contributions by the employees who are participants in the APPLE Plan. 16. That employees shall not have the option of choosing to receive the contributed 3 4 5 6 7 g amounts directly instead of having them paid by the City to the APPLE Plan. 9 17. That the City shall pay to the APPLE Plan the contributions designated as 10 employee contributions from the same source of funds that is used to pay employees'salary. 18. That the amount of the contributions designated as employee contributions and paid by the City to the APPLE Plan on behalf of an employee shall be the entire contributions required ofthe employee under the Plan. 19. That the Human Resources Director is authorized to execute, on behalf of the 12 13 14 15 16 17 City, any additional and required documents with MidAmerica, Keenan & 18 Associates and American United Life Insurance Company (AUL) in furtherance 19 of the purpose and intent of this resolution. 20 21 22 23 24 25 26 27 28 /// /// /// 1 NOT PASSED, APPROVED OR ADOPTED at a Regular Meeting of the City 2 Council of the City of Carlsbad on the 10*^ day of July 2012, by the following vote to wit: 3 4 5 6 7 8 9 10 AYES: Council Members Kulchin, Douglas. NOES: Council Members Hall, Packard. ABSENT: Council Member Blackburn. 11 MATT HALL, Mayor 12 ATTEST: 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 LORRAINE M. WOOD, City Clerk (SEAL) RESOLUTION FAILED DUE TO A LACK OF MAJORITY. SEE MINUTES FOR DETAILS. APPLE PARTICIPATION AGREEMENT This Services Agreement ("Agreement") is made and entered into by and between City of Carlsbad ("Employer") and Keenan & Associates ("Keenan"), as of July 1, 2012 ("Effective Date"). RECITALS WHEREAS, Keenan & Associates ("Keenan") has established the Accumulation Program for Part- Time and Limited-Service Employees ("APPLE") which offers public entities a means of funding an asset accumulation program for their part-time employees; WHEREAS, MidAmerica Administrative Solutions, Inc. ("MidAmerica"), is the exclusive provider of administrative services and technical support for the Social Security Altemative plans established by APPLE participants in accordance with the provisions of Section 3121 of the Internal Revenue Code (hereinafter referred to as the "APPLE Plan"); WHEREAS, Keenan provides certain services to APPLE participants and acts as broker of record for annuities purchased by APPLE participants; and WHEREAS, Employer desires to participate in APPLE, and desires to utilize the services of Keenan. THEREFORE, IN CONSIDERATION OF the mutual covenants herein contained and for other good and valuable consideration the receipt and sufficiency is hereby acknowledged, it is mutually agreed as follows: AGREEMENT 1. TERM A. This Agreement shall be for an initial term of one (1) year (the "Initial Term"), beginning with the execution date of this Agreement, and shall continue from year to year thereafter (each year a "Successive Term" and, collectively with the Initial Term, the "Term"), unless and until terminated by either party hereto upon written notice to the other in accordance herewith. 2. KEENAN SERVICES AND RELATIONSHIP OF THE PARTIES A. Employer elects and Keenan shall provide the services indicated in Exhibit A attached hereto and incorporated herein. B. The relationship of Keenan and Employer shall be that of an independent contractor and Keenan shall at all times remain responsible for its own operational and personnel expenses. Under no circumstance shall any employee of one party look to the other party for any payment or the provision of any benefit, including without exception, workers' compensation coverage. Except as may be expressly set forth in or Keenan & Associates - License #0451271 APPLE Participation Agreement Confidential For Employer Use Oniy (Rev. ()5/.31/12) Page 1 of 9 K contemplated by this Agreement, neither party shall have the right to act on behalf of the other, or to bind the other to any contract or other obligation. C. In providing the Services, Keenan shall act exclusively in an advisory and consultative capacity. Employer shall at all times have the right to determine whether to act on or implement the information, recommendations, and suggestions provided by Keenan, and the manner by which any such action or implementation shall be undertaken. Except for Keenan's responsibilities with respect to funds obtained from or on behalf of Employer, Keenan shall not be a fiduciary of Employer. D. Keenan shall not provide any legal, tax, or accounting service, advice, or opinion, and the Services shall not be interpreted as representing any such service, advice or opinion. Employer shall consult its own attorney on all legal issues and its own tax and accounting experts on all tax, accounting, and financial matters relating to its operations, including without limitation, the establishment, implementation and operation of the APPLE Plan. E. In providing its Services, Keenan shall comply with all applicable state and federal laws and regulations, and obtain and maintain all necessary licenses, registrations, and/or permits necessary for the performance of its duties under this Agreement. F. The Services provided to Employer are non-exclusive and Keenan reserves the right to provide the same or similar services to other Employers who may be in the same industry, business, or service as Employer. 3. EMPLOYER'S DUTIES AND RESPONSIBILITIES A. Employer shall retain decision-making authority for its APPLE Plan, and shall manage the day-to-day activities of the APPLE Plan, except for those duties and/or functions expressly assigned to Keenan under this Agreement or to Keenan under the APPLE Administrative Services Agreement executed contemporaneously herewith. B. Employer shall provide Keenan with timely access to such information and individuals, including its outside advisors and consultants, as may be necessary for Keenan to perform the Services. Keenan shall not be responsible for any delay in its performance that results from the failure of Employer, or any person acting on behalf of Employer, to make available any information or individual in a timely manner. C. All information provided to Keenan, either in anticipation of or during the term of this Agreement, shall be complete and accurate, and that Keenan may rely upon such information. D. Employer shall execute the Broker of Record Designation attached hereto as Exhibit B. Keenan & Associates - License #0451271 APPLE Participation Agreement Confidential For Employer Use Only (Rev. 05/31/12) Page 2 of 9 K MIS 4. COMPENSATION A. As its sole compensation for its Services, Keenan shall receive commissions from the annuit)^ carrier as provided in Exhibit C. Employer shall have no responsibility for the payment of any such commission to Keenan. Keenan's annual commissions may be increased from to year in accordance with the increase in the Consumer Price Index. B. Keenan shall comply with aU applicable state and/or federal laws and regulations regarding disclosure of compensation. We embrace industry efforts for transparency and believe it is important that Employers have access to information that may be relevant to their choice of insurance products, including the cost of such insurance and services, and, the compensation that may be direcdy or indirecdy paid to Keenan in connection with the products or services that are selected. If you have questions regarding any of these items or desire additional information, you may contact your Keenan account representative to discuss this matter in more detail. 5. INSURANCE Keenan shall procure and maintain during the term of this Agreement the following insurance coverages, and shall provide certificates of insurance to Client upon Client's request. A. Workers' Compensation: Coverage in conformance with the laws of the State of California and applicable federal laws; B. General Liability: Coverage (including motor vehicle operation) with a One Million Dollar ($1,000,000) limit of liability for each occurrence and a Two Million Dollar ($2,000,000) aggregate limit of liability; and C. Errors and Omissions: Coverage with a One Million Dollar ($1,000,000) limit of liability for each occurrence and a Two Million DoUar ($2,000,000) aggregate limit of liability. D. Crime: Coverage with a One Million DoUar ($1,000,000) limit of liability for each occurrence and a Two Million Dollar ($2,000,000) aggregate limit of liability. 6. INDEMNIFICATION If either party breaches this Agreement, then the breaching party shall defend, indemnify and hold harmless the non-breaching party, its officers, agents and employees against all claims, losses, demands, actions, liabilities, and costs (including, without limitation, reasonable attorneys' fees and expenses) arising from such breach. In addition, if Keenan (i) becomes the subject of a subpoena or is otherwise compelled to testify or (ii) becomes the subject of a claim, demand, action or liability brought or asserted by one of Client's employees. Plan beneficiaries, or Plan vendors ("Third-Party Demand") relating to the Services and such Keenan & Associates - License #0451271 APPLE Participation Agreement Confidential For Employer Use Only (Rev. 05/.M/12) Page .3 of 9 K MES Third-Party Demand is not a direct result of Keenan's negligence or willful misconduct, then Client shall defend, indemnify and hold Keenan harmless from aU losses, payments, and expenses incurred by Keenan in resolving such Third-Party Demand. 7. LIMITATION OF LIABILITY Notwithstanding anything to the contrary in this Agreement, in no event shall either party be liable for any punitive damages, fines, penalties, taxes or any indirect, incidental, or special damages incurred by the other party, its officers, employees, agents, contractors or consultants whether or not foreseeable and whether or not based in contract or tort claims or otherwise, arising out of or in connection with this Agreement even if advised of the possibility of such damage. Keenan's liability under this Agreement shall further be limited to, and shall not exceed, the amount of its available insurance coverage, but not exceeding the limits of coverage outlined in Section 5. 8. DISPUTE RESOLUTION Disputes arising out of or relating to this Agreement shall first be resolved by good faith negotiations by representatives from the parties with decision-making authority. If either party determines that the dispute cannot be resolved through informal negotiation then the dispute shall be submitted to non-binding mediation. The site of the mediation and the selection of a mediator shall be determined by mutual agreement of the parties. The site of the mediation shall be San Diego County, California. If the dispute is not resolved through mediation within sixty^ (60) days foUowing the first notification of a request to mediate, then either party shall have the right to pursue legal action in the State Courts of California. Venue shall be in San Diego County. 9. TERMINATION A. This Agreement may be terminated upon the occurrence of any of the following events: i. By either party without cause or penalty upon ninety (90) days written notice to the other party; ii. By either party upon the dissolution or insolvency of a party to this Agreement; iii. By either party following the filing of a bankruptcy petition by or against either party (if the petition is not dismissed within sixty (60) days in the case of an involuntary bankruptcy petition); iv. If the application of any law, rule, regulation, or court or administrative decision prohibits the continuation of this Agreement or would cause a penalty to either party if the Agreement is continued, and if the Agreement cannot be amended to conform to such law, rule, regulation, or court or administrative decision in a Keenan & Associates - License #0451271 APPI,E Participation Agreement Confidential For Employer Use Only (Rev. 05/.M/12) Page 4 of 9 / - > manner that would preserve the original intent of the parties with respect to their rights and duties under this Agreement; or V. By the non-breaching party if a breach of this Agreement is not cured within thirty (30) days foUowing receipt of written notice of the breach from the non- breaching party. B. Termination of this Agreement shaU terminate Employer's participation in APPLE, and shaU Hkewise terminate the Administrative Services Agreement entered into between Employer and MidAmerica. Neither Keenan nor MidAmerica (except as specificaUy provided for under the Administrative Services Agreement) shaU be obligated to provide any further APPLE service as of the termination date of this Agreement. It shaU be the sole responsibiUty of the Employer to provide, direcdy or through an alternate service provider, the services provided by Keenan and/or MidAmerica in conjunction with its 3121 Social Security Alternative Plan. AdditionaUy, the termination of this Agreement and the subsequent termination of MidAmerica Administrative Services Agreement may result in the termination of the APPLE group annuity contract. In such event, APPLE Plan assets may be subject to surrender charges if so stated in the carrier's group annuity contract. 10. GENERAL A. This Agreement, its recitals and aU exhibits attached to the Agreement contain the entire understanding of the parties related to the subject matter covered by this Agreement and supersede aU prior and coUateral statements, presentations, communications, reports, agreements or understandings, if any, related to such matter(s). B. This Agreement is made for the benefit of the parties and is not intended to confer any third party benefit or right. The enforcement of any remedy for a breach of this Agreement or claim related to the Services may only be pursued by the parties to this Agreement. C. No modification or amendment to this Agreement shaU be binding unless it is in writing and signed by authorized representatives from both parties. Any waiver or delay by a party in enforcing this Agreement shaU not deprive that party of the right to take appropriate action at a later time or due to another breach. This Agreement shaU be interpreted as if written jointiy by the parties. D. Any provision determined by a court of competent jurisdiction to be partiaUy or whoUy invaUd or unenforceable shaU be severed from this Agreement and replaced by a vaHd and enforceable provision that most closely expresses the intention of the invaUd or unenforceable provision. The severance of any such provision shaU not affect the vaHdity of the remaining provisions of this Agreement. E. Neither party shaU be Uable or deemed to be in default for any delay or faUure in performance under this Agreement resulting, directiy or indirecdy, from acts of God, Keenan & Associates - License #0451271 .APPLE Participation Agreement Confidential For F^mployer Use Only (Rev. 05/31/12) Page 5 of 9 civU or miUtary authority, acts of public enemy, war, accidents, fires, explosions, earthquakes, floods, power outages, faUure of computer systems, machinery or suppHes, vandaUsm, strikes, or other work interruptions, or any simUar or other cause that is beyond the reasonable control of either party'. Each party shaU make good faith efforts to perform under this Agreement in the event of any such circumstances, and shaU resume fuU performance once the cause of the delay has abated. F. AU notices hereunder shaU be in writing and sent to the parties at the addresses as set forth below, or to such other individual or address as a party may later designate. Notices shaU be sent via personal deUvery, courier service. United States maU (postage pre-paid, return receipt requested), express maU service, electronic maU, or fax. Notice shaU be effective when deUvered, or if refused, when deHvery is attempted. Notices deUvered during non-working hours shaU be deemed to be effective as of the next business day. If the notice relates to a legal matter or dispute, a copy shaU be sent to: Keenan & Associates 2355 Crenshaw Blvd., Ste. 200 Torrance, CA 90501 Attn: Legal Department Fax: (310) 533-0573 G. Neither this Agreement nor Keenan's duties hereunder may be assigned without the prior written approval of Employer. H. This Agreement may be executed in counterparts and by fax signatures and each shaU be deemed to be an original. I. Each person signing this Agreement on behalf of a party represents and warrants that he or she has the necessary authority to bind such party and that this Agreement is binding on and enforceable against such party. Citv of Carlsbad Keenan & Associates Signature: Signature: mi Matt Hall By: J. Daniel Keenan Title: Mayor Title: Senior Vice President Address 1635 Faraday Avenue Carlsbad, CA 92008 Address 2355 Crenshaw Blvd., Ste. 200 Torrance, CA 90501 Phone: 760-602-2441 Phone 310-212-0363 Fax 760-602-8554 Fax 310-533-1329 Attention Debbie Porter Attention J. Daniel Keenan Keenan & Associates - License #0451271 APPLE Participation Agreement Confidential For Employer Use Only (Rev. 05/31/12) Page 6 of 9 EXHIBIT A KEENAN'S SERVICES Keenan shaU: 1. Coordinate the ongoing activities of APPLE; 2. Select vendors to provide products and services to the APPLE program ("APPLE Vendors"); 3. Evaluate and review the performance of the APPLE Vendors; 4. In its discretion, remove, replace or change APPLE Vendors; 5. Act as Uaison between Employer and the APPLE Vendors; 6. Act as Broker in securing one or more group annuity contracts for Employer's APPLE Plan(s); 7. Conduct periodic meetings with Employer to review the status of its APPLE Plan; 8. Inform Employer of any changes affecting the APPLE program, including, without limitation, any change in APPLE Vendors; 9. Coordinate the services of the APPLE Vendors; 10. Assist Employer in the implementing of the APPLE Plan; 11. Provide ongoing consultation to APPLE participants; 12. Work with the APPLE Vendors to resolve any customer service issues; 13. Review communication, sales, marketing and customer service materials prepared by APPLE Vendors; 14. Assist Employer in informing its employees about the avaUabiUty of the APPLE Plan; and 15. Assist Employer in providing educational programs about its APPLE Plan. Keenan & Associates - License #0451271 APPLE Participation Agreement Confidential For Employer Use Only (Rev. 05/31/12) Page 7 of 9 EXHIBIT B BROKER OF RECORD DESIGNATION This letter confirms that as of July 1, 2012, the organization Usted below ("Employer") has appointed Keenan & Associates ("Keenan") as the Broker of Record in connection with the group annuity contract(s) to be issued to Employer as a participant of APPLE. It is understood and agreed that American United Life Insurance Company ("AUL") is the current exclusive provider of group annuity products for APPLE Plans. As long as Employer is a participant in APPLE, it shaU not seek to acquire annuity products directiy from any insurance carrier or through any other broker for its APPLE Plan. Keenan is authorized to provide a copy of this letter to AUL, and/or any subsequent APPLE group annuity provider, to demonstrate Keenan's authority to obtain one or more annuities for Employer's APPLE Plan. This appointment rescinds any and aU previous appointments Employer may have made with respect to its APPLE Plan, and shaU remain in fuU force and effect untU Employer ceases to be a participant in APPLE. Employer authorizes Keenan to provide representatives of prospective insurers and other coverage providers with aU information regarding Employer, its operations, employees (i.e., census data) and financial status as may be necessary for AUL, and/or any subsequent APPLE group annuity^ provider, to issue the APPLE group annuity contract to Employer. Acknowledged and agreed to by: Citv of Carlsbad Keenan & Associates Signature: Signature: By: Matt Hall By: J. Daniel Keenan Title: Mayor Title: Senior Vice President Keenan & Associates - License #0451271 .'XPPLF'; Participation Agreement Clonfidential For Employer Use Oniy (Rev. 05/31/12) Page 8 of 9 K MM. EXHIBIT C FEES AND COMMISSIONS* During the first year of the Program, the group annuity carrier shaU pay a total commission of 3.0%. Keenan and MidAmerica shaU each receive half of the total commission (1.5%) paid by the annuity carrier. The commission shaU be calculated based upon the percentage of total plan deposits made during the first year of the program. Beginning with the second year of the program, the carrier shaU pay a "trailer" commission of 0.80% on accumulated assets in the group annuity contract and a 3.0% commission on any assets that transfer from any other contracts that the plan may hold. Keenan and MidAmerica shaU each receive 0.40%. The TraUer commission shaU be calculated based upon the total plan assets beginning in the 13th month and the Transfer commission wUl be based on assets from other plan contracts as they transfer. *The fees and commissions set forth above reflect the terms of the contracts currently in place between Keenan and the annuity provider and administrative services provider ('^Vendors"). If, due to circumstances beyond our control, there is a change in either of the Vendors, the fees and commissions set forth above may be adjusted to reflect the terms of Keenan's agreements with successor vendors. Keenan & Associates - License #0451271 APPLE Participation Agreement Confidential For Employer Use Only (Rev. 05/31/12) Page 9 of 9 MidAmerica AdwiinmtraUvc Solutions, Inc. APPLE PLAN ADMINISTRATIVE SERVICES AGREEMENT THIS ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") is made and entered into on July 1, 2012 by and between. City of Carlsbad, a municipal employer ("Employer"), and MidAmerica Administrative Solutions, Inc. ("MidAmerica"). RECITALS WHEREAS, Keenan & Associates ("Keenan") has estabhshed the Accumulation Program for Part-Time and Limited-Service Employees ("APPLE") which offers pubHc entities a means of funding an asset accumulation program for their part-time employees; WHEREAS, MidAmerica, is the exclusive provider of administrative services and technical support for the Social Security Alternative plans estabhshed by APPLE participants in accordance with the provisions of Section 3121 of the Internal Revenue Code (hereinafter referred to as the "APPLE Plan"); WHEREAS, Employer desires to participate in APPLE and shaU estabHsh and sponsor an APPLE Plan for its part- time employees; and WHEREAS, Employer desires now to engage MidAmerica to provide technical support and administrative services in conjunction with its APPLE Plan. THEREFORE, IN CONSIDERATION OF the mutual covenants herein contained and for otiier good and valuable consideration the receipt and sufficiency is hereby acknowledged, it is mutuaUy agreed as foUows: LOO ENGAGEMENT OF MIDAMERICA 1.01 Engagement of MidAmerica. The Employer hereby engages MidAmerica to provide administrative services and technical support for the APPLE Plan estabhshed by Employer. 1.02 MidAmerica not a Fiduciary or APPLE Plan Administrator. It is understood and agreed that MidAmerica is not a fiduciary or APPLE Plan Administrator within the meaning of ERISA with respect to the APPLE Plan covered by this Agreement. The services to be performed by MidAmerica shaU be ministerial in nature and shaU be performed within the framework of poUcies, interpretations, rules, practices and procedures made or estabhshed by the Employer. MidAmerica shaU not have discretionary authority or discretionary controls respecting management or investment of the APPLE Plan or any trust fund, and shaU not have any authority over, nor exercise any control respecting, management, investment or disposition of the assets of the APPLE Plan or any trust fund, and shaU not render investment advice with respect to any funds or any other property of any trust fund. 1.03 Independent Contractor. It is understood and agreed that MidAmerica wiU perform services under this . Agreement as an independent contractor and not as an employee. Neither the Employer nor any of its officers or employees shaU have any control over the manner by which MidAmerica performs this Agreement and shaU only dictate the results of the performance. MidAmerica shaU use its best efforts to implement such written MidAmerica Service Agreement APPLE Confidential for Client Use Only (Rev 04/01/11) Page 1 of 10 K MES instructions, if any, as to poHcy and procedures which may be given by the Employer to MidAmerica, provided that such instructions are consistent and compatible with the description of services to be performed by MidAmerica and do not violate or contradict any appHcable state or federal laws or regulations, including, but not Umited to, the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). MidAmerica shaU not represent that MidAmerica or its agents, employees or independent contractors are agents or employees of the Employer. Except as the Employer may specif)^ in writing, MidAmerica shaU have no authority, express or impHed, to act on behalf of the Employer in any capacity whatsoever as an agent. MidAmerica shaU have no authority, express or impHed, pursuant to this Agreement, to bind the Employer to any obUgation whatsoever. 2.00 SERVICES TO BE PERFORMED BY MIDAMERICA 2.01 Services to be Performed. MidAmerica shaU perform the foUowing technical support and administration service functions in conjunction with the operation of Employer's APPLE Plan: (a) APPLE Plan InstaUation and Maintenance Services; (b) APPLE Plan Recordkeeping, Distributions, and Reporting Services; (c) APPLE Plan Documentation Services, as required; (d) Comphance Services, as required per APPLE Plan; and (e) Notwithstanding the foregoing, each Valuation Period shaU conclude not later than 90 days after MidAmerica's receipt of the APPLE Plan data from the Employer as provided for in the APPLE Plan. 2.02 Administration Offices. MidAmerica shaU maintain and operate administration offices and computer software and systems necessary for data processing as part of the services required to be performed by it hereunder and shaU pay aU normal costs and expenses for such maintenance and operation except as set forth herein. MidAmerica shaU employ a sufficient staff of employees or others to provide the services to be performed by MidAmerica hereunder. MidAmerica shaU provide a toU free number for customer services during normal business hours, as defined by the Employers' geographic location and time zone, and a website for customer and Employer inquiries, 24 hours a day, 7 days a week, (except for those brief periods when the system's data are refreshed). 2.03 Records and Files. MidAmerica shaU maintain aU records deUvered to it by the Employer or produced by MidAmerica in conjunction with the services required to be performed by it hereunder. The confidentiaUty of such records shaU be maintained by MidAmerica and such records and the information therein shaU not be disclosed or made available to persons other than the Employer unless so directed in writing by the Employer, except: (a) pursuant to an order of a court, arbitrator, or other tribunal; (b) upon request of a state or federal governmental agency; (c) upon the request of an individual participant and then only to the extent of his interest in the APPLE Plan; or (d) as necessary to enforce MidAmerica's rights hereunder. AU records, documents and information coUected and/or maintained by MidAmerica in the course of its duties hereunder shaU be made accessible to both the Employer and to the Employer's designates, the APPLE Plan's consulting company, MidAmerica & Associates, for purposes of inspection, reproduction and audit, upon reasonable notice. The cost of this activity wUl be at the Employer's expense only if the information is being requested by the Employer and has previously been provided to the Employer. If any participant history is MidAmerica Service Agreement APPLE Confidential for Client Use Only (Rev 04/01/11) Page2on0 K MES requested, which has been previously provided to the Employer, or if the request is not in a standard format normaUy provided by MidAmerica, then the Employer shaU pay aU costs incurred by MidAmerica in providing such history, including the cost of computer programming, computer charges, copying charges and mailing costs. MidAmerica shaU be entitied to retain copies of any such records and information at its own expense. In the event of the termination of this Agreement, upon written request, MidAmerica shaU deUver to the Employer, at a time period mutuaUy agreeable but not to exceed 90 days from date of termination, the information and records maintained by it on aU APPLE Plan participants. If, simultaneously with or foUowing the termination of this Agreement, additional information is requested by the Employer that has previously been provided to the Employer or is in a format that is not MidAmerica's standard reporting format, the Employer shaU pay aU costs incurred by MidAmerica in providing such information, including the cost of computer programming, computer charges, copying charges and mailing costs. MidAmerica shaU be entitied to retain copies of any such records and information at its own expense. 2.04 Professional Services for Employer. Neither MidAmerica, nor any of its employees, agents or representatives shaU provide legal or tax advice or provide any service which would be considered the practice of law. The Employer hereby acknowledges that it wiU not rely on any information provided as if it were legal or tax advice. MidAmerica wiU not provide or be responsible for the expense and cost of legal counsel, actuaries, certified pubhc accountants, investment counselors, investment analysts or others providing similar t)^pes of services performed expUcitiy for and on behalf of the Employer, and MidAmerica shaU not be authorized to engage such services or incur any expense or cost therefore without the written consent of the Employer. In the event that such services are engaged by MidAmerica upon written request of the Employer, the Employer shaU be solely responsible for such services and the cost and expense thereof. 2.05 Comphance with Laws. In providing its services, MidAmerica shaU comply with aU appHcable state and federal laws and regulations, and obtain and maintain aU necessary Hcenses, registrations, and/or permits necessary for the performance of its duties under this Agreement. 3.00 SERVICE FEES 3.01 Payment MidAmerica shaU share in the commissions paid by the annuity carrier as set forth in Exhibit C of the APPLE Participation Agreement, executed contemporaneously with this Agreement. In the event that the CUent's APPLE Plan has 250 or more participants, MidAmerica's standard Administrative Fee wUl be waived. In the event that CUent's APPLE Plan has fewer than 250 participants, MidAmerica shaU receive a monthly Administrative Fee of $0.75/per participant to cover the services provided under the Agreement. The administrative fee shaU be deducted by the group annuity carrier from the account of each participant. MidAmerica shaU not look to Employer for the payment of the administrative fees. 3.02 Other Services. If Employer requests services beyond those described in this Agreement, MidAmerica shaU consider the request and shaU inform Employer whether or not it can accommodate the request. If MidAmerica agrees to perform such services, they shaU be biUed to the Employer in accordance with MidAmerica's then-current fee schedule. 4.00 DUTIES OF THE EMPLOYER 4.01 Prior APPLE Plan Documentation. If appUcable, the Employer shaU provide MidAmerica with prior copies of the APPLE Plan, executed APPLE Plan Document, Summary APPLE Plan Description, and aU amendments thereto to enable MidAmerica to properly review the APPLE Plan document to comply with federal regulations. MidAmerica Service Agreement APPLE Confidential for Client Use Only (Rev 04/01/11) Page 3 of 10 K MES 4.02 APPLE Plan Data. The Employer shaU provide MidAmerica information and data on a timely basis as is necessary to enable MidAmerica to carry out its duties and obUgations under this Agreement, and such information and data wiU be provided in a format as is reasonably requested by MidAmerica. For this purpose, "APPLE Plan Data" shaU mean aU data and records suppUed to MidAmerica, obtained by MidAmerica or produced by MidAmerica in connection with performance of the services pursuant to this Agreement. MidAmerica reserves the right to assess additional charges for unacceptable data format or missing or inaccurate data for time and expenses incurred to correct the data. MidAmerica shaU not be Uable for any error or action that is the result of its reUance on incomplete or inaccurate data provided by the Employer or any of its agents or representatives. 4.03 Operational Changes. The Employer hereby agrees to consult with MidAmerica, and/or notify MidAmerica in writing as to any benefits or operational changes or procedures in the APPLE Plan that may affect the compliance of the APPLE Plan with appUcable laws and/or regulations or MidAmerica's internal processing for the administration of the APPLE Plan. AU such changes shaU be reviewed by MidAmerica for IRS compUance pursuant to the terms of this Agreement. 4.04 APPLE Plan Document Amendments. Employer further agrees to make changes in benefits or operations only pursuant to the APPLE Plan Document, or as may be appropriately written by amendment to the APPLE Plan Document upon consultation with MidAmerica. 4.05 Legal Counsel. The Employer shaU review with its legal and/or tax counsel aU documents provided to it by MidAmerica. The Employer understands that it should consult tax and/or legal counsel on any questions concerning the Employer's responsibUities under this Agreement, the APPLE Plan documents, and the legal sufficiency of any documents so provided. 4.06 Review MidAmerica Materials and Documents. The Employer shaU review aU forms, poUcies and procedures developed by MidAmerica for the APPLE Plan and approve such items or instruct MidAmerica as to required changes. 5.00 AUTHORITY OF THE EMPLOYER 5.01 Sponsor. It is understood and agreed that the Employer is a fiduciary, APPLE Plan Sponsor, or APPLE Plan Administrator under the APPLE Plan. The term "APPLE Plan Sponsor" shaU be defined to include and mean the "APPLE Plan Sponsor" as defined in ERISA and tiie "APPLE Plan Administrator" as defined in ERISA if an APPLE Plan Administrator is designated in the APPLE Plan documents, whether or not the APPLE Plan is subject to ERISA. The APPLE Plan Sponsor, or APPLE Plan Administrator if designated, shaU include, where appUcable, the Employer sponsoring the APPLE Plan or APPLE Plan Committee or Trustees of the Trust sponsoring the APPLE Plan who serve at the time of execution of this Agreement, and shaU also include committee members or trustees serving from time to time during the Term of this Agreement. MidAmerica shaU be entitied to rely upon the actions, notice or instructions taken or given by the APPLE Plan Sponsor. 5.02 Discretionary Authority. The Employer shaU estabUsh poUcies, rules, practices and procedures in conjunction with the APPLE Plan and shaU have discretionary authority or discretionary controls respecting management or investment of the APPLE Plan or any trust fund when appUcable, and shaU have authority to exercise any control respecting management, investment or disposition of the assets of the APPLE Plan or any trust fund when appUcable. MidAmerica Service Agreement APPLE Confidential for Client Use Only (Rev 04/01/11) Page4ofl0 K MES 5.03 Interpretation of the APPLE Plan. The Employer shaU have the exclusive and final authority to interpret the terms of the APPLE Plan and shaU advise MidAmenca of any interpretations made by it. 5.04 Distribution Authority. The Employer shaU consider, to the extent it deems appropriate, any appeal from an initial denial of account balances made by MidAmerica under the APPLE Plan. Any determination made by the Employer shaU be final and conclusive on the participant involved and MidAmerica. To the extent that any such determination involves the interpretation of the APPLE Plan, MidAmerica may rely on such determination in implementing the terms of such provision thereof. 5.05 Right to Appoint Duties. The Employer may perform its duties hereunder either direcdy or through the appointment of a person, firm or committee, provided, however, that the Employer shaU notify MidAmerica in writing of the appointment of any person, firm or committee to fulfiU any of the foregoing obUgations and of any change therein. 6.00 OBLIGATIONS OF MIDAMERICA 6.01 APPLE Plan Funding. MidAmerica shaU have no responsibiUty, risk, UabiUty or obUgation for the funding of the APPLE Plan, which shaU be solely and totaUy the responsibiUty of the persons, entities, or participants so provided in the APPLE Plan. MidAmerica shaU perform the services specificaUy set forth in this Agreement and no others without the prior written consent of the Employer. 6.02 APPLE Plan Enforcement. MidAmerica shaU have no responsibiUty or obUgation to take action, legal or otherwise, against any employer, employees, APPLE Plan participants or other person to enforce provisions of the APPLE Plan. In the event the Employer desires to engage the services of MidAmerica for such purposes, such services shaU be engaged and rendered only pursuant to a separate written agreement between the parties. 6.03 Investment of Assets. 6.04 (a) Investment Records. MidAmerica shaU not be responsible or obUgated for the investment of any assets of the APPLE Plan; however, MidAmerica shaU prepare and maintain records of the investment of the assets or funds of the APPLE Plan if the Employer requests MidAmerica to do so and provides the information and documents necessary to prepare and maintain such records pursuant to paragraph 5.03. (b) Investment Services. MidAmerica shaU provide ministerial investment aUocation services and shaU not be responsible for or Uable for any loss or gains therefrom except as a result of MidAmerica's faUure to implement written directions from the Employer or the APPLE Plan participants. Participant Distributions. MidAmerica shaU process distributions in accordance with the APPLE Plan or poUcies adopted by the Employer. MidAmerica shaU incorporate sound business practices and be responsible for reasonable internal audits. Where an error is discovered, MidAmerica shaU use reasonable efforts for recovery of any loss therefrom, but wiU not be required to initiate legal process for any such recovery. Notwithstanding the above, MidAmerica may institute such proceedings as it deems necessary to recover any obUgations owed to the APPLE Plan by a participant, former participant or any other person or entity, even if the Agreement has been terminated, provided that such obUgations were incurred prior to the termination of the Agreement. Any such recovery (after termination of the Agreement) shaU be the exclusive property of the APPLE Plan and shaU be returned to the Employer at the time of receipt of such recovery by MidAmerica. MidAmerica Service Agreement APPLE Confidential for Client Use Only (Rev 04/01/11) Page 5 oflO K MES 6.05 Participant EUgibUity. MidAmerica shaU not be responsible for determining the participants' eUgibUity to participate in the APPLE Plan and shaU rely on the information suppUed by the Employer in determining eUgibiUty. 6.06 Agent LiabiUty. MidAmerica may perform its services by or through independent contractors such as attorneys, agents, or receivers and shaU be entitied to advice of counsel concerning aU legal questions and its duties hereunder. 6.07 ReUance on Employer Directions. MidAmerica shaU use its best efforts to implement the written directions of the Employer and participants, when appUcable, in administering the APPLE Plan, provided that such directions do not violate or contradict the terms of the APPLE Plan, any laws or regulations, including, but not Umited to, ERISA, inasmuch as tiie APPLE Plan is subject to ERISA. Notwitiistanding tiie foregoing, upon advising the Employer of any such contradiction or violation, MidAmerica may accept and rely on the Employer's provision of such directions as their representation that such directions comply with appUcable law and the APPLE Plan's terms. 6.08 ReUance on Documentation. MidAmerica shaU incur no UabiUty in acting or proceeding in good faith upon any resolution, request, consent, waiver, certificate, statement, salary reduction agreement, contribution election form, maximum annual contribution form, participant investment directions, or any other paper or document prepared and furnished to MidAmerica in accordance with the APPLE Plan(s) or this Agreement, that it, in good faith, reasonably beUeves to be genuine. MidAmerica may accept and rely upon any such paper or document as conclusive evidence of the truth and accuracy of such statements and shaU not be required to investigate any matters contained in any such paper or document. 6.09 Good Faith Judgment. MidAmerica shaU not be Uable for any error or judgment made in good faith by it or any of its agents or employees unless it is proved that MidAmerica was negUgent in ascertaining the pertinent facts. 6.10 APPLE Plan CompUance. MidAmerica shaU provide supporting detaU for the APPLE Plan Administrator to monitor compUance of the APPLE Plan and wiU endeavor to advise the Employer of any changes that may be required by law, rule or regulation. The Employer shaU be responsible for implementing such advice, except to the extent that such responsibiUty has been expressly undertaken herein by MidAmerica. 6.11 Financial LiabiUty. MidAmerica shaU have no responsibiUty, UabiUty or obUgation to pay any taxes, Ucenses, or fees levied by any local, state or federal authority in connection with the operation of the APPLE Plan. 6.12 Conflict Between Agreement and APPLE Plan. No provision of this Agreement shaU require MidAmerica to take any action that, in the judgment of MidAmerica, would confUct with any rule or law or with the provisions of any APPLE Plan. If, based on changes in the appUcable regulatory structure or the interpretation of the regulatory structure, there is a reasonable Ukelihood that any service to be provided by MidAmerica under this Agreement shaU be deemed to confUct with the APPLE Plan or shaU be deemed to be unlawful, then MidAmerica shaU, after providing express written notification to the Employer, decline thereafter to provide that service, or shaU amend the Agreement to restructure the service upon reasonable notice to the Employer. FaUure to provide any such service from and after such notice shaU not constitute a breach of MidAmerica's obUgations under this Agreement pursuant to paragraph 6.12 herein. 6.13 ConfidentiaUty. ConfidentiaUty of aU APPLE Plan Data shaU be maintained by MidAmerica and such information shaU not be disclosed except as provided in paragraph 2.03. MidAmerica Service Agreement APPLE Confidential for Client Use Only (Rev 04/01/11) Page 6 of 10 K MES 7.00 INSURANCE 7.01 Procurement of Insurance. MidAmerica shaU procure and maintain during the term of this Agreement the foUowing insurance coverages, and shaU provide certificates of insurance to CUent upon CUent's request. a. Workers' Compensation: Coverage in conformance with the laws of the State of CaUfornia and appUcable federal laws; b. General LiabiUty: Coverage (including motor vehicle operation) with a One MilUon DoUar ($1,000,000) Umit of UabUity for each occurrence and a Two MUUon DoUar ($2,000,000) aggregate Umit of UabiUty; and c. Errors and Omissions: Coverage with a One MilUon DoUar ($1,000,000) limit of UabiUty for each occurrence and a Two MUUon DoUar ($2,000,000) aggregate Umit of UabiUty. d. FideUty Bond: Coverage with a One MilUon DoUar ($1,000,000) Umit of UabiUty for each occurrence and a Two MUUon DoUar ($2,000,000) aggregate Umit of UabUity. 8.00 INDEMNIFICATION 8.01 ObUgation to Indemnify. If either party breaches this Agreement, then the breaching party shaU defend, indemnify and hold harmless the non-breaching party, its officers, agents and employees against aU claims, losses, demands, actions, UabiUties, and costs (including, without limitation, reasonable attorneys' fees and expenses) arising from such breach. In addition, if MidAmerica (i) becomes the subject of a subpoena or is otherwise compeUed to testify or (U) becomes the subject of a claim, demand, action or UabiUty brought or asserted by one of CUent's employees. Plan beneficiaries, or Plan vendors ("Third-Party Demand") relating to the Services and such Third-Party Demand is not a direct result of MidAmerica's negUgence or wiUful misconduct, then CUent shaU defend, indemnify and hold MidAmerica harmless from aU losses, payments, and expenses incurred by MidAmerica in resolving such Third-Party Demand. 9.00 LIMITATION OF LIABILITY 9.01 Limitation. Notwithstanding anything to the contrary in this Agreement, in no event shaU either party be Uable for any punitive damages, fines, penalties, taxes or any indirect, incidental, or special damages incurred by the other party, its officers, employees, agents, contractors or consultants whether or not foreseeable and whether or not based in contract or tort claims or otherwise, arising out of or in connection with this Agreement even if advised of the possibiUty of such damage. MidAmerica's UabiUty under this Agreement shaU further be Umited to, and shaU not exceed, the amount of its avaUable insurance coverage, but not exceeding the Umits of coverage outlined in Section 7. 10.00 DISPUTE RESOLUTION Disputes arising out of or relating to this Agreement shaU first be resolved by good faith negotiations between representatives of the parties with decision-making authority. If either party determines that the dispute cannot be resolved through informal negotiation then the dispute shaU be submitted to non-binding mediation. The site of the mediation and the selection of a mediator shaU be determined by mutual agreement of the parties. The site of the mediation shaU be San Diego County, CaUfornia. If the dispute is not resolved MidAmerica Service Agreement APPLE Confidential for Client Use Only (Rev 04/01/11) Page 7 of 10 K MES through mediation within sixty (60) days foUowing the first notification of a request to mediate, then either party shaU have the right to pursue legal action in the State Courts of CaUfornia. Venue shaU be in San Diego County. ILOO NOTICES Any notice or other communication required or permitted hereunder shaU be in writing and shaU be deUvered personaUy, sent by facsimUe, electronic transmission, by certified, registered or express maU. Any such notice shaU be deemed given when deUvered personaUy, by facsimUe, or electronic transmission upon the recipient's oral verification by telephone of receipt, or if maUed, five days after the date of deposit in the U.S. maU with postage prepaid and duly addressed to the party to be notified, or by proof of receipt by certified, registered or express maU. Notice shaU be made to MidAmerica as foUows: MidAmerica Administrative Solutions, Inc. 211 East Main Street, Suite 100 Lakeland, Florida 33801 Telephone: (863) 688-4500 Atto: J. Wesley Comp ton With a copy to: Keenan & Associates 2355 Crenshaw Blvd., Suite 200 Torrance, CA 90501 Attn: Dan Keenan Fax: (310) 533-1329 12.00 TERM AND TERMINATION Notice shaU be made to the Employer as foUows: City of Carlsbad 1635 Faraday Avenue Carlsbad, CA 92008 Attn: Debbie Porter 12.01 Term. This Agreement shaU be for an initial term of one (1) year(s) (the "Initial Term"), beginning with the execution date of this Agreement, and shaU continue from year to year thereafter (each year a "Successive Term" and, coUectively with the Initial Term, the "Term"), unless and untU terminated by either party hereto upon written notice to the other in accordance herewith. Notwithstanding the foregoing, this Agreement shaU not become effective unless and untU properly countersigned by an authorized officer of MidAmerica. 12.02 Right to Terminate. This Agreement may be terminated upon the occurrence of any of the foUowing events: By either party upon ninety (90) days' prior written notice to the other party ("Termination Notice"); a. b. By either party foUowing dissolution, insolvency, or the fUing of a bankruptcy petition by or against either party (if the petition is not dismissed within sixty (60) days in the case of an involuntary bankruptcy petition); If the appUcation of any law, rule, regulation, or court or administrative decision prohibits the continuation of this Agreement or would cause a penalty to either party if the Agreement is continued, and if the Agreement cannot be amended to conform to such law, rule, regulation, or court or administrative decision in a manner that would preserve the original intent of the parties with respect to their rights and duties under this Agreement; or MidAmerica Service Agreement APPLE Confidential for Client Use Only (Rev 04/01/11) Page 8 of 10 K MES d. By the non-breaching party if a breach of this Agreement is not cured within thirty (30) days foUowing receipt of written notice of the breach from the non-breaching party. 12.03 Account Valuations. Notwithstanding anything in this Agreement to the contrary, where Termination of this Agreement occurs between Valuation Periods, MidAmerica shaU complete mid-period valuations of accounts prior to the date of Termination and provide such mid-period valuations of accounts and copies of aU relevant records to the successor or the Employer as the Employer shaU direct. Where Termination of this Agreement occurs during either Valuation Period, MidAmerica shaU be obUgated to complete the valuation prior to Termination and provide such valuation to the successor or the Employer as the Employer shaU direct. 12.04 Early Termination Fee. In the event that Employer terminates this Agreement pursuant to Section 12.02 (a), MidAmerica reserves the right to charge an Early Termination Fee to cover administration expenses incurred up to the date of termination. The Early Termination Fee shaU not include any fees for Termination Services, such as mid-period valuations of accounts, copies of records, or any other termination services necessary to be provided to a successor third party administrator. Fees for these services shaU be biUed as time and expenses incurred in accordance with MidAmerica's then-current fee schedule. Early Termination Fees, if any, wiU be the responsibiUty of the Employer. 12.05 Effect of Termination. Termination of this Agreement shaU terminate Employer's participation in APPLE, and shaU likewise terminate the APPLE Participation Agreement entered into between Employer and Keenan. Except as provided under Section 12.03, neither MidAmerica nor Keenan shaU be obUgated to provide any further APPLE service as of the termination date of this Agreement. It shaU be the sole responsibihty of the Employer to provide, directiy or through an alternate service provider, the services provided by Keenan and/or MidAmerica in conjunction with its 3121 Social Security Altemative Plan. AdditionaUy, the termination of this Agreement and the subsequent termination of MidAmerica Administrative Services Agreement may result in the termination of the APPLE group annuity contract. In such event, APPLE Plan assets may be subject to surrender charges if so stated in the carrier's group annuity contract. 13.00 MISCELLANEOUS 13.01 No Continuing Waiver. FaUure of either party to enforce at any time any of the provisions of this Agreement shaU in no way be construed to be a waiver of such provision or in any way affect the vaUdity of this Agreement or any part thereof, or the right of such party to thereafter enforce each and every provision of this Agreement. No waiver of any breach of this Agreement shaU be held to be a waiver of any other or subsequent breach. 13.02 Governing Law. The terms and conditions of this Agreement shaU be interpreted and controUed by the laws of the State of CaUfornia appUcable to contracts executed and to be whoUy performed within said State, insofar as state law is appUcable under the terms hereof. 13.03 Third Party Rights. Nothing contained in this Agreement, express or impUed, is intended to confer, or shaU confer, upon any individual participant in or beneficiary under the APPLE Plan, or any other person or entity, any rights or remedies under or by reason of this Agreement. 13.04 Binding Effect. This Agreement shaU be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. Without Umiting the foregoing, if the Employer is a trustee, board of trustees, or committee, this Agreement shaU be binding on such trustee or MidAmerica Service Agreement APPLE Confidential for Client Use Only (Rev 04/01/11) Page 9 of 10 K MES members of such board or committee serving at the time of execution or at any subsequent time during the term of this Agreement. 13.05 Assignment. Neither this Agreement nor MidAmerica's duties hereunder may be assigned without the prior written approval of Employer. 13.06 SeverabiUty. Should any part of this Agreement be declared invaUd, any remaining portion shaU remain in fuU force and effect as if this Agreement had been executed with the invaUd portion eliminated. 13.07 Modification of Agreement. This Agreement, including any Exhibits references herein or attached hereto, may not be modified, changed or additions made, without putting the modifications, changes or additions in writing and having both parties to this Agreement sign such writing. This Agreement shaU supersede any existing Administration Agreements between the parties below. This Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof, and there are no other agreements or understandings except as may be expressly stated herein. 13.08 Prohibited Interests. No officer or employee of the Employer shaU have any direct financial interest in this Agreement. This Agreement shall be voidable at the option of the Employer if this provision is violated. 13.09 Signatures. This Agreement may be executed in counterparts and by fax signatures and each shaU be deemed to be an original. 13.10 Authority. Each person signing this Agreement on behalf of a party represents and warrants that he or she has the necessary authority to bind such party and that this Agreement is binding on and enforceable against such party. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. Citv of Carlsbad MidAmerica Administrative Solutions. Inc. Signature: Signature: By: Matt Hall By: Title: Mayor Title: J. Wesley Compton Address: 1635 Faraday Avenue Address: 211 East Main Street, Ste. 100 Carlsbad, CA 92008 Lakeland, Florida 33801 Telephone: (760) 602-2441 Telephone: (863) 688-4500 Fax: (760) 602-8554 Fax: (863) 686-9557 Attention: Debbie Porter Attention: Attn: J. Wesley Compton MidAmerica Service Agreement APPLE Confidential for Client Use Only (Rev 04/01/11) Page 10 of 10 K MES 5? Unallocated Fixed Contract Application, Acceptance, & New Business Agreement American United Life Insurance Company® P. O. Box Indianapolis, Indiana 46206-0368 Contract Number Version 1.0 - 04/2008 Contract Effective Date ^'^'Y ' 2012 Contract Suffix Number Plan Sponsor's State of Domicile CA The Proposed Contractholder identified below hereby applies to American United Life Insurance Company (AUL) for the Group Annuity Contract Number identified above. This completed form must be approved by the AUL Corporate Office before a group annuity contract will be issued. Contract Type: ^ Unallocated Fixed-Only (15FP) Select Governmental or Non-Governmental Plan Sponsor (select only one): ^ Govemmental (non-registered) • Private Sector (registered) Select Plan Type (select only one): • (I) 3121 or Special Pay 401(a) • (3) 3121or Special Pay or Employer-Sponsored 401(a)/403(b) M (7) 3121 457(b) • (R) HRA Trust/VEBA • (S) HSA • (T) GASB 45 OPEB Trust/VEBA Select Product Type (select only one): • EO DEI •R2 MEOB • ElB • R2B Select Business Type (select only one): • Start-up Takeover General Information Proposed Contractholder: City Of CaflsbaCl Employer's Identification Number (BIN): 95-6004793 Executive Contact: DebblO POfter Phone #: 760-602-2441 Fax #: 760-602-8554 Executive Contacts Address: 1635 Faraday AvGnuG, Carlsbad, CA 92008 Executive Contact's Email Address debbie.porter(gcarlsbadca.gov Administrative Contact: 760-602-2443 Phone #: 760-602-2443 Fax # : 760-602-8554 Administrative Contact's Address 1635 Faraday Avenue, Carlsbad, CA 92008 Administrative Contact's Email Address: Fernanda.hasse@carlsbadca.gov Producer Information Primary Producer: J. Daniel Keenan Primary B/D: |S|/A Primary Producer Address: 2355 Crenshaw Blvd., Suite 200, Torrance, CA 90501 Primary Producer Email Address: (JloenanOkeenan .COm Primary Phone: 310-212-0363 ext. 3600 Primary Fax: 310-533-1329 TPA Information MidAmerica, Administrative & Retirement Solutions, Inc. 211 East Main Street, Suite 100 Lakeland, FL 33801 800.430.7999 Investment Option Selection The AUL Fixed Interest Account(FIA) (12) will be the only annuity investment option made available. Withdrawal Charge (presently approved in California only) A Withdrawal Charge will not be applied under this contract, with one exception. A 5% Withdrawal Charge will be applied at contract termination to any FIA monies that are paid out at the Contractholder's direction in a lump-sum rather than in 5 equal annual installments. Summary of Billable Expenses Currently, there are none. Contract Termination Provisions Upon termination of the contract, the FIA Withdrawal Value must be taken in 5 equal annual installments. A cash lump- sum payment of monies invested in the FIA is not an available option. This restriction applies to all Contribution sources. AUL Recordkeeping/Administrative Services Agreement The Proposed Contractholder hereby requests only investment recordkeeping for assets held in the applied-for Contract, and does not request any other recordkeeping or administrative services. AUL will only maintain recordkeeping of assets at a contract/plan-level. Furthermore, AUL will not be providing statements, confirmations, or any other reporting to the Contractholder. The Proposed Contractholder hereby acknowledges and agrees that, as Plan Fiduciary, it has the sole responsibility for assuring that the Plan complies with all applicable state and federal law, including ERISA, the Intemal Revenue Code, and securities laws, both in form and in operation. The Proposed Contractholder hereby acknowledges and agrees that MidAmerica Administrative & Retirement Solutions, Inc. is the Third Party Administrator (TPA) and Plan Administrator, and that, other than in this Unallocated Contract Application, Acceptance, and Agreement form, AUL shall accept direction and instructions regarding both the Plan and the Contract only from MidAmerica, and shall not accept direction and instructions directly from the Contractholder. Facsimile/Electronic Media Acceptance Agreement Instructions provided to AUL and its agents to execute, cancel, or otherwise proceed with transactions including those related to, but not limited to, enrollments, loan applications, distributions, and correspondence will be accepted via facsimile, copy, or via other electronic media. This agreement does not include retirement plan adoption agreements, group annuity contracts, amendments thereto, the annual census, and Notice, Election & Release or Contract Settlement Agreement documents. This agreement includes Instructions from the TPA, Plan Sponsor, Plan Administrator, and/or Contractholder. The Contractholder and TPA will indemnify and hold harmless AUL for all claims, losses, liabilities and expenses, including legal fees and expenses, resulting from any action taken or not taken by AUL in good faith in accordance with this agreement. Preliminary Agreement for the Group Annuity Contract (1) Upon the date a contribution is made to the Contract following the Proposed Contractholder's receipt ofthe Contract (but no earlier than 60 days after the Contract Date of Issue), if AUL does not receive a signed acceptance ofthe Contract at its Corporate Office by that date, the Proposed Contractholder shall be deemed to have accepted the Contract and any accompanying amendment to the Contract by the making of such contribution. The Contract and any accompanying amendment shall be effective as of the effective dates shown on the Contract and amendment. (2) If the Contract is not accepted or deemed accepted, and if the Proposed Contractholder notifies AUL at its Corporate Office in writing that it will not accept the Contract, the following amount shall be paid in a single sum to the Proposed Contractholder on a mutually agreed-upon date: any contributions to the Contract which have been allocated to AUL's general asset account, plus interest credited thereon as determined pursuant to the Contract, which remain in AUL's general asset account as of such date of payment. AUL shall make such payment only upon receipt at its Corporate Office of a proper form signed by the Proposed Contractholder and, if applicable, by the employer sponsoring the retirement plan for which the Contract is to be a funding vehicle, releasing AUL, its agents, and its employees from any and all liability arising out of such payment by AUL. (3) This Preliminary Agreement shall terminate when: (A) the signed Contract acceptance is received by AUL at its Corporate Office; or (B) the Contract is deemed accepted under Section (I) above; or (C) payment is made by AUL pursuant to Section (2) above. Electronic Contribution Processing and Employee Data Gathering The Employer/Plan Sponsor/TPA has elected to send contributions and employee information electronically using tools provided by AUL. The Employer/Plan Sponsor agrees to allow AUL to debit its checking account for the allocable contribution amount shown on each of its contribution listings submitted to AUL. Additionally, the Employer/Plan Sponsor/TPA agrees that AUL can rely on information provided through the electronic data transmission vehicles. To establish electronic data transmission accounts, you must first complete an Electronic Data Transmission Account Profile available from AUL. Fiduciary Acceptance Any reference to Contractholder in this Application, Acceptance, and Agreement should be read as Proposed Contractholder until the applied-for group annuity contract goes into effect. I, the undersigned, as TPA/Plan Administrator ofthe City Of Carlsbad plan ('Plan"), hereby appoints AUL as theTPA/Plan Administrator's agent for the sole purpose of executing the Plan's investment instructions through the OneAmerica TeleServe® and Account Services systems. It is understood that AUL will execute the Plan's investment instructions received through the OneAmerica TeleServe® and Account Services systems effective as of the close of business on the valuation date, as referenced in your contract, in which AUL receives the request. It is ftirther understood that AUL has no direction or authority to alter or decline to execute any Plan's investment instructions received through the OneAmerica TeleServe® or Account Services systems, unless such instructions are impossible to execute. If any such instructions are impossible to execute, AUL will so notify the TP A/Plan Administrator before the instructions are accepted by OneAmerica TeleServe® or Account Services. All investment instructions received and executed through the OneAmerica TeleServe® or Account Services system will be confirmed in writing to the TP A/Plan Administrator within ten business days. The Contractholder, TP A/Plan Administrator, and AUL hereby agree by signing below, that they will be bound by the terms of this Application, Acceptance, and Agreement as of the date of AUL's acceptance. The terms ofthe Preliminary Agreement are superseded by the terms of the applied-for Contract as issued by AUL, and the Contract is accepted or is deemed accepted under the provisions of the Preliminary Agreement. If an amendment accompanies the issued contract, the Contractholder must sign and date the amendment and return a copy to AUL. Electronic acceptance of this Application, Acceptance, and Agreement by AUL, Indianapolis, Indiana indicates that AUL has reviewed its contents along with all other required materials and has accepted its terms, and is equivalent to AUL's written signature. "•,0 NON-REGISTERED FIXED ANNUITY OFFERING REPRESENTATION (For governmental applicants with an HRA or a GASB 45 OPEB Plan) The undersigned Employer and Trustee(s) understand that American United Life Insurance Company (AUL), in reliance on the following representations and warranties, will offer a non-registered fixed annuity contract to the Employee Benefit Trust or the VEBA Trust entered into by and between the Employer and the Trustee, dated , in connection with certain benefit plans offered by the Employer for the exclusive benefit of its employees. Such offer is based upon the govemmental plan exception to securities registration under Section 3(a)(2) ofthe Securities Act of 1933. REPRESENTATIONS AND WARRANTIES EMPLOYER The Employer hereby represents and warrants that: (1) the Employer is a State, or political subdivision of a State, or agency or instrumentality of a State or political subdivision, within the meaning of Section 414(d) of the Intemal Revenue Code of 1986 ("Code"); (2) the Employer has authority under applicable State laws and regulations to enter into, maintain, and establish said Employee Benefit Trust or VEBA Trust (and benefit plan(s) thereunder); (3) any contributions to the Trust shall be made exclusively by the Employer or its employees and be held for the exclusive benefit of the employees; (4) the Employee Benefit Trust is exempt from taxes under Code Section 115, or the VEBA Trust is exempt from taxes under Code Section 501(c)(9); and (5) the Employee Benefit Tmst or the VEBA Trust (and benefit plan(s) thereunder) is a govemmental plan as defined in Code Section 414(d), established for the exclusive benefit of the employees of the Employer. TRUSTEE The Trustee hereby represents and warrants that: (1) the Employee Benefit Tmst or the VEBA Trust was established to secure and hold funds to be contributed by the Employer under certain benefit plans sponsored by the Employer; (2) the Trust assets will be held for the exclusive benefit of the Employer's employees, and no portion of the corpus or income of the Tmst will revert to the Employer or otherwise divert to third parties, except to pay for reasonable administrative expenses incurred by the Trust; (3) the Employee Benefit Trust is exempt from taxes under Code Section 115, or the VEBA Trust is exempt from taxes under Code Section 501(c)(9); and (4) the Employee Benefit Trust or the VEBA Trust (and benefit plan(s) thereunder) is a govemmental plan as defined in Code Section 414(d), established for the exclusive benefit of the employees of the Employer. IN WITNESS WHEREOF, the undersigned have executed this Representation on the signature page below, on the date(s) set forth on the signature page below. Application for, and Acceptance of, the Contract: APPLICATION TO THE AMERICAN UNITED LIFE INSURANCE COMPANY FOR A GROUP ANNUITY CONTRACT City of Carlsbad (hereinafter called the Applicant) hereby applies for Group Annuity Contract Number G . This application is made a part of said contract, which is hereby approved and its provisions and conditions accepted. This application is executed in duplicate, one counterpart being attached to said contract, and the other being returned to American United Life Insurance Company. It is agreed that this application supersedes any previous application for said contract. STATE NOTIFICATION All states excluding those states listed below: Any person who knowingly presents a false or fraudulent claim for payment of a loss or benefit or knowingly presents false information in an application for insurance is guilty of a crime and may be subject to civil fines and criminal penalties. In Colorado, any person who knowingly provides false, incomplete, or misleading facts or information to an insurance company for the purpose of defrauding or attempting to defraud the company commits a crime. Penalties may include imprisonment, fines, denial of insurance, and civil damages. Any insurance company or agent of an insurance company who knowingly provides false, incomplete, or misleading facts or information to a policyholder or claimant for the purpose of defrauding or attempting to defraud the policyholder or claimant with regard to a settlement or award payable from insurance proceeds shall be reported to the Colorado division of insurance within the department of regulatory agencies. In Florida, any person who knowingly and with intent to injure, defraud, or deceive any insurer files a statement of claim or an application containing any false, incomplete, or misleading information is guilty of a felony of the third degree. In Louisiana, Pennsylvania, and Tennessee, any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or statement of claim containing any materially false information or conceals for the purpose of misleading, information conceming any fact material thereto commits a fraudulent insurance act, which is a crime and subjects such person to criminal and civil penalties. In Maine and Washington, any person who knowingly provides false, incomplete or misleading information to an insurance company for the purpose of defrauding the company commits a crime. Penalties may include imprisonment, fines or denial of insurance benefits. In New Jersey and Virginia, any person who includes any false or misleading information on any application for an insurance policy is subject to criminal and civil penalties. In Florida: Does this group annuity contract replace any existing group annuity contract? Yes No If yes, submit any required replacement forms. P-11104 By signing and completing the information below, the following parties hereby agree to this Unallocated Contract Application, Acceptance, and New Business Agreement. Dated at on APPLICANT/PROPOSED CONTRACTHOLDER/PLAN FIDUCL\RY Signature: Printed Name: Matt Hall Title: Mayor Date: AUL RETIREMENT SERVICES OFFICER Signature: Printed Name: Title: Date: TPA/PLAN ADMINISTRATOR Signature: Printed Name: J- Wesley Compton xitie: President Date: SOLICITING PRODUCER Signature: Printed Name: J. Daniel Keenan xitie: Senior Vice President Date: Florida License ID No. (for Florida Applications) ID No. For govemmental employers applying for a fixed group annuity contract to be used with an HRA or a GASB 45 OPEB Plan, by signing and completing the information below, the following parties hereby agree to the "Non-Registered Fixed Annuity Offering Representation" above. "EMPLOYER" (with respect to Employer representations only) Dated: By: Dated: Dated: Dated: TRUSTEE(S) (with respect to Tmstee representations only) By: Name: By: Name:^ By: Name: 33 Kira Linberg From: Cindy Parkinson <cindyparkinson@hotmail.com> Sent: Saturday, June 23, 2012 4:28 PM To: Council Internet Email Subject: RE: Social Security and hourly employees Attachments: socialsecuritymadatorycoveragel.jpg; socialsecuritymandatorycoverage2.jpg; image001.gif Dear Mayor Matt Hall and Council members Mark Packard, Keith Blackburn, and Farrah Golshan Douglas, I found some information from the Congressional Research Service about Social Security and the current laws that govern social security withholdings and public employees. I am Including the first couple of pages, which I think apply in the case of the City of Carlsbad's plans to discontinue Social Security coverage for their hourly employees. Current hourly employees who started after 12/19/04 have ail been enrolled In social security as have many of us who elected social security instead of the 457 plan. A 457 plan Is no replacement for social security which provides not only retiree benefits, but disability and survivors insurance. Thank you again for your thoughtful consideration. Sincerely, Cynthia Parkinson cindyparklnsQn@hotmail.com 4.. '•>.' '^""'•i-l 5i 3^ Kira Linberg Agenda Item » li For ^ memben ofthe: CITY COUNCIL From: Sent: To: Subject: Cindy Parkinson <cindyparkinson@hotmail.com> Thursday, June 21, 2012 7:58 PM Council Internet Email Social Security and hourly employees ^1 ty t Dear Coucil Members, Mark Packard, Keith Blackburn, and Farrah Golshan Douglas, I am dismayed to learn that the City of Carlsbad Is considering discontinuing the employer contribution to social securitv for their hourly employees. For me, this Is devastating news. When I started working at the library 11 years ago, we had a choice between the Lincoln program and social security. Many chose Lincoln because they had social security credits through their spouses, but for those of us who are earning our own credits, this Is very unwelcome news. I believe that the city should continue to give us a choice. Many employees will probably choose the Apple plan, but for those of us who really need the security of the insurance and safety net that social security provides, we should be given that choice. ' » Even though discontinuing social security contributions for hourly employees may be legal, it certainly is not ethical I believe the citizens of Carlsbad would agree, especially since hourly employees receive no other benefits. I am asking you respectfully to vote against this measure. Thank you for your thoughtful consideration Sincerely, Cynthia Parkinson Date:_ Distributioh: City Clerk Asst. City Clerk Deputy Clerk Book O "2, Sf: >«i SccM, Ffy Mandatonj Covera^ of .VCT/J State and Ucal Govemment Employees Introduction .\cross the United States, about 27.5% of slate and local govermiient employees (about 6.6 mXn persons) work in positions that are not oovcrcd by S(x:ial Securtty. Coverage rales vary considerably across states. Congross made Social Security coverage mandatory, starting in July 1991, for .rjost stetc and U^aC™t employees who were no. already covered by pubhc pen.,«n P a"S. Unto currait law, public employees who have a pension plan, but who are not covered by Soual 4urity, tnay hold a referendum on whether to elect Social Security eomage. Once Soctal tollrity coverage is provided, it generally camtot be terminated, and all hiture employees m covered positions arc required to participate in Social Security. Propo«.ls to mandate Social Security coverage for all state and local government employees hired nXTutu«= have been part ofthe Social Security policy debate for many years, t. nder such a proposal all state and local government positions eventually would be covered by Soc.ai Cm tv This report describes current law. provides some historical background, and discusses some of the potential advantages and disadvantages of mandating Social Security coverage tor newly hired state and local govcmmciit employees from a variety of perspectives. Current Law Social Security coverage is extended to state and local government ^^i^h^^'f 218 Agreements" between a sUrte awl the Social Security Adnumslralion (SS A). AI .states, as ^ «lll a.fPuerto Rico and the Virgin Islands, have a voUinUiry Section 218 Agreeinenl w.th SS A_ A Slate's Section 218 Agreement details which state and local government ixBitions are covered by Social Security and Medicate. Rach state, as well as Puerto R.co and the Virgm Islands. Sat« a Social Security Administrator who is responsible fo.- ad.nimsta.ng. preparing moditlcations for. and monitoring coverage of, its sub<livis.ons under the states Scct.o. 218 A^c-eint-nt. The Mrainistrator, who is a slate employee, serves as a bndge between state and local public einplo)^ and SSA. Coverage under Section 2) 8 Agreements differs greatly from Mate to state. For example within a stU Kiehers in one county may be coveied under Social Security, whereas teachers .u the neio^boring county may nol be covered. The State Social Saurity Administrator is the umn resource for infonnation about Social Security and Medicare coverage and reporting issues toi state and local govcrn.ncnl employers and employees. ' Iht'scagrranc-Usacauthociffid by Scclion 218of tl.v Siicial Sacmty Aci. A,K,«>v.maBiv 60 immtaic ins.irui.H.i.lal..ies also liave Section 218 A|ir>.-uner.« M,rtli SS.^. ;\a mtctslalc i.,tSeI^ is >m imlopendcnt legal c«i.y by iw. or ..we S«„os »c.ny oul one or .nore gov., nmcmal %»aier)S such as police power, taxing povvcrand'orpowiT 01 «.>n.e..l domain. ' A raster ol Slale Social Seeuritv Adminii.lra.ors c« be found a. bt.p:,V«v,-w,rK»ssa.org.'«aiessadn.mmamh<^ For Arostcroisiaii..i«"ai .,-„.,. ,„,,<. A„,,i;mcni'i indudini! mod ficat ons UJ such agra-menu, «»I .S. dl0938.pdn Convrtfssiowfl/ Research Sennce 33 Sertion 218 Agreement coxer poskicr,,. noi individuals, ifthe government position -'s covered by Socia ISeairity and Medicare ur..ic.- a S.^uon ^ 18 Agrm, (hen any empbv^Vcur ^Tor Uiluro) filling .hat posmon is subjcci ;a ScK-ial Security and .Medicare payrolE Coverage is extended to groups of e.Tiployi:e positions known as "coverage groups;" coveraae .my not be extended or an indiv idual basis. Various laws and regulations govern howrvcrtc .nay be extended v,a employee rerercndums. All slates are authorised to use a majorfty vote rerere..duin process, and 2.1 ..rates also are authori..cd to use a divided vote referendum ni^ess created in 1956 (see below). .Most often, state governments allow their st.bS?"g T school board) lo decide >vhether (o hold a referendum on coveiage. Generally a Section 2 SR Agreement may be modified to i.u:rcase, but not reduce, the extent of Sd md!in fi.n ""•"T• Security coverage is provided, i, cannot be S™y employees in covered posifions are required to participate in Social Legislative History •fhe 1935 Social Security Act did not exiend Social Security coverage to stale imd local government workers. In 19.50, Congress added Section 218 to the S^ial Security Act to allow all -•-O s ates Piicno Rieo. and .he Virgin Ishmds to elect Social Security coverage for certain late a..d local govenjntent employees.^ In 1954, Congress extended volunlai^ coteragc ,o a™Ws who were already covered by pension plaas. effective starting in 1955, i fa m^i^ikZuZlL who were members of a pension system voted in favor ofSocial Secu ity covtC ' ^ atnendments in 1956' pami.lcd certain states- to split slate or local retirement sSt^ Uo 'd.v.ded rebrement .systems" ba.sed on groups of employees that voted tor Soe^bl Securit coverage and groups of employees that voted agiiinst Social Security coverage.' Ciirrentlv '3 stales arc aulhorized to operate a divided reliremenl syslcm." i;ntil April 1983 public employers could opt in and oul ofthe Social Security prograiti. In 1983 et S 'tf'" "^^''"^ "^-^ program once ' StK-ial Security Act .AtnondinenUi of f 95(t, P.I. «l-734, (^106. ' St>cial Sccuriiy Ainenditionrs of 1954, IM.. 8.V76I. ;j lOKl^X^l. Social Security Amcndmcms of 1956, IKl. 8'I^88U, .$ s04(c). employee, who ch<.se to .^.^cc in ^^^^^^^^ . SiK'm] Scctjrily nmy fcn,aii» outside Inc syi.lcti I lowcver Jn^urvJ^^Z • f <-hQv>.c not to particiivaic i n wvtifcd hy Social Security. ''' ^"'J''»>*-'^'^ ^''^'''P^ :''>^"K"H arc wmi^^only ' Most r^:cniiy. Kcnluukyj^r^d l.ou'.ijuia vvcrc luklai u> ihc list of s!au:K :uirhori/i^d ti, ci-r 'k-» tii-r v . system. Statutoryauthodty wa« provided under the Social Security IVoicc^on^t of (P toS ^S^'rf' r . 01 .ta.es auc ority to hold divided vote referendum., can he ln6 in SeSa 2^^^^^^^^^^ Act, imdat h«ps:/.'bccua\!«a.gov,'appslO/pom».nsf?Tn.x/193000I330^ ^ " Social Security Atnendments uf 1983, P.I.. 98-?l, f!03. rimven v. Pub. ..\gencies OproRcd to Social .^ecuriiy Hntrapments, 477 l.i.S. A\ (i986j. i-mgrtmsiouat Research Service Lisa Hildabrand Date: PteWbuttom Agenda Item (I For the members ofthe: cirycouNcii, Subject: FW: Social Sec j^l^/^j^emc )loyees From: Debbie Porter Sent: Monday, June 25, 2012 6:42 PM To: Lisa Hildabrand Cc: Julie Clark Subject: RE: Social Security and hourly employees Deputy Clerk Book i ^CM DCM CA ^ 1 )ate(Dfc(^ City Manager ^^^^ This is in response to Cynthia Parkinson's concerns regarding implementation of the APPLE 457 plan in lieu of social security, specifically, the loss of the Old Age Survivor and Disability Insurance (OASDI) portions of Social Security as well as the legality of opting out of social security. It is our understanding that we are legally allowed to opt out of social security. The local State government regulates an agencies' participation in Social Security and their 218 agreements for full-time emplovees. In California they have allowed part-time emplovees to opt out of Social Security in light of OBRA 90 and IRC 3121 regulations. The goals of the transition to APPLE 457 were 1) to save money (the cit/s cost reduces from 6.2% of payroll to 3.75% of payroll and the employee's cost reduces from 4.2% of payroll to 3.75% of payroll), 2) to provide a better more predictable benefit for hourly employees and 3) to streamline the administration process by having only one retirement vendor for hourly employees instead of two. It is difficult to compare the benefits between Social Security (a defined benefit) and the APPLE 457 (a defined contribution plan). Each employee's personal situation impacts how they define which is a better benefit for them (e.g., number of years until they reach retirement eligibility age, whether or not they are "vested" in social security, whether or not they have a spouse who is eligible for social security, availability of other retirement savings/benefits from prior employers etc.). Below are some points in response to concerns regarding the difference in benefits between the two plans: • After five years of not contributing to social security, an employee is no longer eligible for the disability insurance (OASDI) portion of Social Security (a monthly benefit equal to a portion of their earnings in the case that they become disabled and can no longer work). However, there is no impact on the Medicare (health insurance) portion ofSocial Security. Medicare contributions are separate and will continue along with the Units earned towards Medicare. • Social Security requires 40 Units (Quarters) to "vest" and be qualified to receive a benefit. We do not have information regarding which city employees are vested in social security. However, it is our understanding that if they earn at least $4,520 per year, they would be vested after 10 years of hourly part time employment, either with the City of Carlsbad or another employer. If an employee is already vested in social security and stops contributing, they will not lose their social security benefit, however, the benefit amount won't grow. They would also have the APPLE 457 benefit to use as a retirement savings account. If a city employee has not yet vested in social security, they would need to earn more quarters via another employer in order to achieve vested status. 37 • Social Security may be earned through a spouse, provicfirf|«4 retirement benefit equal to 50% of their spouse's benefit if that benefit is higher tbiafrJ^JfciJ^Wlififi^ have earned on their own. . The death benefit frpm SDdal Security's a 9ne-time ca^h benefit paid only to a spouse or dependent child. ln?most cases the p^rm'f/^Pi:^^?^^^ balance will exceed this one time Social Security benefit. _ ...... 'll-iAO 0 i'^^-^« • Social Security woul^:! proviJe a beneficiary some portion of the employee's retirement benefit. Similarly, the APPLE 457 benefit (entire account balance, including interest) would be paid out to a beneficiary. In summary, staff believes that the best option for the majority of hourly city employees is the APPLE 457 plan. However, depending on their personal situation, some employees may have a strong desire to continue to contribute to social security because they believe it will provide a better benefit for them. Council could decide to allow current employees one chance to "opt out of APPLE 457" and remain in social security as a "grandfathered group." If this were allowed, in order to streamline administration, we strongly recommend that all current employees who choose APPLE and all new or re-hired employees would not have an option in the future, but would remain/be enrolled In the APPLE plan. Besides the administrative cost of maintaining two optiot^s, there is also the cost to the city of the additional 2.45% of payroll that the city would pay for those employees who remain in social security. Debbie Porter S55? CITY Of CARLSBAD Human Resources Debbie Porter Senior Management Ar^lyst _ , - - From: Cindy Parkinson [mailto:clndyparkinson@hotmail.coml Sent: Saturday, June 23, 2012 4:28 PM To: Council Internet Email Subject: RE: Social Security and hourly employees Dear Mayor Matt Hall and Council members Mark Packard, Keith Blackburn, and Farrah Golshan Douglas, I found some information from the Congressional Research Service about Social Security and the current laws that govern social security withholdings and public employees. I am including the first couple of pages, which I think apply in the case of the City of Carlsbad's plans to discontinue Social Security coverage for their hourly employees. Current hourly employees who started after 12/19/04 have all been enrolled In social security as have many of us who elected social security instead of the 457 plan. A 457 plan is no replacement for social security which provides not only retiree benefits, but disability and survivors insurance. Thank you again for your thoughtful consideration. Sincerely, Cynthia Parkinson dndvparkinsoncahotmail.com ^ CARLSBAD CITY OF June 26, 2012 To: MAYOR AND CITY COUNCIL From: CITY ATTORNEY Re: AGENDA ITEM #11, APPROVAL OF THE CITY OF CARLSBAD APPLE PLAN TO PROVIDE RETIREMENT BENEFITS FOR HOURLY PART-TIME EMPLOYEES IN LIEU OF SOCIAL SECURITY OR THE EXISTING LINCOLN FINANCIAL ADVISORS PLAN In certain limited circumstances, it may be preferable for a part-time hourly employee to remain in the Social Security system rather than participate in the proposed APPLE Plan, to provide retirement benefits. In order to provide a one-time opportunity for existing part-time hourly employees to elect to continue participating in Social Security, it is recommended that the attached amended resolution be adopted. There would be some minor fiscal impact as explained in the agenda bill Item of 2.45% per employee depending on the individual employees earning. Debbie Porter, Senior Management Analyst, will be in attendance to respond to any questions that Council has in this regard. RONALD R. BALL City Attorney /rn c: City Manager City Clerk Human Resources Director Senior Management Analyst, Debbie Porter DateL Distribution: City Clerk Asst. City Clerk Deputy Clerk Book City Attorney 1200 Carlsbad Village Drive I Carlsbad, CA 92008 I 760-434-2891 I 760-434-8367 fax I www.carlsbadca.gov ^Cj RESOLUTION NO. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, ADOPTING THE CITY OF CARLSBAD ACCUMULATION PROGRAM FOR PART- TIME AND LIMITED-SERVICE EMPLOYEES (APPLE) PLAN TO PROVIDE RETIREMENT BENEFITS IN LIEU OF COVERAGE UNDER SOCIAL SECURITY OR THE EXISTING LINCOLN FINANCIAL ADVISORS PLAN AND AUTHORIZING AND DIRECTING THE HUMAN RESOURCES DIRECTOR TO EXECUTE ALL NECESSARY DOCUMENTS WHEREAS, Section 11332 of the Omnibus Budget Reconciliation ACT of 1990 ("OBRA '90") extends Social Security retirement benefit coverage to employees of state and local governments who are not covered by a state or local retirement system and subjects the employer and employee to Federal Insurance Contributions Act ("FICA") taxes on the employee's wages; and WHEREAS, OBRA '90 excludes from the requirement of Social Security coverage governmental employees who are covered by a compulsory retirement system of a state or local government; and WHEREAS, California Government Code section 53216, et seq., authorizes a governmental employer to establish and fund a pension Plan covering its employees on a compulsory basis; and WHEREAS, certain hourly part-time employees of the City of Carlsbad are not currently covered under any other retirement program through the City or the State of California in lieu of coverage under Social Security, as permitted by OBRA '90; and WHEREAS, the Council desires to adopt a compulsory retirement Plan, qualified under section 457 of the Internal Revenue Code of 1986 ("the Code"), for the hourly part-time employees, council-appointed officials and elected officials in lieu of providing coverage under Social Security, as permitted by OBRA '90; and WHEREAS, the City of Carlsbad currently provides a FICA alternative plan to certain hourly part-time employees through the Lincoln Financial Advisors; and WHEREAS, the Council desires to continue to provide a tax-qualified FICA alternative plan for said employees, but to replace the existing Lincoln Financial Advisors Trust with the Accumulation Program for Part-Time and Limited-Service Employees of the City of Carlsbad ("APPLE Plan"); and WHEREAS, Code section 414(h)(2) permits the City to pick up the employee g portion of contributions to a section 457 Plan and to treat them as employer IQ contributions; and 11 WHEREAS, such "picked up" contributions are not taxable to the employee until 12 distributed; and WHEREAS, the Council has reviewed the Accumulation Program for Part-time and Limited-service Employees (the "APPLE Plan") provided by Keenan & Associates. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 13 14 15 16 17 18 19 2. That the APPLE Participation Agreement, APPLE Plan Administrative Services 20 Agreement and Unallocated Fixed Contract Application, Acceptance & New Business Agreement referred to in the recitals above are incorporated in this resolution by reference. 3. That the Council hereby adopts the City of Carlsbad APPLE Plan to provide retirement benefits to hourly part-time employees of the City in lieu of coverage under Social Security and as an amendment to the existing Lincoln Financial 2^ Advisors Plan replacing the Lincoln Financial Advisors Plan in full, to be effective 28 22 23 24 25 26 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 as soon as administratively possible following adoption of this resolution except that the current hourly part-time emplovees shall be given notice and a one-time opportunity to elect to continue to participate in Social Securitv. The Human Resources Director shall be responsible to implement this provision. 4. That the Council hereby designates the City as the Plan Administrator of the APPLE Plan. 5. That the Council hereby designates the City as the Trustee of the APPLE Plan. 6. That the Council hereby authorizes MidAmerica Administrative Solutions ("MidAmerica"), to execute, on behalf of the City, the APPLE Plan and any other documents necessary to carry out the provisions of the APPLE Plan. 7. That the Council hereby authorizes MidAmerica to execute, on behalf of the Employer, the APPLE Plan and any other documents necessary to carry out the provisions of the APPLE Plan; to enter into contracts with Keenan & Associates to provide ongoing administrative consulting services in connection with the operation of the Plan; to arrange funding of the Plan through American United Life (AUL); to communicate the Plan to eligible employees of the City; and to perform related services in connection with the APPLE Plan. 8. That the Council hereby terminates the City's participation in the Lincoln Financial Advisors Plan and removes Lincoln Financial Advisors as the Trustee of the Plan. 9. That Keenan & Associates will act as Broker for American United Life Insurance Company's 3121 Alternative to Social Security program, and provide consultant and broker services for the APPLE Plan as outlined in the Keenan & Associates 2 Service Agreement 10. That the Council hereby removes Lincoln Financial Advisors as Trust Administrator and appoints MidAmerica as Third Party Administrator of the APPLE Plan 11. That the Council directs the transfer of the plan assets held by Lincoln Financial g Advisors under the Lincoln Financial Advisors Plan and Trust to AUL, as 9 custodian for the successor Trustee, the City of Carlsbad for the benefit of the 10 City of Carlsbad APPLE Plan, to occur within 30 days after July 1, 2012, or a date mutually agreed upon by Lincoln Financial Advisors and the City of Carlsbad. This will facilitate the ability of MidAmerica to process Plan distributions with minimal delays to Plan Participants. 12. That the Council directs the transfer of plan participant's account information from Lincoln Financial Advisors to MidAmerica, to occur within 30 days after July 17 1, 2012 or a date mutually agreed upon by Lincoln Financial Advisors and the 18 ^'ty 0^ Carlsbad in order for MidAmerica to process Plan distribution with minimal 19 delays. 13. That the Council has determined that it is appropriate for the City to "pick up" the employee portion of contributions to the APPLE Plan so that each participant of the Plan shall make contributions to the Plan on a pretax basis, as permitted under IRS Section 414 (h) (2) 14. That the City will implement the "pick-up" provisions of IRC Code section 26 414(h)(2) by making employee contributions to the Plan on behalf of its 27 employees who are participants in such Plan. "Employee contributions" shall 28 11 12 13 14 15 16 20 21 22 23 24 25 B Lfci 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 /// 21 /// 22 /// 23 24 25 26 27 28 mean those contributions to the APPLE Plan, which are deducted from the salary of employees and are credited to individual employees' accounts. 15. That the contributions made by the City to the APPLE Plan, although designated as employee contributions, will be paid by the Employer in lieu of contributions by the employees who are participants in the APPLE Plan. 16. That employees shall not have the option of choosing to receive the contributed amounts directly instead of having them paid by the City to the APPLE Plan. 17. That the City shall pay to the APPLE Plan the contributions designated as employee contributions from the same source of funds that is used to pay employees' salary. 18. That the amount of the contributions designated as employee contributions and paid by the City to the APPLE Plan on behalf of an eniployee shall be the entire contributions required of the employee under the Plan. 19. That the Human Resources Director is authorized to execute, on behalf of the City, any additional and required documents with MidAmerica, Keenan & Associates and American United Ufe Insurance Company (AUL) in furtherance of the purpose and intent of this resolution. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the day of , 2012, by the following vote: AYES: NOES: ABSENT: MATT HALL, Mayor ATTEST: LORRAINE M. WOOD, City Clerk (SEAL) Sherry Freisinger From: Karen Kundtz Sent: Tuesday June 26, 2012 8:27 AM To: Sherry Freisinger; Donna Heraty Subject: FW: Agenda item # 11: Social Security and hourly employees Importance: High Info for Agenda Item 11 From: Lisa Hildabrand Sent: Tuesday, June 26, 2012 8:26 AM To: Council Archive Cc: Karen Kundtz; Lorraine Wood; Cynthia Haas Subject: Agenda item # 11: Social Security and hourly employees Importance: High From: Debbie Porter Sent: Monday, June 25, 2012 6:42 PM To: Lisa Hildabrand Cc: Julie Clark Subject: RE: Social Security and hourly employees This is in response to Cynthia Parkinson's concerns regarding implementation ofthe APPLE 457 plan in lieu of social security, specifically, the loss ofthe Old Age Survivor and Disability Insurance (OASDI) portions ofSocial Security as well as the legality of opting out of social security. It is our understanding that we are legally allowed to opt out of social security. The local State government regulates an agencies' participation in Social Security and their 218 agreements for full-time emplovees. In California they have allowed part-time emplovees to opt out of Social Security in light of OBRA 90 and IRC 3121 regulations. The goals ofthe transition to APPLE 457 were 1) to save money (the city's cost reduces from 6.2% of payroll to 3.75% of payroll and the employee's cost reduces from 4.2% of payroll to 3.75% of payroll), 2) to provide a better more predictable benefit for hourly employees and 3) to streamline the administration process by having only one retirement vendor for hourly employees instead of two. It is difficult to compare the benefits between Social Security (a defined benefit) and the APPLE 457 (a defined contribution plan). Each employee's personal situation impacts how they define which is a better benefit for them (e.g., number of years until they reach retirement eligibility age, whether or not they are "vested" in social security, whether or not they have a spouse who is eligible for social security, availability of other retirement savings/benefits from prior employers etc.). Below are some points in response to concerns regarding the difference in benefits between the two plans: • After five years of not contributing to social security, an employee is no longer eligible for the disability insurance (OASDI) portion ofSocial Security (a monthly benefit equal to a portion of their earnings in 1 the case that they become disabled and can no longer work). However, there is no impact on the Medicare (health insurance) portion ofSocial Security. Medicare contributions are separate and will continue along with the Units earned towards Medicare. • Social Security requires 40 Units (Quarters) to "vest" and be qualified to receive a benefit. We do not have information regarding which city employees are vested in social security. However, it is our understanding that if they earn at least $4,520 per year, they would be vested after 10 years of hourly part time employment, either with the City of Carlsbad or another employer. If an employee is already vested in social security and stops contributing, they will not lose their social security benefit, however, the benefit amount won't grow. They would also have the APPLE 457 benefit to use as a retirement savings account. If a city employee has not yet vested in social security, they would need to earn more quarters via another employer in order to achieve vested status. • Social Security may be earned through a spouse, providing a retirement benefit equal to 50% of their spouse's benefit if that benefit is higher than the benefit they have earned on their own. • The death benefit from Social Security is a one-time $255 cash benefit paid only to a spouse or dependent child. In most cases the person's APPLE 457 account balance will exceed this one time Social Security benefit. • Social Security would provide a beneficiary some portion of the employee's retirement benefit. Similarly, the APPLE 457 benefit (entire account balance, including interest) would be paid out to a beneficiary. In summary, staff believes that the best option for the majority of hourly city employees is the APPLE 457 plan. However, depending on their personal situation, some employees may have a strong desire to continue to contribute to social security because they believe it will provide a better benefit for them. Council could decide to allow current employees one chance to "opt out of APPLE 457" and remain in social security as a "grandfathered group." If this were allowed, in order to streamline administration, we strongly recommend that all current employees who choose APPLE and all new or re-hired employees would not have an option in the future, but would remain/be enrolled in the APPLE plan. Besides the administrative cost of maintaining two options, there is also the cost to the city ofthe additional 2.45% of payroll that the city would pay for those employees who remain in social security. Debbie Porter ^ C > T V Of CARLSBAD Huffidn R€!iOurcc;5 Debbie Porter Senior Management Analyst City of Carlsbad 1635 Faraday Avenue Carlsbad, CA 92008 www.ca risbadca .gov /7 P: 760-602-2441 F: 760-602-8554 E: Debbie.Porter@carlsbadca.gov From: Cindy Parkinson [mailto:cindyparkinson@hotmail.com1 Sent: Saturday, June 23, 2012 4:28 PM To: Council Internet Email Subject: RE: Social Security and hourly employees Dear Mayor Matt Hall and Council members Mark Packard, Keith Blackburn, and Farrah Golshan Douglas, I found some information from the Congressional Research Service about Social Security and the current laws that govern social security withholdings and public employees. I am including the first couple of pages, which I think apply in the case of the City of Carlsbad's plans to discontinue Social Security coverage fbr their hourly employees. Current hourly employees who started after 12/19/04 have all been enrolled In social security as have many of us who elected social security instead of the 457 plan. A 457 plan is no replacement for social security which provides not only retiree benefits, but disability and survivors insurance. Thank you again for your thoughtful consideration. Sincerely, Cynthia Parkinson cindyparkinson(g)hotmail.com