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96-94 ORDINANCE NO. 96-94 AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF DELRAY BEACH, FLORIDA, AMENDING CHAPTER 35, "EMPLOYEE POLICIES AND BENEFITS", "RETIREMENT PLAN", OF THE CODE OF ORDINANCES OF THE CITY OF DELRAY BEACH, FLORIDA, BY AMENDING SECTION 35.089, "DEFINITIONS", TO CLARIFY THE DEFINITION OF "ACTUARIAL EQUIVALENCE"; AMENDING SECTION' 35.097, "RETIREMENT INCOME; BASIS, AMOUNT AND PAYMENT", TO REFLECT THE NORMAL FORM OF BENEFIT AS A SINGLE LIFE ANNUITY; CREATING A NEW SUBSECTION 35.097(J), "MAXIMUM PENSION"; CREATING A NEW SUBSECTION 35.097(K), "COMMENCEMENT OF BENEFITS"; CREATING A NEW SUBSECTION 35.097(L), "DISTRIBUTION OF BENEFITS"; CREATING A NEW SUBSECTION 35.097(M), "DIRECT TRANSFER OF ELIGIBLE ROLLOVER CONTRIBUTIONS"; PROVIDING A SAVINGS CLAUSE; PROVIDING AN EFFECTIVE DATE. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF DELRAY BEACH, FLORIDA, AS FOLLOWS: $~ction 1. That Section 35.089, "Definitions", Subsection (A), "Actuarial Equivalence", is amended to read as follows: (A) "Actuarial (actuarially) equivalence (equivalent)" means equality in value of the aggregate amounts expected to be received under different forms of payment. Actuarial equivalent amounts under the plan will be determined utilizing the 1983 Group Annuity Mortality Table. blended for males and females, with interest at seven percent (7%), where the participant's age shall be set back one year and the beneficiary's age shall be set back four years regardless of gender. However, in the event of plan termination, actuarial equivalence will be based upon the interest and mortality assumptions prescribed by the Pension Benefit Guaranty Corporation for plan terminations in effect on the actual date of plan termination. ~ That Section 35.097, t"Retirement Income; Basis, Amount, and Payment", Subsection (A), "Normal Retirement Income", is amended to read as follows: (1) Amount of normal retirement income. The amount of retirement income payable to a participant who retires on or after his normal retirement date shall be an amount equal to two and one-half percent (2.5%) of final monthly compensation multiplied by credited service, expressed in years and tenths of a year, up to a maximum of thirty (30) years. A participant who has attained the age of sixty and retires with five (5) or more years of credited service, but less than ten (10) years of credited service, shall be entitled to monthly retirement income in an amount equal to two and one-half percent (2.5%) of final monthly compensation multiplied by credited service I expressed in years and tenths of a year, multiplied by the participant's vested percentage as set forth in Sec. 35.091. The normal form of benefit is a single life annuity. (2) Payment of normal retirement income. The monthly retirement income payable in the event of normal retirement will be payable on the first day of each month. The first payment will be made effective on the participant's normal retirement date (or on the first day of the month following actual retirement, if later), and shall be continued thereafter during the participant's lifetime. Upon the participant's death the same monthly benefit shall be continued to his or her spouse for one year, and sixty percent (60%) of that amount shall be continued to the spouse thereafter until the earlier of the spouse's death or remarriage. ~ That a new Subsection 35.097(J), "Maximum Pension", is created to read as follows: CJ) ~aximum Pension. ¢1) Basic Limitation. Subject to the adjustments hereinafter set forth, the maximum amount of annUal retirement income payable with respect to a member under this plan shall not exceed the fa~ ~ (bi one-hundred percent (100%) of the member's average aggregate compensation for the three consecutive calendar years during which he was an active member and had his highest aqqreqate compensation. "Compensation" shall mean the member's total annual remuneration Daid or accrued for personal services rendered to the City during the Plan Year as reported on the member's W-2, For purposes of applyinq the above limitation, benefits payable in any form other than a straight life annuity with no ancillary benefits shall be adjusted. -as provided by Treasury Regulations. so that Such benefits are the actuarial equivalent of a straight life annuity. For purposes of this sectioD, ~he following shall not be taken into account: ¢c) any ancillary benefit which is not directly related to retirement income benefits; (d) any other benefit not required under sectioR 415¢b)¢2) of the Internal Revenue Code and reaulations thereunder to be taken into account for purposes of the limitation of se¢~iQn 415(b)(1) of the Internal Revenue Code. - 2 - Ord. No. 96-94 /~ participation in Qther Defined Benefit Plan. The limitation of this secti°n with respect to any member who at any time has been a member in any other defined benefit plan (as defined in section 414(i) of the Internal Revenue Code) maintained by the City shall apply aS if the total benefits payable under all defi~ed benefi% plans in which the member has been a member were payable from one (3) Adjustments in Limitations. In the event the member's retiremeDt benefits become payable before age sixty-two (62). the ~90,000 limitation prescribed by this section shall be reduced in a0cor~anc9 with regulations issUed by the Secretary of the Treasury pursuant to the provisions of section 415(b) of the Internal Revenue Qode. but not less than S75.000. In the event the member's retirement benefit becomes payable before age fifty-five (55). the S75.000 limitation shall be reduced from age f~fty-five (55) in accordance with regulations issued by the Secretary of the Treasury pursuant to the provisions of section 415(b) of the Internal Revenue Code. A member with at least fifteen (15) years of credited service may not have the benefit reduced below S50.000. If the member's retirement benefit becomes payable after age sixty-fiVe (65). for purposes of determining whether this beDefit meets the limitation set forth in subsection (1) hgrein, such benefit shall be adjusted so that it is' actuariallv made usina an assume~ interest rate of five percent (5%) and Shall be mad~ ~ accordance with the regulations Dromulaated by the Secretary,of the Treasury or his delegate. (4) Less than Ten Years of Service, Th~ maximum retirement benefits payable under this section to a~y member who has completed less than ten (10) years of credited service with the City shall be the amount determined under paragraph (A) of this section multiplied by a fraction, the numerator of which is the number of the member's years of credited serVice and the denominator of which is ten (10), (5) ~10~000 Limit. ~otwithstan6ing the foregoing, the retirement benefit payable with respect to 'a member shall be deeme~ not to exceed the limitations set forth in this section of the benefits payable with respect to such member under this plan and un,er all other qualified defined benefit pension plans to which the Qi~y contributes do not exceed ~10.000 for the applicable plan year an~ for any prior plan year and the City has not at any time maintaine~ a ~ual~fied defined contribution plan in which the member Darticipate~, - 3 - Ord. No. 96-94 (6) Member in Defined Contribution Plan. In any case where · member under this plan is also a member in a "Defined Contribution Plan" as defined in section 414(j) of the Internal ~¥gnue Code, maintained by the City, the sum of the "Defined Benefit ~lan Fraction" and the "Defined Contribution Plan Fraction" (both as ~e~ine~ in section 415(e~ of the Internal Revenue Code) shall not, subject to the restrictions and exceptions contained in section 2004 of the Emgloyee Retirement Income Security Act of 1974. as amended. {7) Reductio~ of Benefits. Reduction of benefits and/or contributions to all plans, where required, shall be ~ccomplished by first reducing the member's benefit under any defined benefit plans in which he participated, such reduction to be made first with respect to the plan in which he most recently accrued benefits and thereafter in such priority as shall be determined by the Trustees of such Other plans, and next, bv reducino or allocatina excess forfeitures for defined contribution plans in which the member participated, such reduction to be made first with respect to the plan in which he most recently accrued benefits and thereafter in such Driority as shall be established bv the Trustees for such other provided, however, that necessary reductions may be made in a ~if~ereDt manner and priority pursuant to the agreement of the Trustees of all other ulans covering such member. (8) Cost-of-Living Adjustments. The limitations as ~tated iD subsections (1)., (2), (3) and (6) herein shall be adgusted tO the time payment of a benefit beains in accordance with any cost-of-living adjustments prescribed by the Secretary of the Treasury pursuant to section 415(d} of the Internal Revenue Code. (9~ Additional Limitation on ~ens~on Bgnef~ts. Notwithstanding anything herein to the coDtrary: (a) The normal retirement benefit or pension payable to a retiree who becomes a member of the plan and who has not previously participated in such plan, on or after JaDuary ~. 1980, shall not exceed ~00 percent of 'his average final compensation, HoWever. nothing contained in this section shall apply to supplemental retirement benefits or to pension increases attributable to cost-of-living increases or adjustments. - 4 - Ord. No. 96-94 (b) No member of the plan who is not now a member of such plan shall be allowed to receive a retirement benefit or pension which is in part or in whole based upon any service with re~pec~ to which the member is already receiving, or will receive in the future, a retirement benefit or pension from another retirement plan or system. This restriction does not apply to social security benefits or ~ederal benefits under Chapter 67. Title 10. U.S. Code. ~ection 4. That a new Subsection 35.097(K), "Commencement of Benefits" is created to read as follows: (K) Commencement of Benefits. (1) Unless the member otherwise elects, with such election being in writing and to the Trustees and specifying the form of retirement income and date on which the retirement income is to commence, the payment benefits under the plan to the member shall commence no~ later than the 60th day after the close of the plan year in which the latest of the followina events occur: Ca) the attainment of the member of aae 65: (b) the 10th anniversary Qf the date o~ whigh the member commenced uarticipation in the plan: or ¢c) the termination of the member's service with (2) If the payment of a member's retirement inco~9 cannot begin on the date required under subsection (1) of this section becaUse the Trustees either Cannot ascertain the amount of ~he member's retirement income or cannot locate the member after making reasonable efforts to do so. the payment of the member's benefit shall begin not later than sixty_ ~60) days after the date on which the amount can be ascertained or the member is located., whichever is applicable. Any such payment shall be made retroactive to a date which is not earlier than the date on which the payment of th~ member's benefit was scheduled to beain but which is not later than the date specified under subsection ~1) of this section. ~ That a new Subsection 35.097(L), "Distribution of Benefits", is created to read as follows: (L) Distribution of Benefits. Notwithstanding any oth~ provision of this plan to the contrary, a form of retirement income payable from this plan after the effective date of this ordinance, shall satisfy the following conditions: - 5 - Ord. No. 96-94 (1) If any retirement income is payable before the member's death: (a) It shall either be distributed or commence to the member not later than April 1 of the calendar year follQw~g the later of the calendar year in which the member attains age seventy and one-half ¢70-1/2) years or the calendar year in which he retire~, (b) The distribution shall commence not later than the calendar year defined in paragraph IAI above and Il) shall be paid over the life of the member or over the lifetimes of the member and his spouse, issue or dependent, or 12) shall be paid over the period extending not beyond the life expectancy of the member and hi~ 'spouse. issue or dependent. Where a form of retirement income payment has commenced in accordance with the preceding paragraphs and the member dies before his entire interest in the plan has been distributed, the remainina portion of such interest in the plan shall be distributed ~o less rapidly than under the form of distribution in effect at the time Q~ the member's death. (2) If the member's death occurs before the distribution of his interest in the plan has commenced, his entire interest in the plan shall be distributed within five years of his death, unless it is to be distributed in accordance with· the following Iai The member's remaining interest in the pla~ is payable to his spouse, issue or dependent: lb) The remainina interest is to be distributed over the life of the spouse, issue or dependent or over a period not extending beyond the life expectancy of the spouse, issue or dependent: add lc) Such distribution becins within one year of the member's death unless the member's Spouse. issue or dependeD~ shall receive the remainin~ interest in which case the distribution need not be~in before the date on which the member would have attained age seventy and one-half (70-1/2) years, and if the spouse, issue or dependent dies before the distribution to the SPouse. issue or dependent begins, this section shall be applied as if the spouse. issue or dependent were the plan member. - 6 - Ord. No. 96-94 Section 6. That a new Subsection 35.097(M), "Direct Transfers of Eligible Rollover Contributions", is created to read as follows: Direct Transfers of Eliaible Rollover Contributions. fl) General. This section applies to distributions made on or after January 1. 1993. Notwithstanding any provision of th~ system to the contrary that would otherwise limit a distributee's election under this section, a distributee may elect, at the time and in the manner prescribed by the board, to have any portion of an eliqibl'e rollover paid directly to an eligible retirement plan sDecified by the distributee in a direct rollover. (2) Definitions. fa) Eliaible rollover distribution. An eligible rollover distribution is any distribution of all or any portion of th9 balance to the credit of the distributee, e~cept that an eligible rollover distribution does not include: any'distribution that is one of a series of substantially equal Periodic payments fnot less frequently than annually) made for life for life expectancy) of the dis~ributee or the ~oint lives for joint life expectanc%es) of ~he distributee and the distributee's desigB~ted beneficiary, or for a specified period of ten fl0) years or. more: any distribu%ion to th9 extent such distribution is required under sectioD 4Ol{a)fP) Q~ ~he Internal Revenue Code: and the portion of any distribution that is nQt includable in ~ross income, fbi Eligible retirement plan. An eligible retirement plan is an individual retirement account described in section 408~a) of the Internal Revenue Code an individual retirement annuity described in section 408lb) of the Internal Revenue Code. an annuity plan described in section 403fa) of the Internal Revenue Code, or a qualified trust described in section 401(a) of the Internal Revenue Code. that accepts the distributee's eligibl~ rQllQv~r distribution. However. in the case of an eligible rollov~r distribution of the survivina SDOUSe. an eligible retirement plan is an individual retirement account or individual retirement a~nuity, lc) Distributee.. A distribut~e i~cludes an employee or former employee. In addition, the employee's or former employee's surviving spouse is a distributee with regard tQ ~he interest of the SPouse, rd) Direct rollover. A direct rollover is a payment by the plan to the eligible retirement plan specified bv th~ distributee. - 7 - Ord. No. 96-94 Section 7, That should any section or provision of this ordinance or any portion thereof, any paragraph, sentence or word be declared by a court of competent jurisdiction to be invalid, such decision shall not affect the validity of the remainder hereof as a whole or part thereof other than the part declared to be invalid. ~_9~Z~LQA__~ That, except as othe~ise provided in the ordinance, this ordinance shall take effect upon adoption. PASSED AND ADOPTED in regular session on second and final reading on this the 13th day of December , 1994. ATTEST: /City C~rk ~ First Reading Dece~er 6, 1994 Second Reading Dece~er 13~ 1994 - 8 - Ord. No. 96-94 £1TV OF I:IELAAV BEA£H CITY ATTORNEY'S OFFICE ~°° ~TM^~' ~"^~ "~'^~"' ~°"~^ ~"~ FACSIMILE 407/278-4755 Writer' s Direct Line pE~R~8~A~ ( 407 ) 243-7091 lll.~dca Ci~ MEMO~ND~ ~99~ TO: City Co~ission FROM: Susan A. Ruby, City Attorney SUBJECT: Ordinance No. 96-94 - Modification to the General Employees Pension Ordinance The attached ordinance includes a modification requested by our actuary to use blended rates (male and female) in the 1983 Group Annuity Mortality Table to determine actuarial equivalent amounts and to codify our existing policy of assuming a normal form benefit in a single life annuity as the basis upon which other options are calculated when a retiree chooses a beneficiary other than a spouse. An actuarial impact statement is not necessary for these changes. In addition, the ordinance reflects Internal Revenue Code provisions which are to be included in every qualified plan. These provisions are benefit limitations of Section 415, distribution rules of Section 401(a)(9) and rollover and 20% withholding rules from the Unemployment Compensation Act which added Section 401(a)(31) to the IRS Code. Attachment cc: David Harden, City Manager Joseph Safford, Director of Finance ~mm~a._ aY OF ?~O?0$ED. AM~-,ND~NT TO (12/2//94) 1. Sec. 35.089 (Definitions)--amends the definition of "actuarial equiva].ence" to clarify that actuarial equivalent amounts will be determined using the 1983 Group Annuity Mortality Table, b!endgd fQr mg~s and females. This change was suggested by the plan actuary, and codifies the current practice. There is no actuarial cost associated with this change. 2. Sec. 35.097 (Normal Retirement)--adds a sentence to state that the normal form of benefit is a single life annuity. This change reflects the pension board's long-standlng policy, and also was requested by the actuary. There is no actuarial cost associated with this change. 3. Sec. 35.097(J} (Maximum Pension)[New]--provides maximum limits on pension benefits in compliance with Section 415 of the Internal Revenue Code and Section 112.65, Florida Statutes. Generally limits pension benefits to a maximum of $90,000 at normal retirement age or 100% of average final compensation, whichever is less. There is no actuarial cost associated with this change. 4. Sec. 35.097(K) (Commencement of BenefitS)[New]--provides that benefits must commence within 60 days following the end of the plan year in which the member attains age 65, attains 10 years of service, or terminates City employment, ~hichever is latest. This change is required by Section 401(a) of the Internal Revenue Code. There is no actuarial cost associated with this change. 5. Sec. 35.097(L) (Distribution of Benef~ts)[New]--provides that benefits must commence, notwithstanding any other provision of the plan, not later than April 1 of the calendar year in which the member attains age 70 and one-half. This change is required by Section 401(a)(9) of the Internal Revenue Code. There is no actuarial cost associated with this change. 6. Sec. 35.097(M) (Direct Transfers of Eligible ~ollover Distributlons)[New]--provides for direct rollover of pension plan distributions into another eligible retirement plan, in compliance with Unemployment Compensation Amendments Act of 1992. Basically, this avoids the 20% withholding tax on pension plan distributions, and permits a ~ested member to roll his city pension refund into an IRA or other qualified pension plan upon leaving the city's employ prior to retirement. As required by federal law, this amendment is retroactive to January 1, 1993. There is no actuarial cost associated with this change.