Item 5Qlaity of NoumjaKe, i exas
MEMORANDUM
November 29, 2005
TO: Shana Yelverton, City Manager
FROM: Kevin Hugman, Director of Human Resources
SUBJECT: Resolution No. 05 -073, Authorizing the City Manager to enter into an agreement
with Public Agency Retirement Systems (PARS) to establish a Section 457 FICA
Alternative Retirement Plan for part -time, seasonal and temporary employees.
Action Requested: City Council consider Resolution No. 05 -073, authorizing the City Manager to
execute an agreement with Public Agency Retirement Systems (PARS) to
establish a Section 457 FICA alternative retirement system for part -time,
seasonal and temporary employees.
Background
Information: The City of Southlake opted out of Social Security pursuant to federal
legislation allowing it. The opt out relates only to full -time employees.
Federal legislation at the time did not allow the City to opt out of social
security for part -time employees. The City is required to contribute an amount
equal to 6.2% of each part -time employee's salary to social security and the
employee is required to contribute a similar amount for a total contribution of
12.4 %.
In 1990 Congress adopted the Omnibus Budget Reconciliation Act (OBRA).
OBRA mandated that employees not covered at the time by a retirement
program should be enrolled in social security or an alternate retirement
program which meets the statutory requirements of the Act. The Pubic Agency
Retirement System (PARS) offers an Alternate Retirement System (ARS) that
meets these requirements.
The ARS program provides certain benefits to both the employee and the City.
The legislation requires a minimum contribution to the alternate plan of 7.5 %.
The employee's contribution will therefore, remain the same as it is under
social security (6.2 %). This deduction can however, be taken from pre -tax
dollars and this will actually result in an increase in take home pay for the
contributing employees. The City will contribute the remaining 1.3% for a
total of 7.5 %, as well as pay the administrative fees associated with the Plan
($3,600 annually). The reduced rate of contribution by the City (1.3% versus
6.2 %) results in estimated annual savings of approximately $11,000 after
payment of the Plan fees. This level of savings will continue each year with
the amount varying depending on the total number of part-time employees and
the hours worked.
The benefits to employees from enrollment in PARS versus Social Security are
as follows:
(a) PARS plan participants are fully vested in their individual accounts
from day one. This is the same as immediate ownership of the invested
Shana Yelverton, City Manager
November 29, 2005
Page 2
funds. This compares to Social Security which requires contributions
for a minimum of 40 calendar quarters (10 years total) before an
employee is eligible for any Social Security retirement benefit.
(b) In the event of the participant's separation from the City, the participant
may receive the contributed funds as follows:
a. distributed as a lump sum for the participant; or
b. rolled over to an IRA or other qualified plan that accepts
rollovers.
(c) PARS contributions are pre -tax dollars. Social Security contributions
are post -tax dollars (income tax). The result is additional take home
pay for the enrolled employees.
(d) Contributions to the PARS plan increase account balances without
limit. With Social Security, once the limit is met, additional
contributions do not result in any higher benefits for the contributing
participant.
Financial
Considerations: The $3,600 administrative fee will be paid from funds budgeted for eligible
employee Social Security benefits. Including payment of administrative fees,
cost savings are estimated at $11,000 annually (less during first year due to
partial fiscal year).
Citizen Input/
Board Review: Not Applicable.
Legal Review: The City Attorney has reviewed the applicable documents.
Alternatives: Decline to authorize the agreement and continue with Social Security benefits
for part-time, seasonal and temporary employees.
Supporting
Documents:
• Resolution No. 05 -073
PARS Agreement for Administrative Services
Staff
Recommendation: City Council authorize the City Manager to enter into an agreement with
Public Agency Retirement Systems (PARS) to establish a Section 457 FICA
alternative retirement system for part -time, seasonal and temporary employees.
Staff Contact: Kevin Hugman, Director of Human Resources
f _i+w of Qmat hiaka Toymt
RESOLUTION NO. 05-073
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SOUTHLAKE, TEXAS, ADOPTING A SECTION 457 FICA
ALTERNATIVE RETIREMENT PLAN.
WHEREAS, it is in the City's best interest and the best interest of the City's employees
to provide a Qualifying Retirement System for all its employees not currently eligible for such a
Qualifying Retirement System ( "Deferred Compensation FICA Alternative Plan "), thereby
meeting the requirements of Section 11332 of the Omnibus Budget Reconciliation Act (OBRA
90) and Section 3121(b)(7)(F) of the Internal Revenue Code (IRC); and
WHEREAS, the Public Agency Retirement System (PARS) has made such a system
available to the City and its eligible employees and qualifies under OBRA 90 Section 11332,
IRC Sections 3121(b)(7)(F) and 457(b), and meets the meaning of the term "retirement system"
as given by Section 218(b)(4) of the Federal Social Security Act; NOW
THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
SOUTHLAKE, THAT:
Section 1: The City Council hereby adopts the PARS 457 Trust, including the PARS Section
457 FICA Alternative Retirement Plan, effective January 1, 2006 the Effective Date for the
benefit of employees on that date and hired thereafter; and
Section 2: The City Council hereby appoints the Cit y Manager, or his/her successor or his /her
designee as the City's Plan Administrator for the Public Agency Retirement System Section 457
FICA Alternative Retirement Plan; and
Section 3: The City's Plan Administrator is hereby authorized to implement the plan(s), execute
the PARS legal documents on behalf of the City and to take whatever additional actions are
necessary to maintain the City's participation in PARS and to maintain PARS compliance of any
relevant regulation issued or as may be issued; therefore, authorizing him/her to take whatever
additional actions are required to administer the City's PARS plan(s).
Section 4: This resolution shall become effective after its passage and adoption by the City
Council.
PASSED AND APPROVED THIS THE DAY OF , 2005.
Andy Wambsganss, Mayor
ATTEST:
Lori Farwell, City Secretary
NAHuman Resources \Director\CCOUNCILIFYOS- 061Res. No. 05 -073, ARS resolution.DOC
AGREEMENT FOR ADMINISTRATIVE SERVICES
This agreement ( "Agreement ") is made this day of , 2005, between Phase II
Systems, a California corporation, hereinafter Public Agency Retirement System
( "PARS ") and the City of Southlake ( "Agency ").
WHEREAS, Agency has adopted the City of Southlake PARS Section 457 FICA Alternative
Retirement Plan (the "Plan ") effective , 2005, and is desirous of retaining
PARS, as Trust Administrator to the PARS Trust, to provide administrative services;
NOW THEREFORE, the parties agree:
1. Services. PARS will provide the services pertaining to the Plan as described in the
exhibit attached hereto as "Exhibit I A" ( "Services ") in a timely manner, subject to the
further provisions of this Agreement.
2. Fees for Services. PARS will be compensated for performance of the Services as
described in the exhibit attached hereto as "Exhibit 1 B".
3. Payment Terms. Payment for the Services will be remitted directly from Plan assets
unless the Agency chooses to make payment directly to PARS. In the event that the
Agency chooses to make payment directly to PARS, it shall be the responsibility of'the
Agency to remit payment directly to PARS based upon an invoice prepared by PARS and
delivered to the Agency. If payment is not received by PARS within thirty (30) days of
the invoice delivery date, the balance due shall bear interest at the rate of 1.5% per
month. If payment is not received from the Agency within sixty (60) days of the invoice
delivery date, payment plus accrued interest will be remitted directly from Plan assets,
unless PARS has previously received written communication disputing the subject
invoice that is signed by a duly authorized representative of the Agency.
4. Fees for Services Beyond Scope. Fees for services beyond those specified in this
Agreement will be billed to the Agency at the rates indicated in PARS' standard fee
schedule in effect at the time the services are provided and shall be payable as described
in Section 3 of this Agreement. Before any such services are performed, PARS will
provide the Agency with written notice of the subject services, terms, and an estimate of
the fees therefore.
5. Information Furnished to PARS. PARS will provide the Service contingent upon the
Agency's providing PARS the information specified in the exhibit attached hereto as
"Exhibit 1 C" ( "Data'). It shall be the responsibility of the Agency to certify the
accuracy, content and completeness of the Data so that PARS may rely on such
information without further audit. It shall further be the responsibility of the Agency to
deliver the Data to PARS in such a manner that allows for a reasonable amount of time
for the Services to be performed. Unless specified in Exhibit IA, PARS shall be under
no duty to question Data received from the Agency, to compute contributions made to the
Plan, to determine or inquire whether contributions are adequate to meet and discharge
liabilities under the Plan, or to determine or inquire whether contributions made to the
Plan are in compliance with the Plan or applicable law. In addition, PARS shall not be
Page 1
liable for non performance of Services if such non performance is caused by or results
from erroneous and/or late delivery of Data from the Agency. In the event that the
Agency fails to provide Data in a complete, accurate and timely manner and pursuant to
the specifications in Exhibit 1C, PARS reserves the right, notwithstanding the further
provisions of this Agreement, to terminate this Agreement upon no less than ninety (90)
days written notice to the Agency.
6. Suspension of Contributions. In the event contributions are suspended, either
temporarily or permanently, prior to the complete discharge of PARS' obligations under
this Agreement, PARS reserves the right to bill the Agency for Services under this
Agreement at the rates indicated in PARS' standard fee schedule in effect at the time the
services are provided, subject to the terms established in Section 3 of this Agreement.
Before any such services are performed, PARS will provide the Agency with written
notice of the subject services, terms, and an estimate of the fees therefore.
7. Records. Throughout the duration of this Agreement, and for a period of five (5) years
after termination of this Agreement, PARS shall provide duly authorized representatives
of Agency access to all records and material relating to calculation of PARS' fees under
this Agreement. Such access shall include the right to inspect, audit and reproduce such
records and material and to verify reports furnished in compliance with the provisions of
this Agreement. All information so obtained shall be accorded confidential treatment as
provided under applicable law.
8. Confidentiality. Without the Agency's consent, PARS shall not disclose any
information relating to the Plan except to duly authorized officials of the Agency, subject
to applicable law, and to parties retained by PARS to perform specific services within
this Agreement. The Agency shall not disclose any information relating to the Plan to
individuals not employed by the Agency without the prior written consent of PARS,
except as such disclosures may be required by applicable law.
9. Independent Contractor. PARS is and at all times hereunder shall be an independent
contractor. As such, neither the Agency nor any of its officers, employees or agents shall
have the power to control the conduct of PARS, its officers, employees or agents, except
as specifically set forth and provided for herein. PARS shall pay all wages, salaries and
other amounts due its employees in connection with this Agreement and shall be
responsible for all reports and obligations respecting them, such as social security,
income tax withholding, unemployment compensation, workers' compensation and
similar matters.
10. Indemnification. To the extent permitted by law, PARS and Agency hereby indemnify
each other and to hold the other harmless, including their respective officers, directors,
employees, agents and attorneys, from any claim, loss, demand, liability, or expense,
including reasonable attorneys' fees and costs, incurred by the other as a consequence of
PARS' or Agency's, as the case may be, acts, errors or omissions with respect to the
performance of their respective duties hereunder.
11. Compliance with Applicable Law. The Agency shall observe and comply with federal,
state and local laws in effect when this Agreement is executed, or which may come into
Page 2
effect during the term of this Agreement, regarding the administration of the Plan.
PARS shall observe and comply with federal, state and local laws in effect when this
Agreement is executed, or which may come into effect during the term of this
Agreement, regarding Plan administrative services provided under this Agreement.
12. Applicable Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas. In the event any party institutes legal proceedings to
enforce or interpret this Agreement, venue and jurisdiction shall be in any state court of
competent jurisdiction sitting in Tarrant County, Texas.
13, Force Majeure. When a party's nonperformance hereunder was beyond the control and
not due to the fault of the parry not performing, a party shall be excused from performing
its obligations under this Agreement during the time an d to the extent that it is prevented
from performing by such cause, including but not limited to: any incidence of fire, flood,
acts of God, acts of terrorism or war, commandeering of material, products, plants or
facilities by the federal, state or local government, or a material act or omission by the
other party.
14. Ownership of Reports and Documents. The originals of all letters, documents, reports,
and data produced for the purposes of this Agreement shall be delivered to, and become
the property of the Agency. Copies may be made for PARS but shall not be furnished to
others without written authorization from Agency.
15. Designees. The Plan Administrator of the Agency, or their designee, shall have the
authority to act for and exercise any of the rights of the Agency as set forth in this
Agreement, subsequent to and in accordance with the written authority granted by the
Governing Board of the Agency, a copy of which writing shall be delivered to PARS.
Any officer of PARS, or his or her designees, shall have the authority to act for and
exercise any of the rights of PARS as set forth in this Agreement.
16. Notices. All notices hereunder and communications regarding the interpretation of the
terms of this Agreement, or changes thereto, shall be effected by delivery of the notices
in person or by depositing the notices in the U.S. mail, registered or certified mail, return
receipt requested, postage prepaid and addressed as follows:
(A) To PARS: PARS; 5141 California Avenue, Suite 150, Irvine, CA 91617 -3069;
Attention: President
(B) To Agency: City of Southlake; 1400 Main Street, Southlake, TX 76092; Attention:
(Plan Administrator)
Notices shall be deemed given on the date received by the addressee.
17. Term of Agreement. This Agreement shall remain in effect for the period beginning
January 1, 2006 and ending December 31, 2008 ( "Initial Term "). This Agreement shall
be automatically extended, at the end of the initial Term or any renewal period, for a
renewal period of one (1) year upon the same terms and conditions, unless either party
gives written notification of termination to the other party sixty (60) or more days prior to
the end of the Initial Term or any renewal period thereafter.
Page 3
In the event the Agency determines that PARS has failed to satisfactorily perform the
services outlined in ExhibitlA of this Agreement, Agency will have the right to notify
PARS of its intent to terminate the Agreement within sixty (60) days unless PARS cures
the performance deficiencies to the Agency's satisfaction within thirty (30) days of
receipt of the notice of intent to terminate.
Agency intends to remit all payments due or to become due under this Agreement if
funds are legally available. In the event Agency is unable to appropriate funds at any
time during the term of this Agreement, Agency will have the right to terminate this
Agreement upon thirty (30) days written notice to PARS.
18. Amendment. This Agreement may not be amended orally, but only by a written
instrument executed by the parties hereto.
19. Entire Agreement. This Agreement, including exhibits, contains the entire
understanding of the parties with respect to the subject matter set forth in this Agreement.
In the event a conflict arises between the parties with respect to any term, condition or
provision of this Agreement, the remaining terms, conditions and provisions shall remain
in full force and legal effect. No waiver of any term or condition of this Agreement by
any party shall be construed by the other as a continuing waiver of such term or
condition.
20. Attorneys Fees. In the event any action is taken by a party hereto to enforce the terms of
this Agreement the prevailing party herein shall be entitled to receive its reasonable
attorney's fees.
21. Counterparts, This Agreement may be executed in any number of counterparts, and in
that event, each counterpart shall be deemed a complete original and be enforceable
without reference to any other counterpart.
22. Headings. Headings in this Agreement are for convenience only and shall not be used to
interpret or construe its provisions.
23. Effective Date. This Agreement shall be effective on the date first above written, and
also shall be the date the Agreement is executed.
AGENCY:
BY:
TITLE:
DATE:
PARS:
BY:
TITLE: Senior Vice President
DATE:
(Plan Administrator)
Page 4
EXHIBIT IA
SERVICES
PARS will provide the following services for the City of Southlake PARS Section 457 FICA
Alternative Retirement Plan:
1. Plan Installation Services:
(A) Meeting with appropriate Agency personnel to discuss Plan provisions,
implementation timelines, benefit communication strategies, data reporting and
contribution submission requirements;
(B) Providing the necessary analysis and advisory services to finalize these elements of
the Plan;
(C) Providing for review by Agency legal counsel the documentation needed to establish
the Plan;
2. Plan Administration Services:
(A) Monitoring the receipt of Plan contributions made by the Agency to the trustee of the
PARS Trust Program ( "Trustee "), based upon information received from the Agency
and the Trustee;
(B) Performing periodic accounting of Plan assets, including the allocation of employer
and employee contributions, distributions, investment activity and expenses (if
applicable) to individual Plan participant ( "Participant ") accounts, based upon
information received from the Agency and/or Trustee;
(C) Acting as ongoing liaison between the Participant and the Agency in regard to
distribution payments, which shall include use by the Participants of toll -free
telephone communication to PARS;
(D) Coordinating the processing of Participant distribution payments pursuant to
authorized written Agency certification of distribution eligibility, authorized direction
by the Agency, and the provisions of the Plan, and, to the extent possible, based upon
Agency - provided Data;
(E) Directing Trustee to liquidate Plan assets (if necessary) and make Participant
distribution payments, and producing required tax filings regarding to said
distribution payments;
(F) Notifying the Trustee of the amount of Plan assets available for further investment
and management, or, the amount of Plan assets necessary to be liquidated in order to
fund Participant distribution payments;
(G) Coordinating actions with the Trustee as directed by the Plan Administrator within
the scope this Agreement;
(H) Preparing and submitting periodic reports of non - contributing Participants to the
Agency;
Page 5
(1) Preparing and submitting a monthly report of Plan activity to the Agency, unless
directed by the Agency otherwise;
(J) Preparing and submitting an annual report of Plan activity to the Agency;
(K) Maintaining Plan in compliance of any relevant regulation issued or as may be
issued.
3. PARS is not licensed to provide and does not offer tax, accounting, legal, investment or
actuarial advice. In providing the services specified above, PARS will retain qualified
professional service providers at its cost as it deems necessary if the service lies outside
its area of expertise.
Page 6
EXHIBIT 1 B
FEES FOR SERVICES
1. PARS will be compensated for performance of Services, as described in Exhibit IA
based upon the following schedule:
(A) A distribution fee equal to $12.00 per terminated Participant ( "Distribution Fee "),
which shall be deducted solely from the terminating Participant's account;
(B) An annual asset fee to be paid by the Agency based on the following schedule:
For Plan Assets from: Annual Rate:
$1
to
$500,000
2.00%
$500,001
to
$2,500,000
1.50%
$2,500,001
to
$5,000,000
1.25%
$5,000,001
to
$10,000,000
1.00%
$10,000,001
and
above
0.75%
Annual rates are prorated and paid monthly. The annual asset fee shall be calculated
by the following formula [Annual Rate divided by 12 (months of the year)
multiplied by the Plan asset balance at the end of the month]. Asset based fees are
subject to a $300.00 monthly minimum. Trustee and Investment Management Fees
are not included.
(C) A fee equal to the out of pocket costs charged to PARS by an outside contractor for
formatting contribution data on to a suitable .magnetic media, charged only if the
contribution data received by PARS from the Agency is not on readable magnetic
media ( "Data Processing Fee ").
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EXHIBIT 1C
DATA REQUIREMENTS
PARS will provide the Services under this Agreement contingent upon receiving the
following information:
1. Contribution Data — readable magnetic media containing the following items of employee
information related to the covered payroll period:
(A) Agency name
(B) Employee's legal name
(C) Employee's social security number
(D) Payroll date
(E) Employer contribution amount
(F) Employee contribution amount
2. Distribution Data — written Plan Administrator's (or authorized Designee's) direction to
commence distribution processing, which contains the following items of Participant
information:
(A) Agency name
(B) Participant's legal name
(C) Participant's social security number
(D) Participant's address
(E) Participant's phone number
(F) Participant's birthdate
(G) Participant's condition of eligibility
(H) Participant's effective date of eligibility
(I) Signed certification of distribution eligibility from the Plan Administrator, or
authorized Designee
3. Executed Legal Documents:
(A) Certified resolution of the City of Southlake
(B) Trust Document
(C) Plan Document
(D) Trustee Investment Forms
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