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R-06-06-22-10B1 - 6/22/2006RESOLUTION NO. R -06-06-22-10B1 WHEREAS, the City of Round Rock has previously adopted a Deferred Compensation Plan for Public Employees ("Plan"), and WHEREAS, the City Council wishes to amend said Plan, Now Therefore BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS, That the Mayor is hereby authorized and directed to execute on behalf of the City a Loan to Participants Amendment to Plan Document, a copy of same being attached hereto as Exhibit "A" and incorporated herein for all purposes. The City Council hereby finds and declares that written notice of the date, hour, place and subject of the meeting at which this Resolution was adopted was posted and that such meeting was open to the public as required by law at all times during which this Resolution and the subject matter hereof were discussed, considered and formally acted upon, all as required by the Open Meetings Act, Chapter 551, Texas Government Code, as amended. RESOLVED this 22nd day of June, 2006. A t.AN I C GRA W , Mayor pep -T fl 1 City of Round Rock, Texas CHRISTINE R. MARTINEZ, City Sectary @PFDesktop\::ODMA/WORLDOX/O:/WDOX/RESOLUTI!R60622B1.WPD/sc THE UNITED STATES CONFERENCE OF MAYORS DEFERRED COMPENSATION PROGRAM THE DEFERRED COMPENSATION PLAN FOR PUBLIC EMPLOYEES LOANS TO PARTICIPANTS AMENDMENT TO PLAN DOCUMENT WHEREAS, PLAN SPONSOR executed the above referenced Plan Document, as amended: and WHEREAS, effective , PLAN SPONSOR now desires to further amend the plan document. The following Section 8.06 is hereby added: 8.06 Loans to PARTICIPANTS (a) PLAN SPONSOR has elected to make loans available to PARTICIPANTS and has delegated certain administrative duties regarding loans from the PLAN to the ADMINISTRATOR. (b) Any loan by the PLAN to a PARTICIPANT under this Section shall be subject to the loan administrative procedures established by the ADMINISTRATOR as well as the following requirements: (i) Loan Eligibility. Any PARTICIPANT may apply for a loan from the PLAN. A PARTICIPANT who has defaulted on a previous loan from the PLAN shall not be eligible for another loan from the PLAN until all defaulted loans are repaid in full, including accrued interest and fees. (ii) Loan Application and Loan Agreement. A PARTICIPANT must complete and return to ADMINISTRATOR a loan application. A non- refundable application fee established by ADMINISTRATOR will be deducted from the PARTICIPANT'S ACCOUNT(s) at the time of loan origination. Before a loan is issued, the PARTICIPANT must enter into a legally enforceable loan agreement as provided for by the ADMINISTRATOR. (iii) Loan Repayment. The PARTICIPANT receiving a loan shall be required to furnish to ADMINISTRATOR any information and authorization necessary to effectuate repayment of the loan prior to the commencement of a loan. In the event that a payment cannot be processed because of lack of sufficient funds, the ADMINISTRATOR shall assess an insufficient funds charge, which will be deducted from the PARTICIPANT'S ACCOUNT(s). 1 EXHIBIT "A" (iv) Loan Term and Interest Rate. The maximum term over which a loan maybe repaid is five (5) years (fifteen (15) years if the PLAN SPONSOR permits loans for the purchase of a PARTICIPANT'S principal residence). Each loan shall be amortized in substantially equal payments consisting of principal and interest during the term of the loan, except that the amount of the final payment may be higher or lower. The ADMINISTRATOR shall establish the interest rate for any loan. (v) Loan Frequency. Each Participant may have only one (1) PLAN loan outstanding at any given time. A PLAN loan which is in default, even if the defaulted loan was treated as a "deemed distribution" under federal regulations, shall be treated as an outstanding loan until such PARTICIPANT'S account balance is offset by the amount of principal and accrued interest under the loan. A PARTICIPANT will be granted a loan no more frequently than two (2) times in any twelve (12) month period. (vi) Default. The PARTICIPANT must pay the full amount of each loan payment (principal and interest) on the date that it is due. Failure to make such a payment by the due date, or within any cure period established by the ADMINISTRATOR, shall cause the PARTICIPANT to be in default for the entire amount of the loan, including any accrued interest. A loan will also be in default if the PARTICIPANT either refuses to execute, revoke, or rescind any agreement necessary to comply with the provisions of this Section or the loan administrative procedures established by the ADMINISTRATOR , commences or has commenced against PARTICIPANT a bankruptcy case, or upon the death of the PARTICIPANT. (vii) Loan Security. By accepting a loan, the PARTICIPANT is giving a security interest in their vested PLAN balance as of the loan process date, together with all additions thereof, to the PLAN that shall at all times be equal to 100% of the unpaid principal balance of the loan together with accrued interest. (viii) Loan Amount. The maximum amount of any loan permitted under the PLAN is the lesser of (i) 50% of the PARTICIPANT'S vested account balance less any outstanding loan balances under the PLAN or (ii) $50,000 less the highest outstanding loan balance during the preceding one-year period. The ADMINISTRATOR shall establish the minimum loan amount. The PARTICIPANT and not the ADMINISTRATOR shall at all times remain responsible for ensuring 2 that any loan received under the PLAN is in accordance with these limits with regard to any other loans received by the PARTICIPANT under any other plans of the PARTICIPANT's employer. (ix) Loan Maintenance Fee. Until a loan is repaid in full, an annual loan maintenance fee established by ADMINISTRATOR will be deducted from the PARTICIPANT'S ACCOUNT(s). (x) Loan Default Fee. At the time when a default occurs, a loan default fee established by ADMINISTATOR will be deducted from the PARTICIPANT'S ACCOUNT(s). (c) The ADMINISTRATOR shall fix such other terms and conditions necessary to the administrative maintenance of the provisions of this Section and as necessary to comply with the IRC and regulations there under. IN WITNESS WHEREOF, the undersigned has executed this Amendment this day of 20 . (Name of PLAN SPONSOR) By: 3 DATE: June 16, 2006 SUBJECT: City Council Meeting - June 22, 2006 ITEM: 10.B.1. Consider a resolution authorizing the Mayor to execute an Amendment to the Deferred Compensation Plan. Department: Human Resource Staff Person: Teresa Bledsoe. Director Justification: Nationwide Retirement Solutions, Inc., as Third Party Administrator of the United States Conference of Mayors, Deferred Compensation Program, administers the City of Round Rock Deferred Compensation Plan for the City Employees. This amendment includes a loan provision available to participants through the deferred compensation program. This will increase the employee benefit options to include: • Flexibility when making decisions on how to finance large purchases. • Debit consolidation - This option would give employees (participants) the option to consolidate and pay themselves back principal and interest. • Tax benefits - A loan offered through the deferred comp plan provides a way to avoid taxes, provided the employee repays what they took out. • Timesaving - The processing of a loan takes about three business days with deposit in the bank within 5 business days. Funding: Cost: N/A Source of funds: N/A Outside Resources: Nationwide Retirement Solutions, Inc. Background Information: In 1979, the City of Round Rock adopted the U. S. Conference of Mayors Deferred Compensation Program and its attendant investment options and established the City of Round Rock Deferred Compensation plan for the voluntary participation of all eligible city employees. The program provides substantial tax benefits to allow employees to voluntarily set aside and invest portions of their current income to meet their future financial requirements and supplement their City retirement and Social Security, at no cost to the City. Public Comment: N/A EXECUTED DOCUMENT FOLLOWS THE UNITED STATES CONFERENCE OF MAYORS DEFERRED COMPENSATION PROGRAM THE DEFERRED COMPENSATION PLAN FOR PUBLIC EMPLOYEES LOANS TO PARTICIPANTS AMENDMENT TO PLAN DOCUMENT WHEREAS, PLAN SPONSOR executed the above referenced Plan Document, as amended: and WHEREAS, effective jp'aa'('tp , PLAN SPONSOR now desires to further amend the plan document. The following Section 8.06 is hereby added: 8.06 Loans to PARTICIPANTS (a) PLAN SPONSOR has elected to make loans available to PARTICIPANTS and has delegated certain administrative duties regarding loans from the PLAN to the ADMINISTRATOR. (b) Any 1pan by the PLAN to a PARTICIPANT under this Section shall be subject to the loan administrative procedures established by the ADMINISTRATOR as well as the following requirements: IQ -Ob -O4-1A-108 (i) Loan Eligibility. Any PARTICIPANT may apply for a loan from the PLAN. A PARTICIPANT who has defaulted on a previous loan from the PLAN shall not be eligible for another loan from the PLAN until all defaulted loans are repaid in full, including accrued interest and fees. (ii) Loan Application and Loan Agreement. A PARTICIPANT must complete and return to ADMINISTRATOR a loan application. A non- refundable application fee established by ADMINISTRATOR will be deducted from the PARTICIPANT'S ACCOUNT(s) at the time of loan origination. Before a loan is issued, the PARTICIPANT must enter into a legally enforceable loan agreement as provided for by the ADMINISTRATOR. (iii) Loan Repayment. The PARTICIPANT receiving a loan shall be required to furnish to ADMINISTRATOR any information and authorization necessary to effectuate repayment of the loan prior to the commencement of a loan. In the event that a payment cannot be processed because of lack of sufficient funds, the ADMINISTRATOR shall assess an insufficient funds charge, which will be deducted from the PARTICIPANT'S ACCOUNT(s). 1 (iv) Loan Term and Interest Rate. The maximum term over which a loan may be repaid is five (5) years (fifteen (15) years if the PLAN SPONSOR permits loans for the purchase of a PARTICIPANT'S principal residence). Each loan shall be amortized in substantially equal payments consisting of principal and interest during the term of the loan, except that the amount of the final payment may be higher or lower. The ADMINISTRATOR shall establish the interest rate for any loan. (v) Loan Frequency. Each Participant may have only one (1) PLAN loan outstanding at any given time. A PLAN loan which is in default, even if the defaulted loan was treated as a "deemed distribution" under federal regulations, shall be treated as an outstanding loan until such PARTICIPANT'S account balance is offset by the amount of principal and accrued interest under the loan. A PARTICIPANT will be granted a loan no more frequently than two (2) times in any twelve (12) month period. (vi) Default. The PARTICIPANT must pay the full amount of each loan payment (principal and interest) on the date that it is due. Failure to make such a payment by the due date, or within any cure period established by the ADMINISTRATOR, shall cause the PARTICIPANT to be in default for the entire amount of the loan, including any accrued interest. A loan will also be in default if the PARTICIPANT either refuses to execute, revoke, or rescind any agreement necessary to comply with the provisions of this Section or the loan administrative procedures established by the ADMINISTRATOR , commences or has commenced against PARTICIPANT a bankruptcy case, or upon the death of the PARTICIPANT. (vii) Loan Security. By accepting a loan, the PARTICIPANT is giving a security interest in their vested PLAN balance as of the loan process date, together with all additions thereof, to the PLAN that shall at all times be equal to 100% of the unpaid principal balance of the loan together with accrued interest. (viii) Loan Amount. The maximum amount of any loan permitted under the PLAN is the lesser of (i) 50% of the PARTICIPANT'S vested account balance less any outstanding loan balances under the PLAN or (ii) $50,000 less the highest outstanding loan balance during the preceding one-year period. The ADMINISTRATOR shall establish the minimum loan amount. The PARTICIPANT and not the ADMINISTRATOR shall at all times remain responsible for ensuring 2 that any loan received under the PLAN is in accordance with these limits with regard to any other loans received by the PARTICIPANT under any other plans of the PARTICIPANT's employer. (ix) Loan Maintenance Fee. Until a loan is repaid in full, an annual loan maintenance fee established by ADMINISTRATOR will be deducted from the PARTICIPANT'S ACCOUNT(s). (x) Loan Default Fee. At the time when a default occurs, a loan default fee established by ADMINISTATOR will be deducted from the PARTICIPANT'S ACCOUNT(s). (c) The ADMINISTRATOR shall fix such other terms and conditions necessary to the administrative maintenance of the provisions of this Section and as necessary to comply with the IRC and regulations there under. IN WITN SS WHEREOF, the undersigned has executed this Amendment this a a day of , 200(p. (Name of PLAN SPONSOR) A J.RN me tRW rnAyo. PRO -rem aitusit By: ei-ry of RouN1 Rock, Tk 3