REPORT TO COUNCIL
SUBJECT
Title
Action on a Resolution Adopting and Approving the Implementation of a Section 401(a) Deferred Compensation Plan and Authorizing Execution of Side Letter Agreements with Bargaining Units for City Contributions Towards Deferred Compensation Pursuant to the 401(a) Plan
Report
BACKGROUND
The City provides retirement benefits through different vehicles for its employees. This includes a defined benefit pension plan with CalPERS, Social Security, and deferred compensation.
The City established a deferred compensation retirement plan (hereafter, "Plan") and authorized a deferral of a portion of employee compensation to be contributed to the plan and invested in an Internal Revenue Service (IRS) approved plan. The plan was established under Section 457(b) (hereafter, "457(b) plan") of the Internal Revenue Code of 1986, as amended. Generally speaking, a 457(b) plan is similar to a private sector Section 401(k) plan. Through the labor negotiation process, the City agreed with multiple bargaining units to make contributions towards their represented employees' deferred compensation retirement accounts. Those City contributions were deposited in the employees' 457(b) deferred compensation retirement accounts. Recently, there was interest in the creation of a Section 401(a) deferred compensation retirement account (hereafter, "401(a) plan") in which the City would make employer contributions to certain of its employees' 401(a) deferred compensation retirement accounts to allow employees to maximize their own contributions to the 457(b) deferred compensation retirement account.
DISCUSSION
On or about November 21, 2024, the Deferred Compensation Advisory Committee recommended to the City Manager that the City adopt a Section 401(a) deferred compensation retirement plan and authorized the City Manager to execute all required Plan documents upon aligning terms with the City's existing Section 457(b) deferred compensation retirement plan to ...
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