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HomeMy WebLinkAboutPension & Audit Committee December 15, 2015 PENSION & AUDIT COMMITTEE COMMITTEE ROOM – December 15, 2015 11:00 A. M. PRESENT: Hons. Hardie Davis, Jr., Mayor; Wayne Guilfoyle, Finance Committee Chairman; Janice Jackson, Administrator; Donna Williams, Finance Director; Ben Hasan, Sammie Sias, Bill Fennoy and Bill Lockett, Commissioners; Jody Smitherman, Law Department; Lena Bonner, Clerk of Commission. ABSENT: Hon. Grady Smith, Mayor Pro Tem. 1.Receive report of investment earnings for 1945 and 1949 Pension Plans from pension consultant Charles A. May, Morgan Stanley. Mr. Charles May of Morgan Stanley made a presentation regarding the status of these pension plans. Mr. Guilfoyle: Motion to receive this as information. Ms. Williams: Second. Motion adopted unanimously. 2.Approve adoption of the revised Adoption Agreements, General Addendum and Service Credit Purchase Agreement for the GMEBS I plan. Ms. Smitherman: Pursuant to several IRS amendments that have occurred this year we are required to restate the adoption agreement, general addendum and service credit purchase agreement for the GMEBS I plan. That is the plan that covers the majority of the Augusta, Georgia employees. It’s basically purely housekeeping. I have a copy of the actual plans if you want to see them. I believe you got a copy of the summary of the changes. The only ones that really affect our employees at all are two. One is in January of 2015 GMA amended the master agreement to get rid of the 30-day waiting period for the employees for participation. That was eliminated January 1, 2015 so this brings that into effect and this also eliminates the directive that Public Safety personnel can’t work beyond 70 years of age. That has been in our plan for some time and we have not enforced it and so we have taken that directive out of the plan. The GMEBS I plan is an ordinance which normally requires two readings. We are requesting that the Commission waive the second reading because this revision has to be to the IRS by January 31 of 2016 and GMA’s tax counsel is concerned that we will miss that deadline if it is not approved at this meeting so we are asking to approve these agreements and waive the second reading. After a short discussion, Ms. Williams: I’ll make a motion to approve. Mr. Guilfoyle: Second. Motion adopted unanimously. 1 3.Request to add loans to the Richmond County Commission’s 457 Plan. Ms. Williams: This is technically not a pension plan. It is a deferred compensation plan that is available to all employees. Our existing plan agreement as it was adopted does not allow the employees to take out a loan. This is administered through Nationwide against their own contributions. It is a very common practice that these type plans do allow loans. We’ve had a request at different times from different employees and I believe the most recent probably made its way on down to this point now whereas this amendment to our existing plan has been brought forward. Ms. Smitherman: We have had requests from multiple employees that they be allowed to take loans against their own money. This is their deferred compensation. In order to allow loans to be taken against 457B plans, the government must engage in, enter into a loan agreement plan with Nationwide who administers our plan. In order to do that, there are certain elections that must be made and the loan agreement to be filled out. The first issue we need to determine is who would be eligible to take a loan against a 457B plan. The options are all employees, all employees who are approved non-military leave of absence, employees who are on military leave of absence, disabled employees, retired employees and terminated employees. Later we have to elect how the loan will be repaid. One of them is through a monthly automated clearinghouse in that the employee signs up for this loan and Nationwide takes the money directly out of their checking account each month. The other option is to prepare a deduction in which it comes out of their paycheck. The reason I bring that up now is because if the choice of the committee is to allow payroll deduction repayment, then the only employee that will be eligible to take a loan is the employees. We can’t do the people that are on leave because they will not be getting a paycheck so if you want those employees to be able to take a loan, then we have to go through the automated clearinghouse loan repayment method. Mr. Guilfoyle: Instead of having us determine which avenue is best to get the money back from the employees, Nationwide handles this account, correct? Ms. Smitherman: Yes. Mr. Guilfoyle: What is the best way or best practice that Nationwide had recommended? Ms. Smitherman: Nationwide’s recommendation is to allow all employees of any status to obtain a loan which means as a result that they also recommend that you do the automated clearinghouse as opposed to a payroll deduction. That’s their recommendation. Mr. Mayor: I’m rather cautious about that component of it, the ACH. I would rather take the approach of the payroll deductions because of how it will affect the retirements. Ms. Smitherman: Only active employees could do this in that case. Anyone on any type of leave could not take a loan. Ms. Williams: We all need to remember that this is not a pension plan. This is an optional savings tax deferral plan for employees. Not all employees are covered. This is also an 2 agreement between the employee and the administrator, Nationwide. This is not an Augusta Richmond County agreement. We simply sponsor it or facilitate it. But we control who can or can’t participate so in order to get the maximum number of participants to make it available, we would need to choose the all and by choosing all, allow those that are not currently getting a paycheck but that have contributions in the plan to be able to take advantage of making these loans and that’s the employees’ determination, what they want to do, and it is left up to Nationwide to be able to get those loan agreements repaid. Augusta has no interest, no risk included in this. Ms. Smitherman: We can only choose one repayment option so we could not allow both ACH and payroll deductions. We can choose one of the other which is going to determine who will participate. Mr. Mayor: How many employees participate today in it? Mr. Sias: Is there any percentage limit or any need of a restriction percentage? Ms. Smitherman: The plan has a maximum loan amount and it is limited to 50%. We have to set a minimum loan term and maximum loan term. The default or what Nationwide recommends is a minimum loan term of one year and a maximum loan term of five years however you can set a minimum loan term of less than one year but cannot be less than six months and you can also set a maximum loan term of less than five years but it cannot exceed five years. They recommend the loan repayment term be anywhere from one year to five years. Mr. Mayor: Who sets the repayment amount? Ms. Smitherman: That will be dependent on how much the loan is and Nationwide will break it down so that the employee can determine, depending on what their financial circumstances are at the time they take the loan, they can determine their repayment time period. Mr. Mayor: What about default? Ms. Smitherman: There are default provisions. Mr. Mayor: What is the timeline on this? Ms. Smitherman: There isn’t one. Mr. Mayor: I’d like to suspend action on this one and we’ll take more time to review this. If you would take the other information and distribute it to the members and we’ll thoroughly vet that and then look at it at the next meeting. Ms. Smitherman: For the minimum loan amount they recommend $1,000. The cure period for an ACH is 31 days. The loan interest rate is prime plus a certain amount. Their current recommendation is prime plus 2%. There is an issue of whether you want employees to allow loans for the purchase of principle residence. Their recommendation is to not allow this 3 because there are a lot more factors. The last issue is internet utilization or what do you want employees to do over the internet. Mr. Mayor: I think these are substantial issues to look at and give everyone enough time to look over this. Ms. Williams: I’d like to make a motion that Jody disseminate the information but since this isn’t actually a pension plan, it is simply a deferred compensation plan, that we bring this back through the Finance Committee so that we have an opportunity to discuss it and can bring it forward to the floor through our regular cycle and bring it to the second Finance meeting in January and take action for approval at the first Commission meeting in February. Mr. Guilfoyle: Second. Motion adopted unanimously. 4.Restatement and Termination of Augusta-Richmond County Planning Commission’s Georgia Municipal Association 401(a) Defined Contribution Plan; Required Federal Law Updates. Ms. Williams: This has to do with our 401 Defined Contribution Plan both one that was in effect from the Planning Commission before it became an Augusta department. I guess we can take that up first and then the next portion is Augusta’s 401 Defined Contribution Plan. Ms. Smitherman: Very simply the first one is just a matter of information. The Augusta, Georgia County Planning Commission had a 401 Defined Contribution Plan. The 401(a), these are different than the GMEBS plans we’re talking about which is a defined benefit plan. With GMEBS you put in a certain amount, say 4%, and you get a certain defined amount out each month once you retire. Defined contribution is more like a 401(k). It earns interest and whatever that value is is what you’ll get out upon retirement. For whatever reason the Planning Commission had a 401(a) defined contribution plan in effect at the time that it ceased having employees and the employees came over to Augusta, Georgia. We adopted their GMEBS plan which is why we have a GMEBS I and a GMEBS II plan. The GMEBS II plan is the old Planning Commission plan; however, the 401(a) plan has no active employees and has no assets. So as an informational item we were letting you know that we are bringing to the Planning Commission a resolution and restatement to dissolve their 401(a) plan because it has no active participants and it has no assets and that will clean that up and that plan will never have to be dealt with again after this year. Mr. Mayor: So you’re going to take that to the Planning Commission. They will take action on that matter and then they’ll send it back to the full Commission to ratify that? Ms. Smitherman: It will not need to be ratified by the full Commission. That plan is between GMA and the Planning Commission. It does not affect any employees. The other issue is Augusta, Georgia’s 401(a) defined contribution plan. Similar to the GMEBS plan there have 4 just been multiple tax amendments that happened through the course of the year and we have a legal obligation to restate the 401(a) plan to be in compliance with the IRS regulations and so we are asking for you to approve the resolution and restatement of the adoption agreement and the addendum for the Augusta, Georgia County 401(a) defined contribution plan. This one needs to be to the IRS by January 31, 2016 but because is not an ordinance, there is no need to waive a second reading. A single approval is all that is necessary for this plan. Mr. Mayor: Who are the participants in that? Ms. Williams: There are 131 active folks in there. They contribute 4% into the plan and Augusta matches it with 2%. Mr. Mayor: Are they senior level staff? Typically the big distinction between 401(k)s and 401(a)s is that private employers offer 401(k)s to generally everybody and 401(a)s as an incentive to keep employees on – Ms. Williams: It’s a mix. I’ll give you a little history of this. This was formerly called the 1998 Plan. It was available and mandatory for all employees before the GMEBS plan was adopted in 2008 so at one point you had a good bit of Augusta’s population on that plan. In 1998 when the GMEBS defined benefit plan was created, employees were given a one-time election to stay with this plan and the plan was closed or they could move their existing contributions over into the defined benefit plan. The majority of employees moved to the defined benefit plan. You have a mix of these 131 folks that for whatever reason decided to stay on this plan and not go to GMEBS. They have no defined benefit plan. They stayed with this plan and they range from administrative assistants to upper level management. It’s a broad mix of employees. Mr. Mayor: With a defined contribution from the city. Ms. Williams: 2%. Mr. Mayor: And does the same apply for GMEBS, the plan that they’re now in? Ms. Williams: These folks are not in GMEBS. GMEBS, the employees that are in that plan, Augusta contributes like they do on the ’45 and the ’49 plan whatever is necessary to keep that plan fully funded. Right now it is somewhere in the neighborhood of a little over $6 million dollars per year but we have in excess of 2,000 folks on that plan. Mr. Mayor: And the employee is able to contribute upwards of how much? Ms. Williams: It’s a set amount. 4%. Ms. Smitherman: I would like a motion to approve the resolution and restatement of the adoption agreement and addendum for Augusta Richmond County 401(a) Defined Contribution Plan. Mr. Guilfoyle: So move on that what you just said. 5 Ms. Williams: Second. Mr. Mayor: Ms. Jackson. Ms. Jackson: I was just going to second. Mr. Mayor: Okay. Motion adopted unanimously. ADJOURNMENT: There being no further business, the meeting was adjourned. Lena J. Bonner Clerk of Commission 6