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92-2813 OrdinanceORDINANCE NO. 92-2813 AN ORDINANCE OF THE CITY OF MIAMI BEACH, FLORIDA, PROVIDING FOR THE CREATION OF A DEFINED CONTRIBUTION RETIREMENT PLAN UNDER SECTION 401(A) OF THE INTERNAL REVENUE CODE OF 1986, ESTABLISHING THE BENEFITS PROVIDED UNDER THE DEFINED CONTRIBUTION PLAN, PROVIDING FOR SEVERABILITY, A REPEALER AND AN EFFECTIVE DATE. Whereas, the City Commission of the City of Miami Beach, Florida, wishes to establish a defined contribution retirement plan for its unclassified employees as an optional plan to the Unclassified Employees and Elected Officials Retirement System; and, Whereas, the benefits to the employee and the obligation of the City must be established for the proper maintenance of the plan; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA: Section 1 Establishment of a Defined Contribution Retirement Plan for the City. ARTICLE 1. Creation and Purpose of the System 1.01 A retirement system is hereby created under and by the authority of Chapter 166, Florida Statutes. This system shall be known as the "City of Miami Beach Defined Contribution Retirement System" and shall be hereinafter, referred to as the "Defined Contribution Plan" or the "System". 1.02 The purpose of the Defined Contribution Plan is to provide retirement and other related benefits for eligible employees who elect membership in this System as an option to other retirement systems sponsored by the City. 1.03 The System shall at all times comply with the provisions of section 401(a) of the Internal Revenue Code of 1986, as the same may be amended from time to time. ARTICLE 2. Definitions For purposes of the Defined Contribution Plan, certain words and phrases shall have the meanings ascribed to them in this article except when the context otherwise requires. The masculine pronoun, whenever used, shall include the feminine. 2.01 "City" or "Employer" means the City of Miami Beach, Florida. 2.02 "City Commission" or "Commission" means the City Commission of the City of Miami Beach, Florida. 2.03 "Employee" means any person employed by the City on a regular basis, who is receiving compensation from the City for personnel services, and who has selected this System as the retirement plan of his choice, exclusive of the following: (a) Persons whose services are compensated on a contractual basis. (b) Persons employed on a provisional, original probationary or other temporary basis. (c) Members of boards or commissions, officers, or employees receiving no salary or a nominal salary or fee. (d) Persons whose regular employment with the City is for less than thirty (30) hours per week. (e) Members of any of the other City sponsored defined benefit retirement plans. 2.04 "Members" means persons who have selected this System for their retirement plan rather than one of the other City sponsored retirement plans. 2.05 "Earnings" means all compensation for personal services rendered as an employee, but excluding any extra compensation allowance such car allowance or uniform allowance. 2.06 "Board of Trustees" means the City Manager or his designee, the Personnel Director and the Finance Director of the City. 2.07 "Employee Account" or "Account" means the individual employee self directed investment account containing all contributions made by and for the employee. ARTICLE 3. Membership 3.01 Any person employed on or after October 18, 1992, in the unclassified service of the City, shall have the right to select this System as an optional retirement plan to the Unclassified Employees and Elected Officials Retirement System. 3.02 Any current employee of the City who is a member of the Unclassified Employees and Elected Officials Retirement System shall have the irrevocable right to elect to transfer membership from that plan the Defined Contribution System. Such right of transfer may be limited by a specific time limitation during which the election on the transfer may be made. 3.03 Any employee who returns to the unclassified service of the City, who previously elected membership in this System shall be continued in this System upon his return to unclassified service. ARTICLE 4. Contributions 4.01 Upon employment, or in the case of employees transferring membership under section 3.02 above, upon transfer, the employee shall have the irrevocable option to select the level of contribution which shall be withheld from his compensation and deposited into his account. Such contributions may be within a range of contributions of from a minimum of five percent (5%) of the employee's annual earnings to a maximum of fifteen percent (15%) of the employee's annual earnings. Once an employee selects the level of his contribution to the System, that level of contribution may be amended annually on a date established by the Board of Trustees. 4.02 The City shall contribute into the account of the employee an amount equal to the employee contribution to a maximum contribution of ten percent (10%) of the employee's earnings. 4.03 All contributions made by and for the employee shall become the property of the employee upon contribution. The employee shall have a right to all of the funds in his account, including earnings thereon, upon separation of service with the City for any reason, and a right to withdraw the funds upon retirement. ARTICLE 5. Retirement 5.01 All employees transferring their membership under section 3.02 hereunder shall be eligible to retire and begin withdrawing funds from their account upon their separation of service from the City and the first day of the calendar month coincident with or next following the attainment of the fifty-fifth anniversary of their birth. 5.02 All employees who become employees on or after October 18, 1992, shall be eligible to retire and begin withdrawing funds from their account upon their separation of service from the City and the first day of the calendar month coincident with or next following the attainment of the sixtieth anniversary of their birth. 5.03 Any employee who is totally and permanently disabled and unable to carryout the requirements of their position in City service shall be entitled to a disability retirement. Such disability retirement benefit shall be equal to two-thirds of the employee's annual earnings, provided that such benefit shall not exceed $5,000 a month. This disability payment will commence upon the completion of the sixth month of such disability and continue throughout the life of the disabled employee. The City shall be obligated to purchase an insurance policy for employees in this System which shall provide this benefit. An offset to the fullest extent allowed by law for all payments made to the disability retiree for worker's compensation payments, shall be taken by the Board of Trustees. The Board of Trustees shall consider all requests for total and permanent disability, and shall make positive recommendations to the insurer of all employees whom it determines meet the insurer's criteria for total and permanent disability. The final determination of disability shall be made by the insurer. ARTICLE 6. Board of Trustees 6.01 The City of Miami Beach Defined Contribution Retirement System shall be construed as a trust and shall be administrated by a Board of Trustees. The Board shall have the general responsibility for the proper operation and management of the City of Miami Beach Defined Contribution Retirement System and for making effective the provisions of this Ordinance. 6.02 The Board shall consist of three (3) persons, each of whom shall be designated as a Trustee. The members of the Board shall be as follows: (a) (b) (c) (d) (e) The City Manager or his designee The Personnel Director of the City The Finance Director of the City A quorum shall consist of two members and the affirmative votes of two members shall be necessary for the Board to take action. Each Trustee shall have one vote. 6.03 Each Trustee shall take an oath of office within ten (10) days after his appointment. A trustee shall serve without compensation but shall be reimbursed for any expenses incurred as a result of service as a trustee. 6.04 The Board shall have all powers and duties arising from this Ordinance and from Part 7, Chapter 112, Florida Statutes for the proper operation and maintenance of the Defined Contribution System. ARTICLE 7. General 7.01 The City Attorney shall serve as legal advisor to the Board when requested to do so, and his services to the Board shall not be compensated additionally. 7.02 All Employee Accounts, disability payments and other benefits provided in accordance with this System shall not be assignable. 7.03 Any person who shall knowingly make any false statement, or shall falsify, or permit to be falsified, any record or records of the Defined Contribution Plan in any attempt to defraud the Defined Contribution Plan shall be guilty of a misdemeanor, and shall be punishable therefor, upon conviction, by a fine of not more than one thousand dollars ($1,000.00) or imprisonment for not more than ninety (90) days, or both, in the discretion of the Court. Section 2 Repealer All ordinances or parts of ordinances in conflict herewith be and the same are hereby repealed. Section 3 Severability If any article, section, subsection, clause or provision of this ordinance is held invalid, the remainder shall not be effected by such invalidity. Section 4 Effective Date of October, 1992. Passed and Adopted this __ Attest: City Clerk 1st read±ng 9/16/92 2nd read±ng 10/8/92 This Ordinance shall become effective on the 18th day 8th day of ~~ FORM APPROVED LEGAL DEPT. CITY OF MIAMI BEACH CitY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH FLORIDA 33139 OFFICE OF THE CITY MANAGER COMMISSION MEMORANDUM NO. TELEPHONE: (305) 673-7010 FAX: (305) 673-7782 5 af ;L TO: FROM: Mayor Seymour Gelber and Members of the City Commission Floger M. Ca~//~.` ~ City Manage~,./~'v ~ -~ DATE: September 16, 1992 SUBJECT: Two Ordinances Allowing For and Creating A Defined Contribution Retirement Plan as an Option for Unclassified Employees and Elected Officials Retirement System Administrative Recommendation The Administration recommends that the City Commission adopt these Ordinances on first reading and schedule a public hearing and second reading at the Commission meeting of October 7, 1992. At the City Commission meet.:.ag oe September 2, 1992, a request was made by the City Commission for the Administration to review the effects of the establishment of a defined contribution Plan as an optional benefit for employees rather than the current defined benefit plan. The implementation of the defined contribution plan requires the adoption of two ordinances. The first ordinance amends the current Unclassified Employees and Elected Officials Retirement System to allow for current employees to transfer their accumulated benefit from that plan to the defined contribution plan and also allows new employees the option to select either of the two plans upon employment. The second ordinance authorizes the execution of an agreement with providers of such a 401(a) defined contribution plan, and establishes the parameters of the benefits within that plan. Analysis The defined contribution plan authorized in the second ordinance would have benefits for members of the system as follows: Employee: City: Vesting: Retirement: can contribute from 5% to 15% of salary at their option match employee contribution up to 10% immediate for unclassified, at the end of probation for others age 60 for new hires, age 55 for transfers 8¸3 Transfers: Disability: Loans: allowed for current employees and the transfer will be equal to the present value of accumulated benefit. City funded long-term disability insurance for six months to life equivalent to two-thirds of pay to a ma~dmum of $60,000 ability to borrow up to 40% of balance using balance as collateral Each new unclassified employee would have an irrevocable option upon employment _~ ....... :: ~ co.,r,~.~.t, on to select the bifurcated ,4,,e;.,on benefit plan, "Green Report", or ,n" defined ' .... " plan above described. The experience of other cities has shown that most new employees, given this option, will select the defined contribution plan. There are two reasons that this would be their selection. First, the defined contribution plan vests immediately for unclassified employees and as the defined benefit plan has a 10-year vesting period, most new employees will not anticipate working for the City for the period it would take to vest in the defined benefit plan. Second, most of our new hires will be younger and the ability to select a contribution level at a rate of less than the 10% required in the defined benefit plan will allow them to increase their take-home pay. Those current employees most likely to wish to transfer their benefit to this plan will be those of shorter tenure with the City. Any current employee with less than-four years of service may wish to transfer his benefit for the portability feature inherent in a defined contribution plan. 'With the amount of the transfer equal to the present value of the employee's accumulated benefit, the employee would be in equal position at the point of the transfer between the two plans. The defined contribution plan will be less costly to the City than the current Unclassified and Elected Officials Retirement System. The City currently contributes in excess of-20% of the employee's covered pay as its contribution into the defined benefit plan. The maximum contribution, as a percentage of payroll, that the City will be required to fund into the defined contribution plan is 10% of covered pay with the additional cost of providing a long-term disability insurance program for that plan. The savings to the City will be approximately 10% of the amount of total payroll cost for all employees selecting this plan over the Unclassified Plan. This total covered payroll cost will be approximately $2.25 million by the end of the first year of the implementation of the new plan. This would equate to $225,000 in savings to the City on an annual basis. Such savings will increase in future years as more incorrfing employees select the defined contribution plan over the defined benefit plan. Conclusion With the anticipated savings of $225,000 for the first year of implementation of the new defined contribution plan, and as this plan will be solely at the discretion of the employee, the Administration recommends that the City Commission adopt these ordinances providing for the amendments to the current Unclassified Employees and Elected Officials Retirement System and the establishment of the defined contribution plan.