Board of Directors Regular Meeting Agenda


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Meeting Date: 10/16/2014  

SUBJECT MATTER:
Receive, consider and act upon an update regarding The Woodlands Firefighters Retirement System, and approve a Board Resolution in connection therewith:
FISCAL IMPACT:
None.
BACKGROUND:
In August 2014, firefighters held an election and approved the plan document of The Woodlands Firefighters Retirement System (“TWFRS”).  This approval means that a pension plan under the Texas Local Firefighters Retirement Act (Article 6243e) (“TLFFRA”) will be implemented and actions have commenced by the TWFRS Board to accomplish this. 
 
In connection with the implementation of TWFRS, it is necessary for The Township Board of Directors to approve a Board Resolution relative to three separate issues concerning the TWFRS pension:  1) authorizing “pick up” contributions, 2) discontinuing matching contributions for TWFRS participants who continue to contribute to the 457b plan and 3) allowing a one-time plan-to-plan transfer of vested balances between the 401(a) plan and TWFRS for individual participants who elect this transfer within a stated period of time.  Upon approval of the Board Resolution, Principal Financial will prepare Plan Amendments to the 401(a) Plan which will be brought back to the Board of Directors for approval.  Principal will not begin preparation of Plan Amendments without an approved Board Resolution.
 
Section 30 of TLFFRA, states that political subdivisions may “pick up” employee contributions from the participating employee’s paycheck and pay these contributions to the retirement system.  These contributions are accompanied by a reduction in the compensation of participating employees.  The pick-up of employee contributions takes effect on January 1 of the year following the year in which the governing body of the political subdivision by ordinance has adopted the pick-up, and the pick-up has been approved by a majority vote of the participating employees.  The Township does not have ordinance making authority, and staff sought advice from legal counsel who confirmed that a Board Resolution would suffice in place of an ordinance.  When The Township approves pick-up contributions, eligible participants in TWFRS will be eligible to make these contributions on a pre-tax basis in accordance with Section 414(h) of the Internal Revenue Code.
 
Any eligible Township employee, who participates in the 457b retirement plan, currently receives a matching contribution into the 401(a) plan based on the level of his or her 457b plan contribution.  Employees who are participants in the TWFRS may elect to continue making contributions into the 457b in addition to their TWFRS contributions.   A revision to the 401(a) plan, however, is necessary in order to exclude TWFRS participants from being Eligible Employees in the 401(a) plan so that The Township will discontinue any matching contributions into the 401(a) plan for TWFRS participants.
 
The Township Board has previously approved in concept individual plan-to-plan transfers between the 401(a) plan and the TWFRS pension plan contingent upon legal review and approval of a final plan document by the firefighters.  The Board Resolution states the Township desires to authorize a one-time plan-to-plan transfer and approves an amendment to the 401(a) Plan that authorizes this transfer.  Tony Eppert of Winstead, has suggested the following terms and limitations regarding these transfers must be satisfied in total:
 
  1.     the only Accounts eligible for the plan-to-plan transfer are those where the Participant was an Active Participant in the 401(a) Plan as of December 31, 2014, and is covered as a participant in the TWFRS Fund effective January 1, 2015;
  2.      only the vested portion of Account balances as of January 1, 2015, may be subject to a plan-to-plan transfer (i.e., the unvested portion of Account balances as of such date are not eligible);
  3.      if an Account is subject to an outstanding Loan, then the only portion of the vested Account eligible for the plan-to-plan transfer is the amount that exceeds the sum of (A) the Account’s outstanding loan balance, and (B) the portion of the vested Account used as collateral to secure repayment of the outstanding loan;
  4.      any Participant that satisfies the foregoing (i), (ii) and (iii) shall make an election to implement the plan-to-plan transfer for his or her Account, if at all, within a specific time period yet to be determined, and any attempted election outside of this time period shall be null and void; and
  5.      any election by a Participant to implement a plan-to-plan transfer shall be pursuant to terms and conditions set forth by the Employer, and any failure of a Participant to strictly follow such terms and conditions shall immediately and automatically null and void such intended election.  Whether the foregoing is satisfied on a Participant-by-Participant basis, or on an Account-by-Account basis, shall be determined by the Employer in its sole and absolute discretion.
 
The Board Resolution Approving Amendments to The Woodlands Township 401(a) Retirement Plan and Authorizing Pick-Up Contributions is attached for your review and approval.  Upon Board approval, Principal will begin preparing Plan Amendments which will be brought back to the Board at a later date for consideration and approval.
RECOMMENDATION:
Approve the Board Resolution Approving Amendments to The Woodlands Township 401(a) Retirement Plan and Authorizing Pick-Up Contributions.
Attachments
401a Board Resolution


    

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