HomeMy WebLinkAboutRESOLUTION 2002-22Suggested by:
City of Kenai
RESOLUTION NO. 2002-22
Administration
A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA
AMENDING THE ICMA 457 DEFERRED COMPENSATION PLAN TO PERMIT
LOANS.
WHEREAS, the City of Kenai has established a 457 Deferred Compensation
Plan administered by the ICMA Retirement Corporation; and
WHEREAS, there have been many changes to IRS laws making government
sector deferred compensation plans similar to private sector plans; and
WHEREAS, the ICMA Retirement Corporation allows a participant to borrow
money from their own deferred compensation account if the plan document
allows loans; and
WHEREAS, allowing loans permits individuals additional flexibility in managing
their retirement plans; and
WHEREAS, it is in the best interest of the City of Kenai to amend the ICMA 457
Deferred Compensation Plan document to allow loans.
NOWi THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF
KENAI, ALASKA, THAT THE ICMA 457 DEFERRED COMPENSATION PLAN
WILL PERMIT LOANS.
PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA~
May, 2002.
ATTEST:
this 1 ST day of
Carol L. Freas, City Clerk
Approved by Finance'
(4/15/2002) jl
CITY OF KENAI
"Oil Capital of Alaska"
210 FIDALGO AVE., SUITE 200 KENAI, ALASKA 99611-7794
TELEPHONE: 907-283-7535
FAX: 907-283-3014
MEMORANDUM
TO:
THRU:
FROM:
DATE:
SUB J:
City Council ~
Linda Snow, City Manager'
Lawrence A. Semmens, Finance Director '~
April 8, 2002
Amendment of ICMA 457 Deferred Compensation Plan
This year IRS laws and regulations regarding public sector deferred compensation plans were
changed to make them more consistent with private sector plans. One of the options ICMA
offers their participants is a loan program whereby an individual can borrow half of their 457
plan balance, up to $50,000, to use for any purpose. Previously the only way to get any of this
money was if the individual had a narrowly defined hardship. Offering loans requires a change
to our plan document, which requires approval of council.
Our loan program, if approved, will be limited such that there is almost no administrative
overhead on the City. ICMA does the administration; we would only need to set up payroll
deduction. Individuals will understand that they will be required to repay the loan with interest at
prime plus ½% through payroll deduction. Upon separation from employment any loan balance
becomes due and taxable if not paid.
This is a very good option for the employees of the City. It allows individuals to 'diversify their
retirement plans or use their own money as they see fit. It is a very common component of
private sector plans.
I recommend the Council amend our ICMA 457 Plan document to allow loans.