R2009-23 ESTABLISHING DEFERRED COMPENSATION PROGRAM

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COUNCIL MEMORANDUM #2009-02 DATE: February 25, 2009 TO: Honorable Mayor Michael T. Carrigan a d City Council FROM: Ryan P. McCrady, City Manager � Jerry Bauer, Assistant City Manager�� SUBJECT: Nationwide Deferred Compensation Program SUMMARY RECOMMENDATION: Staff recommends that City Council adopt the attached resolution, authorizing the City to establish a deferred compensation program with Nationwide Retirement Solutions, Inc., for the members of International Association of Fire Fighters (IAFF) Local 505. BACKGROUND: The City agreed, as an item of bargaining in the most recent round of contract negotiations, to permit members of the Fire union, IAFF Local 505, to participate in the Nationwide Deferred Compensation program. This program, sponsored by the IAFF, operates under the rules of Section 457 of the U. S. Internal Revenue Code, and provides for tax deferred employee salary deductions and earnings on contributions. Participation in the program is voluntary, there are no employer contributions, and costs of the program are born exclusively by the participants. The Fire union requested this specific provider. The City also currently maintains a Section 457 Plan for all employees, including Fire Fighters, through the ICMA Retirement Corporation (ICMA-RC). POTENTIAL OBJECTIONS: The former City Manager entered into an exclusivity agreement in November 2005 with ICMA-RC regarding the offering of a 457 deferred compensation plan. I The City Council was not involved in this contract or advised that it existed, and the Firefighters' ' union members were not aware of the agreement with ICMA-RC. By this agreement ICMA-RC I waived all administrative fees, which up to that time were 55 basis points for enrollees. With the agreement, the basis points were reduced to zero. In October 2006, the City and the union tentatively agreed to allow Local 505 members to participate in the Nationwide 457 Plan, as a term of the new labor agreement being bargained at that time. Negotiating staff did not recall the ICMA-RC exclusivity agreement and did not remember the ramifications and limitations of the agreement. In November of 2008, the new IAFF labor agreement was signed, and the terms were implemented. The provision for the Nationwide 457 plan was one of the terms. At that time, ICMA-RC brought the exclusivity agreement to the attention of staff. Allowing the Firefighter's union to have the option to invest with another 457 plan provider will break the agreement entered into by the previous City Manager. ICMA-RC has advised us that this may cause them to revert to charging administrative fees to employees' accounts. Those fees could range from zero to 55 basis points. We have been notified that the Police union objects to any increase in administrative fees caused by this proposed change. However, if the city chooses to not allow fire union members the Nationwide investment option, we will be in violation of our collective bargaining agreement. This will potentially leave the city open to