| | | | | | | |  | Ordinances - R5 A
COMMISSION MEMORANDUM |
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| | | | | | | | | TO: | Honorable Mayor and Members of the City Commission | | | FROM: | Jimmy L. Morales, City Manager | | | DATE: | June 6, 2018 | | | | 10:50 a.m. Second Reading Public Hearing
| | SUBJECT: | AN ORDINANCE OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AMENDING THE POLICE OFFICERS’ RELIEF AND PENSION FUND TO COMPLY WITH APPLICABLE PROVISIONS OF THE INTERNAL REVENUE CODE, AND REGULATIONS THEREUNDER, BY AMENDING THE RELATED SPECIAL ACTS OF THE CITY, BY AMENDING ARTICLE VIII, ENTITLED “POLICE OFFICERS’ RELIEF AND PENSION FUND,” BY AMENDING SECTIONS 49 THROUGH 60 AND CREATING A NEW SECTION 61; PROVIDING FOR SEVERABILITY; REPEALER CODIFICATION; AND AN EFFECTIVE DATE. |
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| | | | | | | | RECOMMENDATION
| | Adoption of the ordinance is recommended. It is further recommended that the second reading and public hearing be scheduled for the June 6, 2018 commission meeting. |
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| | | | | | | | ANALYSIS
| We have reviewed the proposed amendments to the Miami Beach Police Officers’ Relief and Pension Fund with special pension counsel, Jim Linn. His recommendation is attached. All of the changes proposed to this ordinance are required for compliance with the Internal Revenue Code, with two exceptions. The two exceptions are: (1) The revision to section 52 that changes the month for election of trustees from February to January of even numbered years. This change reflects the current practice; (2) The new provision at the top of page 11 that allows retired members to pay for health insurance premiums through deductions from their retirement benefit and have the payment excluded from taxable income. This provision is permitted but not required by the Internal Revenue Code.
Attached is the Internal Revenue Service (IRS) determination letter dated March 6, 2015. An Internal Revenue Service “determination letter” is issued in response to a request as to the qualified status of a retirement plan, and applies only to the employer and the plan participants on whose behalf it was issued.
The proposed amendments are required by the Internal Revenue Code (IRC) and IRS regulations in order for the Plan to retain its qualified status and comply with the favorable determination from the IRS. Among the changes are amendments making gender neutral references throughout the document, i.e., police officers rather than policemen. More substantial elements include the addition of 17 newly defined terms and amendments to the seven originally included in the ordinance.
Additionally, the proposed ordinance specifies how a retired/separated member’s account is to be treated until such time as the funds are withdrawn and how survivor benefits are disbursed. Language further indicates that amounts allocated to a participant’s account may not exceed the limitations set forth in Section 415 of the Code. The proposed maximum limit on annual additions to a participant's defined contribution account shall not exceed the lesser of $40,000 or 100% of Compensation, as set forth in Section 415(c) of the Code. The Plan addresses the manner in which the City is to dispose of funds, the ratio of amounts credited to a participant’s account, and how the Fund shall provide benefits to the participants.
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| | | | | | | | CONCLUSION
| The proposed amendments satisfy the IRS requirements for plan qualification. Further, the amendments memorialize the City’s current intent regarding the benefits derived from the premium taxes as set forth in Ch. 185, Florida Statutes.
While public employers that sponsor retirement plans are not required to apply for a determination letter, receiving a favorable determination letter provides documentation that the Plan satisfies the applicable qualification standards.
There are several legal and practical advantages to obtaining a determination letter. One legal advantage is that an IRS determination letter provides a definitive analysis of whether a plan is qualified. It also provides the basis for retroactive relief if the Service later changes its position. One practical advantage of obtaining a determination letter is that the City’s auditors will be less likely to question the qualified status of the Plan.
We have prepared an ordinance incorporating the IRC compliance amendments. The amendments are technical in nature, and will not result in additional cost to the City since all funding comes from state premium taxes in Ch. 185, Florida Statutes. Because of the nature of the 185 plan benefits, these changes will not have any actuarial impact.
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| | | | | | | | FINANCIAL INFORMATION
| | Because of the nature of the 185 plan benefits, these changes will not have any actuarial impact. |
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| | | | | | | | Legislative Tracking
Human Resources |
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| | | | | | | | Sponsor
Commissioner John Elizabeth Aleman |
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