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HomeMy WebLinkAboutItem #02 Approval to Create Loan Program for Employees Under City Principal 457 Deferred Comp PlanSre Ce nter of Good Li . f , AGENDA ITEM COVER SHEET Meeting Date 2/19/13 Item # Contact Name: Gene Williford Contact Number: 1032 Reviewed By: Department Director: City Manager: Subject: Approval to create a loan program for employees under the City Principal 4J i ijeierreu CmmnPn lnn Plan_ Resoltuion. Background Summary: The City provides a Principal 457 Deferred Compensation Plan for employees to tax defer a portion of their salaries. This loan program would allow employees to borrow against their own money. Issue: Provide for employees tinder the plan to borrow against money which they have contributed to the plan. Recommendations: It is recommended the Mayor /Commission approve the attached resolution to create a loan program under the current 457 Deferred Compensation Plan with Principal Financial Group and designate the Human Resources Director as the Plan Administrator. Attachments: Attached is the Resolution for the City relating to amending the Principal 457 Deferred Compensation Retirement Plan to permit loans and the associated adoption agreement. Financial Impact: None. Type of Item: El Fj Public Hearing Ordinance First Reading Ordinance Second Reading Resolution Commission Approval Discussion & Direction For Clerk's Dept Use: ® Consent Agenda ❑ Public Hearing ❑ Regular Agenda Original Document/Contract Attached for Execution by City Clerk Original Document/Contract Held by Department for Execution Reviewed by City Attorney ❑ N/A Reviewed by Finance Dept. ❑ N/A Reviewed by ( ) ❑ N/A V hr � nanci al Mailin Address: Principal Life eSignature Loan Payout 9 Des Moines, IA 50392 -0001 I Insurance Company I Authorization /Release CTD 01337 Contract No. /Plan I.D. No. Plan Name 6F As an authorized officer of f_ ,4 0+ 0c Z (employer name), I authorize and direct Principal Life Insurance Company to process loan requests from all employees who are participants under the Plan according to the procedures outlined in this agreement. This is for the purpose of binding that company in both its non - fiduciary capacity as plan sponsor and its fiduciary capacity as Plan Administrator within the meaning of ERISA for the above referenced retirement plan. Once the participant accepts the loan terms through The Principal Retirement Service Center' (retirement service center), applicable fees will be assessed and are non- refundable. Loans requested on the retirement service center will be taken proportionately from the participant's available investments. If the participant wants to specify investments or contributions from which to take the loan, we will prepare the Loan Application & Agreement and Truth -in- Lending Disclosure Statement and send Principal Life a completed Loan Payout Request form to process the loan payout. Principal Life will process loans requested through the retirement service center. It isn't necessary for Principal Life to receive written approval of each loan request from the Loan Administrator. Given that all loan applicants are actively employed and use up to 50% of their vested account balance at the time the loan is made as security for the loan, the Loan Administrator deems all participants who seek loans as creditworthy, except for those who have loans already in default. Establishing Interest Rate The Loan Administrator determines the interest rate(s) for all loans and directs Principal Life to use the following interest rate for all loans requested through the retirement service center until otherwise indicated in writing to Principal Life: 1. The initial interest rate and the rate used until a change is submitted in writing by the Loan Administrator is % Or Please circle A base rate equal to the Prime Rate (as published in the Wall Street Journal) (+ j -) _ % (P n., e- -t - 2 5c) The following illustrates the process of this loan service: The Participant: • logs on to The Principal Retirement Service Center and selects the terns of the loan • verifies his /her home address, and reviews the Loan Application & Agreement and Truth -in- Lending Disclosure Statement • directs Principal Life to process the loan by re- entering his /her PIN number. This eSignature serves as acceptance of the loan terms and authorization to process the loan. No written signature will be obtained. Principal Life: • processes the loan and sets up the loan records • issues a check and mails it to the participant • mails a paper copy of the loan document to the participant separately • produces a paper copy of the loan documents and sends it to the address provided below for the Trustee to retain until the loan is paid off • uses the secure Employer Message Center ( www.r)rincipal.com ) to notify the Primary Security Administrator of the terms of the loan to establish payroll deduction of the loan payments PG 3804 11/2002 Address to Send Loan Documents It is the trustee's responsibility to retain loan documents until the loan is paid off. Loan documents should be sent to the person and address indicated below. Name (-- 21'l if Lt:, I I; hcy,A� Address 04,t if L'Pce' - HLAjA ckc1_:r"ck 15 Iy Lr r - Dciyt_ Those signing below (hereinafter "we ", "us ", or "our ") have reviewed and approve this loan processing method. We agree this loan processing method complies with plan loan provisions. We release Principal Life from any and all liability that may arise from the performance of this authorization or processing of loans. This includes, but is not limited to, holding Principal Life harmless if: • our state law prohibits this arrangement • someone other than the participant takes a loan from the participant's account without the participant's knowledge or consent • the loan payout results in a loss of investment earnings • the participant is later determined not to be creditworthy • the terms of the loan are unreasonable (i.e., the payment exceeds the participant's take home pay) • the address confinned by the participant is inaccurate and prevents /delays receipt of the check • the person requesting a loan is not a party -in- interest, but Principal Life is not aware of this at the time the loan is requested In the event a participant disputes this procedure, we agree to indemnify Principal Life with respect to any costs or liability of any nature, including but not limited to attorney fees. We may terminate this authorization at any time by notifying Principal Life in writing. Any termination of this authorization will not be effective until such notification is received at the home office of Principal Life. The release of Principal Life herein shall survive any liability due to this loan processing method. Prinninnl T.ife has the right to terminate this service upon providing written notice to us. X Loan Administrator Signature (if different from above) Title Please see attached signatures. Date Date PG 3804 11/2002 CITY OF OCOEE SIGNATURE PAGE ATTEST: Beth Eikenberry, City Clerk (SEAL) FOR USE AND RELIANCE ONLY BY THE CITY OF OCOEE, FLORIDA APPROVED AS TO FORM AND LEGALITY on this day of � 20_• SHUFFIELD, LOWMAN & WILSON P.A. Scott Cookson, City Attorney APPROVED: CITY OF OCOEE, FLORIDA S. Scott Vandergrift, Mayor DATE: APPROVED BY THE OCOEE CITY COMMISSION AT A MEETING HELD , 20_, UNDER AGENDA ITEM NO. RESOLUTION NO. 2013 -004 A RESOLUTION OF THE CITY OF OCOEE, FLORIDA RELATING TO AMENDING THE PRINCIPAL LIFE 457 DEFERRED COMPENSATION RETIREMENT PLAN TO PERMIT LOANS; PROVIDING THAT THE PLAN CONTINUES TO BE ADMINISTERED BY PRINCIPAL LIFE RETIREMENT SERVICES PURSUANT TO THE SPECIFIC PROVISIONS OF THE ADOPTION AGREEMENT ATTACHED HERETO; PROVIDING FOR CONFLICTS; PROVIDING FOR SEVERABILITY; PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, The City of Ocoee has employees rendering valuable services; and WHEREAS, the City of Ocoee has established a 457 Deferred Compensation Retirement Plan (the "Plan ") for such employees which serves the interest of the City by enabling it to provide reasonable retirement security for its employees, by providing increased flexibility in its personnel management systems, and by assisting in the attraction and retention of competent personnel; and WHEREAS, the City of Ocoee has determined that permitting participants in the retirement plan to take loans from the Plan will serve these objectives; NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF OCOEE, FLORIDA: the Principal Life 457 Deferred Compensation Retirement Plan will permit loans. SECTION ONE: authorizes that the Human Resources Director shall be the coordinator for the amended Plan; shall receive reports, notices, etc., from the Principal Life Insurance Company; may delegate any administrative duties relating to the Plan to appropriate departments; and shall execute all necessary agreements with Principal Life Insurance Company incidental to the administration of the Plan. SECTION TWO: Conflicts All resolutions, parts of resolutions or acts of the City Commission of the City of Ocoee in conflict herewith are hereby repealed and rescinded. SECTION THREE: Severability If any section, subsection, sentence, clause, phrase or portion of this Resolution is for any reason held invalid or unconstitutional by any court of competent jurisdiction, such portion shall be deemed a separate, distinct and independent provision and such holding shall not affect the validity of the remaining portion hereof. SECTION FOUR: Effective Date immediately upon passage and adoption. This Resolution shall become effective PASSED AND ADOPTED this 19th day of February, 2013 ATTEST: Beth Eikenberry, City Clerk (SEAL) FOR USE AND RELIANCE ONLY BY THE CITY OF OCOEE, FLORIDA. APPROVED AS TO FORM AND LEGALITY THIS _ DAY OF .2013 SHUFFIELD, LOWMAN & WILSON PA R-A City Attorney APPROVED: CITY OF OCOEE, FLORIDA S. Scott Vandergrift, Mayor APPROVED BY THE OCOEE CITY COMMISSION ON THE ABOVE DATE UNDER AGENDA ITEM NO.