Loading...
2003-051RESOLUTION NO-. 2003-51 A RESOLUTION OF THE CITY COMMISSION OF THE CiTY OF AVENTURA, FLORIDA AUTHORIZING THE CITY MANAGER TO EXECUTE THE ATTACHED 457 PLANS LOAN GUIDELINES AND TRANSMIT SAME TO THE ICMA RETIREMENT CORPORATION; AUTHORIZING THE CITY MANAGER TO DO ALL THINGS NECESSARY TO CARRY OUT THE AIMS OF THIS RESOLUTION; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City of Aventura has employees rendering valuable services; and WHEREAS, the City of Aventura has established a deferred compensation plan for 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 system, and by assisting in the attraction and retention of competent personnel; and WHEREAS, the City Staff and City Manager have determined that permitting participants in the deferred compensation plan to take loans will serve these objectives; and WHEREAS, the City Commission, concurs with said recommendation. NOW, THEREFORE, BE iT RESOLVED BY THE CiTY COMMISSION OF THE CITY OF AVENTURA, FLORIDA, THAT: Section1: The City Manager is hereby authorized to execute the attached 457 Plans Loan Guidelines and to transmit same to the ICMA Retirement Corporation. Section 2: The City Manager is hereby authorized to do all things necessary to carry out the aims of this Resolution. Section 3: This Resolution shall become effective immediately upon its adoption. The foregoing resolution was offered by Vice Mayor Grossman, who moved its' adoption. The motion was seconded by Commissioner Diamond, and upon being put to a vote, the vote was as follows: Commissioner Zev Auerbach Commissioner Jay R. Beskin Commissioner Ken Cohen Commissioner Bob Diamond Commissioner Harry Holzberg Vice Mayor Manny Grossman Mayor Jeffrey M. Perlow yes yes yes yes yes yes yes Resolution No. 2003-_.5j Page 2 A'1-rl PASSED AND ADOPTED this 19th day of June, 2003. (A, ?MC ./J~_FF:REY ~. PERLOW,~'A'~'-OR APPROVED AS TO LEGAL SUFFICIENCY: 457 Plan Loan Guidelines Name of Plan: _ cITY OF AVENTURA DE[~LRED COMPENSATION PLAN -PLAN{ 304326 I. Purpose The purpose of these guidelines is to establish the terms and conditions under which the employer will grant loans to partici- pants. This is the only official Loan Program Document of the above named Plan. II. Eligibility Loans are available to all active employees. Loans will not be granted to participants who have an existing loan in default. Loans will be pro-rated among all the funds in which the participant is invested at the time the loan is made. Loans are available for the following purposes: [select one] All purposes Loans shall only be granted in the event of a par[icipant's hardship or for the purpose of enabling a participant to meet certain specified financial situations. The employer shall determine, based on all relevant facts and circumstances, that the amount of the loan is not in excess of the amount required to relieve the financial need. For this purpose, financial need shall include, but not be limited to: unreimbursed medical expenses of the participant or members of the participant's immediate family, establishing or substantially rehabilitating the principal residence of the participant, or paying for a college education (including graduate studies) for the participant or his/her dependents. III. Frequency of loans [select one] [~[ Participants may receive one loan per calendar year. Moreover, participants may have only one outstanding loan at a time. [2~ Participants may receive one loan per calendar year. Moreover, no participant may have more than five (5) loans outstanding at one time. rt'Ci~oa~antSwas lssue~. --__[]~e may r~finance an existing loan within the same calendar Plan year IV. Loan amount The minimum loan amount is $1,000. The maximum amount of al} loans to the participant from the plan and all other plans sponsored by the employer that are qualified employer plans under section 72(p)(4) of the Code is the lesser of: (1) $50,000, reduced by the excess (if any) of a. The highest outstanding balance of loans during the one-year period ending on the day before the date a loan is to be made, or b. The outstanding balance of loans on the date the loan is to be made; or (2) one half of the participant's vested account balance. If a participant has any loans outstanding at the time a new loan is requested, the new loan will be limited to the maximum amount calculated above reduced by the total of the outstanding loans. A loan cannot be issued for more than the above amount. The participant's requested loan amount is subject to downward adjustment without notice due to market fluctuation between the time of application and the time the loan is made. 3 ICMA RETIREMENT CORPORATION V. Length of loan A loan must be repaid in substantially equal installments of principal and interest, at least monthly, over a period that does not exceed five (5} years. Loans for a principal residence must be repaid in substantially equal installments of principal and interest, at least monthly, over no more than 10 YEARS ]state number of years] years (maximum 30 years). VI. Loan repayment process Loans for active employees must be repaid through payroll deduction. Repayment will begin as soon as practicable on a date determined by the empl&yer's payroll cycle. Loans outstanding for former employees or employees on a leave of absence must be repaid on the same schedule as if payroll deductions were still being made unless they reamortize their loans and establish a new repayment schedule that provides that substantially equal payments ~re made at least monthly over the remaining period of the loan. All repayments must be made through the employer. Loan payments, including loan payments from former employees, are allocated to the participant's current election of invest- ment options on file with ICMA-RC. The participant may pay off all or a portion of the principal and interest early without penalty or additional fee. Extra payments are applied forward to both principal and interest as specified in the original repayment schedule, unless the additional payment is for the balance due. VII. Loan interest rate The rate of interest for loans of five (5) years or less will be based on prime plus 0.5%. The rate of interest for loans for a principal residence will be based on the FHA/VA rate. Interest rates are determined on the last business day of the month preceding the month the loan is disbursed. The interest rate is locked in at the time a loan is approved and remains constant throughout the life of the loan. The prime interest rate is determined on the last business day of each month using the V/all Street Journal as the source. The FHA/VA interest rate is also determined on the last business day of each month using the Telerate Information Service as the source. Loan interest rates for new loans may fluctuate upward or downward monthly, depending on the movement of the prime and FHA/VA interest rates. The employer may modify the manner in which loan interest rates will be determined, but only with respect to future loans. 457 Plan Loan Guidelines VIII. Loan application procedure All loans must be requested in writing on an application approved by the plan administrator. The application must be signed by the participant.The employer must review and approve the application. The participant will be required to sign a promissory note evidencing the loan and a disclosure statement that includes an amortization schedule prior to receiving a loan check. Loan checks will generally be issued on the Friday follo~ving the receipt of a complete loan application. The loan check, promissory note, disclosure statement and truth-in-lending recision notice will be sent to the employer, who will obtain the necessary signatures and deliver the check to the participant. All executed docu- ments must be returned to the plan administrator within 10 calendar days from the date the check is issued. IX. Security/Collateral That portion of a participant's account balance that is equal to the amount of the loan is used as collateral for the loan.The collateral amount may not exceed 50 percent of the participant's account balance at the time the loan is taken. Only that portion of the account-balance that corresponds to the amount of the outstanding loan balance is used as collateral. X. Acceleration Iselect one] All loans are due and payable in full upon separation from service. All loans are due and payable when a participant receives a distribution of all of his/her account balance after separation from service. The amount of the outstanding loan balance will be reported as a distribution in addition to the amount of cash distributed from the plan. All loans are due and payable when a participant receives a distribution of part of his/her account balance after separation from service.The amount of the outstanding loan balance will be reported as a distribution in addition to the amount of cash distributed from the plan. Xl. Reamortization Any outstanding loan may be reamortized. Reamortization means changing the terms of a loan, such as length of repayment period, interest rate, and frequency of repayments. A loan may not be reamortized to extend the length of the loan repayment period to more than five (5) years from the date the loan was originally made, or in the case of a loan to secure a principal residence, beyond the number of years specified by the employer in Section V above. A participant must request the reamortization of a loan in writing on a reamortization application acceptable to the plan administrator. Upon processing the request, a new disclosure statement will be sent to the employer for endorsement by the participant and approval by the employer. The executed disclosure statement must be returned to the plan administrator within 10 calendar days from the date it is signed. The new disclosure statement is considered an amendment to the original promis- sory note, therefore a new promissory note will not be required. A reamortization will not be considered a new loan for purposes of calculating the number of loans outstanding or the one loan per calendar year limit. XII. Refinancing existing loans If a participant has one outstanding loan, that loan may be refinanced. ~f a participant has more than one outstanding loan, no loans may be refinanced. Refinancing means concurrently repaying an existing loan and borrowing an additional amount through a new loan. m participant may not refinance a residential loan. In order to refinance an existing loan, a participant must request a new loan in writing on an application approved by the plan administrator. Such request must be made at a time when the participant is eligible to obtain a loan as defined by the employer in Section III above. The amount of a new loan requested for the purpose of refinancing is subject to the loan limits specified in Section IV above. Because a refinancing is considered a new loan, only active employees may refinance an outstanding loan. 5 ICMA RETIREMENT CORPORATION XIII. Reduction of Loan If a participant dies prior to full repayment of the outstanding loan(s), the outstanding loan balance(s) will be deducted fi'om the account prior to distribution to the beneficia~2/(ies). The unpaid loan amount is a taxable distribution and may be subject to early withdrawal penalties. The participant's estate is responsible for taxes or penalties on the unpaid loan amount, if any. The beneficiary is responsible for taxes due on the amount he/she receives,A Form 1099 will be issued to both the beneficiary and the estate for these purposes. XIV. Loan default If a required payment of principal and interest is not made within 90 days of the date such payment is due, the loan is consid ered in default. If a loan is in default, the loan will be foreclosed during the calendar year in which the participant separates from service. If a participant has separated from service and defaults on a loan, then the loan will be foreclosed during the calendar year in which the default occurs. If the employer has elected in Section X, and the promissory note so provides, a loan becomes due and payable when the participant separates from service. If the terms of the loan contain this provision, the, outstanding loan amount is "deemed" in default as of the date of separation from service. The amount of the outstanding loan, including accrued interest, will be reported to the IRS as a distribution that may be subject to taxes. If the employer has so elected in Section X, and the promissory note so provides, a loan becomes due and payable when the participant takes a distribution of some or all of the balance in his/her account after separation from service, if the terms of the loans contain such a provision and the outstanding loan balance is not paid prior to the distribution from the account, the outstanding loan amount will be considered in default upon issuance of the distribution check. The amount of the outstanding loan, including accrued interest, will be reported to the IRS as a distribution that may be subject to taxes. Participants who have an existing loan in default will not be eligible for additional loans. XV. Fees Fees may be charged for various services associated with the application for and issuance of loans. All applicable fees will be debited from the participant's account balance and/or from the participant's loan repayments prior to crediting the repayment of principal and interest to the participant's account, m schedule of fees applicable to this plan is available from the plan admin istrator. · XVI. Other The employer has the right to set other terms and conditions as it deems necessary for loans from the plan in order to comply with any legal requirements. All terms and conditions will be administered in a uniform and non discriminatory manner. In Witness Whereof, the employer hereby caused these Guidelines to be executed this day of ,20 EMPLOYER Accepted: ICMA RETIREMENT CORPORATION By: By: Title: Title: Attest: Attest: 6