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HomeMy WebLinkAbout600_Amending OMRF Defined Contribution PlanTULSA COUNTY CLERK - JOAN HASTINGS RCPT 335683 02/09/99 09:22:36 DOC # 99014946 FEE 12.00 PGS 3 B/P 617110840 -0842 ORDINANCE NUMBER 600 CITY OF OWASSO, OKLAHOMA AN ORDINANCE AMENDING THE DEFINED CONTRIBUTION RETIREMENT PLAN OF THE CITY OF OWASSO, OKLAHOMA, ADMINISTERED BY THE OKLAHOMA MUNICIPAL RETIREMENT FUND TO ADD A NEW SECTION DEALING WITH PARTICIPANT LOANS; PROVIDING GENERAL PROCEDURES FOR PARTICIPANT LOANS, IMPOSING CONDITIONS AND RESTRICTIONS UPON PARTICIPANT LOANS; PROVIDING FOR ESTABLISHMENT OF LOAN ACCOUNT; PROVIDING FOR FORECLOSURE AND RESTRICTIONS; PROVIDING FOR ORDER OF APPLICATION OF ACCOUNT BALANCES TO FUND LOANS; PROVIDING FOR ESTABLISHMENT OF A LOAN PROGRAM; PROVIDING FOR REPEALER AND SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE. BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF OWASSO, OKLAHOMA THAT: SECTION ONE: The Defined Contribution Retirement Plan of the City of Owasso, Oklahoma, is hereby amended to add a new section authorizing participant loans to read as follows: SECTION 6:13 LOANS TO PARTICIPANTS: (a) General. The Committee, in its sole discretion, may direct Trustees to make loans to Participants upon the written direction and application of the Participant who desires to effect such loan, up to 50% of the vested balance of a Participant's Accounts. All such loans (i) shall not be made available to Highly Compensated Employees (as defined in Section 414(q) of the Code) in an amount greater than the amount made available to other Employees, (ii) shall be available to all Participants on a nondiscriminatory basis, (iii) shall be made available in an amount equal to the lesser of 50% of the borrowing Participant's vested Benefit in his Account or $50,000, (iv) shall bear a reasonable rate of interest which will be established by the Committee, (v) shall be secured by the borrowing Participant's Benefit account balance attributable to his Account (vi) shall be amortized and repaid in level payments of principal and interest made not less frequently than quarterly monthly over the term of the loan, (vii) shall be repaid by payroll deduction while the Participant is employed; (viii) shall accelerate and be due in full on the date a Participant terminates employment with the Employer; (ix) shall not be less than $1,000 in amount -eaeh; and (x) shall be made upon such other reasonable terms which the Committee shall designate, such terms being applied in a nondiscriminatory fashion; provided, in no event shall any loan have a term in excess of five years; provided ftuther, the Committee may make a loan with a longer maturitr-to—a residenee of the Parfieipant. There shall not be more than two one loans outstanding at any time with respect to a Participant. No Participant who has borrowed from the plan may make another loan until the previous loan has been fully repaid. Outstanding loans are not subject to refinancing by a new loan. Upon direction by the Committee, and subject to Subsection (c) below, the Trustees may foreclose upon such Participant's interest in his Account in the event of default. A loan to a Participant, when added to the outstanding balance of all other loans to the Participant from the Plan and other plans sponsored by the employer, cannot exceed $50,000, reduced by the excess of the highest outstanding balance of loans from the Plan (and all other plans sponsored by the Employer) during the one -year period ending on the day before the date the loan c i is made over the outstanding balance of the loans from the Plan on the date the loan is made. No distribution of a Benefit shall be made to any Participant, Beneficiary, or the estate of a Participant unless and until all unpaid loans made by the Plan to such Participant together with accrued interest have been paid in full. In determining if any of the foregoing limitations regarding the making of loans to Participants, loans made under all other plans (i) sponsored by the Employer and (ii) qualified under Sections 401(a) and 501(a) of the Code will be considered. All costs and expenses of any loan will be charged to the applicable Accounts of the Participant. (b) Establishment of Loan Account. At such time as it is determined that a Participant is to receive a loan from the Plan, the loan shall be made from the Participant's applicable Account in the order and precedence indicated hereafter, and such amount shall be deemed to be credited to the Participant's Loan Account with a corresponding debit to occur to his Account as of the first day of the month in which such loan occurs: (i) first, an Account holding Employer contributions, including "rollover contributions" (other than Deferred Compensation Contributions, if applicable); and -(ii) second, an Account holding Deferred Compensation Contributions, if applicable; and (iii) third, an Account holding Employer Contributions which the Employer contributed pursuant to the 414(h) of the Internal Revenue Code (Government Pick -Up Option). All interest payments to be made pursuant to the terms and provisions of the loan shall be credited to the applicable Account in such a manner so that the Loan Account will reflect unpaid principal and interest from time to time. The earnings attributable to the Loan Account shall be allocable only to the Loan Account of such Participant and shall not be considered as general earnings of the Trust Fund to be allocated to the other Participants therein as provided herein. Other than for the limited purposes of establishing a separate account for the allocation of the interest thereto, a Participant's Loan Account shall, for all other purposes, be considered as part of his applicable Account. (c) Foreclosure of Loan Account. The Trustees may foreclose upon such Participant's interest in his Account in the event of default under the loan made to the Participant under this Section. (d) Special Restrictions on Foreclosure. In the event of default under a loan made under this Section, foreclosure under the promissory note evidencing such loan and attachment of the Participant's interest in his applicable Accounts shall occur within a reasonable time following the event of default; provided, with respect to any portion of a loan secured by amounts governed under Section 401(k) of the Code, if applicable, foreclosure on such 401(k) amounts shall not occur until the occurrence of an event described under Section 401(k) of the Code which would otherwise permit a distribution to be made from the Plan. Pa Establishment of Loan Program. The Trustees are hereby authorized and O directed to establish a "loan program' (the "Loan Program ") and the Trustees are further authorized to delegate to the Committee the duties and responsibilities with regard to the implementation of the Loan Program as adopted by the Trustees for and on behalf of the Plan. The Loan Program shall be considered to be a part of this Plan for the purposes stated in the Loan Program. (g) Loan Account. The words" Loan Account" shall mean a Participant's separate Account established in the event he desires to make a loan from his applicable Account as provided in this Section." SECTION TWO: All ordinances in conflict herewith are hereby repealed. SECTION THREE: If any part, article, section, or subsection of this ordinance shall be held invalid or unconstitutional for any reason, such holding shall not be construed to impair or invalidate the remainder of this ordinance, notwithstanding such holding: SECTION FOUR: This ordinance shall become effective on March 1, 1999. Marcia Boutwell, City Clerk CITY OF OWASSO, OKLAHOMA as to form and legality on January 19, 1999 D Cates, City Attorney Denise Bode, Mayor The foregoing ordinance was introduced before the Owasso City Council on the 19th day of January, 1999, and was duly adopted and approved by the Mayor and City Cotmcil of the City of Owasso, Oklahoma, on the 19th day of January, 1999, after compliance with notice requirements of the Open Meeting Law (25 OS, Section 301, et seq). MEMORANDUM TO: HONORABLE MAYOR & CITY COUNCIL CITY OF OWASSO FROM: ALLAN E. HARDER HUMAN RESOURCES DIRECTOR SUBJECT: ORDINANCE NUMBER 600, AN ORDINANCE AMENDING THE DEFINED CONTRIBUTION PLAN OF OWASSO, OKLAHOMA, ADMINISTERED BY THE OKLAHOMA MUNICIPAL RETIREMENT FUND TO ADD A NEW SECTION DEALING WITH PARTICIPANT LOANS; PROVIDING GENERAL PROCEDURES FOR PARTICIPANT LOANS, IMPOSING CONDITIONS AND RESTRICTIONS UPON PARTICIPANT LOANS; PROVIDING FOR ESTABLISHMENT OF LOAN ACCOUNT; PROVINDING FOR ESTABLISHMENT OF LOAN ACCOUNTY; PROVIDING FOR ORDER OF APPLICATION OF ACCOUNT BALANCES TO FUND LOANS; PROVIDING FOR ESTABLISHMENT OF LOAN PROGRAM; PROVIDING FOR REPEALER AND SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE. DATE: January 12, 1999 On September 17, 1996, the Council through Ordinance Number 5' )0, adopted an amendment to the OMRF Defined Contribution Plan to allow participant loans from the fund. Since the effective date of that ordinance, the City through OMRF has offered participant loans to qualified employee members of the OMRF Defined Contribution Plan, with many employees having taken advantage of the loan program, The City received notice from OMRF on December 3, 1998, of the Board of Trustees of OMRF adopting OMRF Resolution Number 98-01, a RESOLUTION OF THE BOARD OF TRUSTEES OF THE OKLAHOMA MUNICIPAL RETIREMENT FUND APPROVING REVISED POLICIES AND PROCEDURES FOR PARTICIPANT LOANS IN THE DEFINED CONTRIBUTION RETIREMENT PLANS. As a municipality participating in the loan program, the City of Owasso is required to adopt an amending ordinance to the OMRF Plan Document before March 1, 1999, that incorporates the changes approved by the Board of Trustees. With or without the adoption of the amending ordinance, the changes will be in effect for participant loans originating on or before February 25, 1999. MODIFICATIONS APPROVED BY THE BOARD OF TRUSTEES: Plan modifications approved by the Board of Truess include loan application and processing procedural changes, a change in the method of calculating the interest rate charged on loans, a change in the administration fees charged for loans, the requirement to pay off existing loans prior to application for a second loan, establishment of a loan term of five years for all typs of loans including mortgage loans, waiver of payments during military service of up to one year, and declaring a loan in default if a participant receives a distribution from the fund. All modifications to the plan are identified in the OMRF Board of Trustees Resolution No. 98-01 and APPENDIX A, OMRF REVISED PARTICIPANT LOAN POLICIES, included as an attachment for your review. HUMAN RESOURCES ACTIONS: Human Resources has notified employees of the pending changes to the loan program and of the "window of opportunity" for any employee to request loans under the current plan, prior to the changes being effective. City Attorney Ron Cates has examined the amending ordinance and supporting materials and has approved the content. STAFF RECOMMENDATION: Staff recommends approval of Ordinance Number 600, adopting the amendments previously approved by the OMRF Board • Trustees and allowing continued participation in the OMRF Defined Contribution Plan Participant Loan Program by the City of Owasso. ATTACHMENTS: 1. Ordinance Number 600 2. OMRF letter dated November 25, 1998 3. OMRF Board of Trustees Resolution No. 98-1 and APPENDIX A, OMRF REVISED PARTICIPANT LOAN POLICIES Allan Harder City of Owasso PO Box 180 Owasso OK 74055-0180 Dear Allan: November 25, 1998 BOARD OF TRUSTEES MARCY ALEXANDER, DISTRICTS, STILLWATER JERRY FARNHAM, DISTRICT 3, ADA JAY HEINRICHs, DISTRICT 1, BROKEN ARROW Jim HUDGENs, DISTRICT2, SALLISAW Jim LUCKETT, JR., DISTRICT 8, GUTHRIE JOHN SHUGART, DISTRICTS, BETHANY RANDYSWINSON, AT-LARGE, SEMINOLE GEORGE WILKINSON. DISTRICT 7, WEATHERFORD BERTHA ANN YOUNG, DISTRICT 4, SHAWNEE Jodi Cox, Relationship Manager The OMRF Board of Trustees has approved an amendment to the OMRF Defined Contribution Plan document for Participant Loans. Attached is a copy of the Board Resolution which approves the changes as outlined on Appendix A. We now need you to amend your plan document as well. Please take the following steps to ensure that the approved changes are incorporated in your plan: Review the revised loan policies as outlined on Appendix A. Please call us with any questions you have. Adopt the enclosed amending ordinance before March 7, 1999, and send one original back to OMRF. Please note the ordinance changes are shown with "strike-overs" through the deleted language and added language is in bold font. Upon receipt of the amending ordinance, OMRF will send the administrative forms and instructions for you to administer participant loans. Introduce the new policies to the Employee group and explain that the changes will be effective for the February 25, 1999, loan applications. This will allow a "window of opportunity" for any employees who want to request a second loan or obtain a real estate loon before the effective date. We hope you will find these changes favorable and easier to administer. Fee/ free to call me to discuss any aspect of the attached documents. Enclosures 100 North Broadway Oklahoma City, Oklahoma 73102 RESOLUTION NO. 98-01 A RESOLUTION OF THE BOARD OF TRUSTEEES OF THE OKLAOMA MUNICIPAL RETIREMENT FUND APPROVING REVISED POLICIES AND PROCEDURES FOR PARTICIPANT LOANS IN THE DEFINED CONTRIBUTION RETIREMENT PLANS. WHEREAS, the Board of Trustees has determined it desirable and appropriate for employers under the Oklahoma Municipal Retirement Fund to authorize participant loans from their retirement systems; and, WHEREAS, in order to administer such loans it is necessary to adopt revised loan policies and procedures for participant loans. NOW, THEREFORE, BE IT RESOLVED by the Board of Trustees of the Oklahoma Municipal Retirement Fund that the proposed amendment allowing employers to authorize participant loans, as set forth in the attached Appendix "A" is hereby approved, and the Trust Administrator is hereby directed to distribute these revised loan policies and procedures to the participating employers along with such documents as are necessary to revise the retirement plans to be consistent with these revised policies and procedures. ***END*** Approved as to form and legality on Revised Policy 1. The check is mailed with the loan documents, and the Authorized Agent is asked to get all appropriate signatures before delivering the check. 2. (same) 3. (same) 4. (same) 5. The interest rate is 1 % above the Prime Interest rate in the Mid-West edition of the Wall Street Journal and updated the 25th of each month. 6. The Participant will pay a $20 set-up fee upon 6. $150 set-up fee and no monthly submitting the Application For Loan and Trust processing fee. Administrator's Action (to be deducted from the Participant's OMRF account) and a monthly $4 posting fee with each monthly loan payment. 9. A Participant loan will become a separate asset in 9. (same) a segregated fund of the borrower's vested account balance. All payments of principal and interest on the loan will be allocated solely to such borrower's vested account balance. 10. Loan withdrawals and loan payments will be 10. (same) posted to a Participant's account pro rata of investment selections. Revised Policy 11. (same) 12. (same) 13. No distribution will occur to a terminated 13. (Refer to #18 below) Distributions Participant or Beneficiary until all unpaid loans are not held up to allow for loan pay (including applicable interest and fees) have been back. If a distribution is requested, it paid in full. Since 90 days are allowed to pay is assumed that the Participant has no back the loan, distributions are held for 90 days. intention of paying back the loan. 14. A second loan may be requested only if the first loan is refinanced simultaneously. 15. Loans can be established to be paid over one to five years. Mortgage loans may be paid over a period of up to 30 years. 14. Not available. The first loan must be repaid before additional funds can be requested. 15. Repayment limited to five years. (No exceptions for home mortgage loans.) Other policies: 16. Loans are not available to an "alternate payee"; to any beneficiary of a deceased Participant; and to any Participant who refuses to sign all loan documents. 17. Loan payments are not required during military or other approved leave (up to one year) with written notification of such leave. Loans are not extended but are recalculated for the remainder of the loan term. 18. Loan is in default if the Participant receives a distribution.