54-10

Expedited Bill No. 54-10

Concerning: Retirement – Investments

Revised: November 22, 2010 Draft No.2

Introduced: October 26, 2010

Enacted: November 30, 2010

Executive: December 10, 2010

Effective: December 10, 2010

Sunset Date: None

Ch. 56 , Laws of Mont. Co. 2010

County Council

For Montgomery County, Maryland

By: Council President at the Request of the County Executive

AN EXPEDITED ACT to:

(1) require an automatic distribution for account balances of $1,000 or less in the Guaranteed Retirement Income Plan and the Retirement Savings Plan;

(2) permit rollover contributions into the Retirement Savings Plan from any eligible retirement plan;

(3) permit additional investment choices in the Retirement Savings Plan;

(4) permit additional investments in the Deferred Compensation Plan; and

(5) generally amend the law regarding the retirement and deferred compensation plans.

By amending

Montgomery County Code

Chapter 33, Personnel and Human Resources

Sections 33-44, 33-113, 33-116, 33-120, 33-121, 33-125 and 33-145

Boldface                                             Heading or defined term.

Underlining                                          Added to existing law by original bill.

[Single boldface brackets]                  Deleted from existing law by original bill.

Double underlining                              Added by amendment.

[[Double boldface brackets]]              Deleted from existing law or the bill by amendment.

*   *   *                                                  Existing law unaffected by bill.

The County Council for Montgomery County, Maryland approves the following Act:

Sec. 1. Sections 33-44, 33-113, 33-116, 33-120, 33-121, 33-125 and 33-145 are amended as follows:

33-44. Pension Payment Options and cost of living adjustments

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(n) Required distribution for guaranteed retirement income plan participants.

(1) The distribution of a participant’s guaranteed retirement income plan account balance must be made no later than April 1 of the calendar year after the later of the calendar year in which the participant attains age 70 ½ or the calendar year in which the participant terminates employment. Distributions must be made in accordance with subsection (g). If the participant does not elect a form of distribution, the distribution must be made in a lump sum. If the participant dies before beginning to receive benefits, the participant’s designated beneficiary under 33-46(h) must receive a lump sum distribution as soon as practicable after the participant’s death, but not later than the December 31st of the year containing the fifth anniversary of the participant’s death.

(2) [[If a participant terminates employment with an]] A participant’s account balance of $1,000 or less[[, the account balance]] must be automatically distributed in a lump sum as soon as administratively feasible after termination of employment without a request from the participant.

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33-113. Definitions

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(r) Rollover contributions means that portion of a participant's account balances in the retirement savings plan that is attributable to any assets transferred or rolled over to the retirement savings plan from another [qualified pension or profit sharing plan] eligible retirement plan as defined in [under] the Internal Revenue Code Section 402(c). No after-tax contributions may be transferred or rolled over into the retirement savings plan.

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33-116. Participant Contributions

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(c) Participant rollover contributions. With the Chief Administrative Officer's written consent, a participant may transfer or rollover to the retirement savings plan any interest in any other [qualified] eligible retirement plan [under] as defined in [the] Internal Revenue Code Section 402(c).

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Section 33-120. Distribution of Benefit

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(h) Benefit distribution date.

(1) The Chief Administrative Officer must pay a participant who retires by reason of normal, deferred, or disability retirement the participant's account balances in the retirement savings plan. The distribution must begin as soon as administratively feasible after the participant's retirement and after the date elected by the participant, but no later than April 1 following the later of the calendar year in which the participant attains age 70½, or the calendar year in which the participant's County employment ends.

(2) A participant who has a 100% vested interest in the County contributions account, and whose County employment ends before the participant's death, disability retirement, or normal retirement date, may receive the account balances in the County contribution accounts and the participant contribution accounts before reaching the normal retirement date only upon filing written consent for the distribution with the Chief Administrative Officer. The distribution must be made as soon as administratively feasible after the Chief Administrative Officer receives the written consent for the distribution.

(3) (A) If a participant's County employment ends before the participant has a vested interest in the County contributions and the participant properly completes and submits an application for distribution of the participant’s contribution account, the County must distribute the participant's contribution account as soon as administratively feasible.

(B) If a participant does not properly complete and submit an application for a distribution, the County must distribute the participant’s contribution account under the time limits described in this Section.

(4) Notwithstanding any other provision of this subsection, [[if a participant terminates employment with an]] a participant’s account balance of $1000 or less[[, the account balance]] must be automatically distributed in a lump sum as soon as administratively feasible after termination of employment without a request from the participant.

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33-121. Investment of contributions to the retirement savings plan.

(a) Investment [funds] options.

(1) A participant must direct that contributions allocated to the participant's retirement accounts be invested in one or more of the investment [funds] options selected by the Board. The investment [fund] options selected by the Board must conform to all applicable requirements of the Internal Revenue Code.

(2) A participant must allocate contributions among the investment [funds] options only in percentages of the value of the account balances of the participant, as determined by the Board.

(3) A participant's direction of investment must remain in effect until the participant changes the direction. If a participant does not provide a valid direction of investment, the account balances of the participant, to the extent they are not governed by a valid direction of investment, must be invested in an appropriate investment option selected by the Board.

(b) Change of allocation.

(1) A participant or former participant may change the allocation of the participant's account balances among the investment [funds] options [by giving written notice of the requested change at a time] in accordance with procedures set by the Board. The changes [will] must take effect on the date or dates set by the Board.

(2) A participant or former participant may designate that the change of the allocation among investment [funds] options is effective as to one or both of:

(A) the participant's or former participant's account balances on the effective date of the change; and

(B) the participant's contributions and County contributions made after the effective date of the change.

(c) Gains and losses. The Board must maintain [pro rata accounts of a commingled fund or] separate and distinct accounts for each participant. [If the Board establishes pro rata accounts, the Board may allocate realized and unrealized gains and losses, using the ratio that the portion of the account balance of a participant allocated to an investment fund bears to the portion of the account balances of all participants allocated to the investment fund as of the previous valuation date. If the Board establishes separate and distinct accounts, the] The Board must determine the value of an individual account solely with respect to the activity within each participant's account and unrealized gains to a participant's account. [The Chief Administrative Officer may deduct operating expenses from the realized and unrealized gains before allocation.]

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33-125. Powers and duties under the retirement savings plan.

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(a) General

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(2) The Board must invest and reinvest, or cause to be invested or reinvested, the principal and income of the retirement savings plan and keep the same invested without distinction between principal and income. The Board has the exclusive authority to manage the assets of the retirement savings plan, but must, to the extent directed by participants, invest each participant's accounts in the manner directed by the participant. [The Board may make or permit an investment manager to make individual investment selections with respect to any investments described in this section.] The Board may select mutual funds, commingled funds, or any combination of [funds] other investments [to provide] as investment options for the retirement savings plan.

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(1) The Board may select or remove any investment option for the retirement savings plan that the Board finds prudent under the policies set by the Board. [The Board may invest or permit an investment manager to invest the assets of the retirement savings plan in any investment it considers prudent within the policies set by the Board. The Board must use an investment manager except when making an investment in any pooled investment vehicle, including any combined, common or commingled trust fund, retirement or annuity contract, mutual fund, investment company, association, or business trust. The Board also may authorize the Executive Director to make investments in pooled investment vehicles and transition assets from one investment manager to another investment manager as the Board specifies.]

(2) If an investment through any combined, common, or commingled trust fund exists, the declaration of trust of that fund is a part of the retirement savings plan trust.

[(3) The board or any investment manager must not invest any retirement savings plan asset in any bond, note, or debt instrument issued by:

(A) Montgomery County;

(B) any political subdivision within Montgomery County;

(D) any agency supported by bond issues underwritten by Montgomery County.

However, the Board and any investment manager may invest plan assets in such bonds, notes, and debt instruments if held indirectly through a mutual fund, subject to any limit in the Internal Revenue Code.]

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(f) [Investment management agreements.

(1) The Board may appoint investment managers to manage, acquire, or dispose of all or some of the assets of the retirement savings plan. The Board may dismiss any manager the Board appoints. The fees charged by any manager are expenses of the retirement savings plan.

(2) In any contract with an investment manager, the Board must identify the assets that are subject to the contract. The Board may give an investment manager the right to invest the assets of the retirement savings plan specified in the contract without prior notice to or approval by the Board. The Board may limit the investment of a specified portion of the retirement savings plan to a certain type of property. If a contract with an investment manager only applies to a portion of the assets of the retirement savings plan and specifies the type of property to be invested in, the manager must achieve diversification within the specified category of property, but is not responsible for diversification of investments of the entire retirement savings plan. The Board may delegate to the investment manager any power or discretion conferred on the Board under this Division and may provide that the investment manager must have custody and control of certain assets of the retirement savings plan.

(3) The Board must monitor the performance of any investment manager. Monitoring may include any tests or analyses that the Board considers prudent in the circumstances.]

The Board must monitor the performance of investment options. Monitoring may include any tests or analyses that the Board finds prudent.

33-145. Powers and duties of the board.

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(d) Authorized investments.

(1) The Board must invest each participant's account in one or more of the Board-designated investment options in the manner directed by the participant.

(2) The Board may select or remove any investment options for the deferred compensation plan that the Board [considers] finds prudent [within] under the policies set by the Board [, except real property investments described in this subsection].

(3) [The Board must not invest in real property unless the investment is a pooled investment in which the Board has no power or right to manage the real estate property. The pooled investment must not invest more than 10 percent of its assets in real property located in Montgomery County. The 10-percent limitation applies to the market value of the total assets on the preceding June 30. If the market value of investments in real property in the County exceeds the 10-percent limitation as a result of market forces, the Board, or the investment manager without direction from the Board, is not required to sell an existing equity investment. The Board may obtain valuations and take appropriate steps to comply with the 10-percent limitation.]

[(4)] If an investment through any combined, common, or commingled trust fund exists, the declaration of trust of that fund is a part of the deferred compensation plan trust.

[(5) The Board and any investment manager must not invest the deferred compensation plan assets in any bonds, notes, or debt instruments issued by:

(A) Montgomery County;

(B) a political subdivision in Montgomery County;

(D) an agency supported by bond issues underwritten by Montgomery County.

The Board and any investment manager may invest plan assets in bonds, notes, and debt instruments of these entities if the investment is held indirectly through a mutual fund and complies with any limit in the Internal Revenue Code.]

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(g) [Investment management agreements. Section 33-60(g) (Investment management agreements) applies to the Board with respect to its responsibilities under the deferred compensation plan.] The Board must monitor the performance of each investment option. Monitoring may include any tests or analyses that the Board finds prudent.

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Sec. 2. Effective Date.

The Council declares that this legislation is necessary for the immediate protection of the public interest. This Act takes effect on the date on which it becomes law.

Approved: