GO Item 1
April 16,2012
Worksession
MEMORANDUM
April 12, 2012
TO:
FROM:
SUBJECT:
Government Operations and Fiscal Policy Committee
Robert H. Drummer, Senior Legislative Attorney
~
Worksession: Expedited Bill 7-12, Employees' Retirement System - Automatic
Distributions
Expected attendee: Linda Herman, Executive Director for the Board of Investment Trustees
Expedited Bill 7-12, Employees' Retirement System - Automatic Distributions,
sponsored by the Council President at the request of the County Executive, was introduced on
March 6, 2012. A public hearing was held on March 27.
Background
Bill 7-12 would provide for an automatic distribution for account balances of $1,000 or
less in the Optional and Integrated Plans and the Elected Officials' Plan of the Employees'
Retirement System. There is a significant cost associated with maintaining small account
balances for terminated participants of the Optional, Integrated, and Elected Officials Plan of the
Employees' Retirement System. This Bill would reduce Plan administrative costs if these
participant accounts are automatically distributed. Bill 54-10, enacted on November 30, 2010,
added a similar provision for a terminated participant's account balance of $1000 or less in the
Retirement Savings Plan and the Deferred Compensation Plan.
Public Hearing
The only witness at the March 27 public hearing, Linda Herman, Executive Director for
the Board ofInvestrnent Trustees, supported the Bill on behalf ofthe Executive (©12).
Issues
Currently, a participant in the Optional, Integrated, or Elected Officials' Plan in the
Employees' Retirement System who leaves County service must request a distribution regardless
of the size of the account. The Internal Revenue Code permits a plan sponsor to distribute
account balances of less than $1000 automatically without a request. The cost to administer
these small accounts is charged to the Trust Fund. This Bill would authorize the automatic
distribution of these small accounts without waiting for the terminated employee to request it.
This would be consistent with the automatic distributions of small accounts to terminated
employees in the Retirement Savings Plan and the Deferred Compensation Plan. Council staff
recommendation: approve the Bill as introduced.
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This packet contains:
Expedited Bill 7-12
Legislative Request Report
Memo from County Executive
Fiscal and Economic Impact Statement
Testimony of Linda Herman
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Expedited Bill No. _7!....-..\.:12=---_ _ __
Concerning: Employees'
Retirement
System - Automatic Distributions
Revised: March 1 2012 Draft No.
L
Introduced:
March 6, 2012
Expires:
September 6, 2013
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
...!N~o~n~e
_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
f
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request of the County Executive
AN EXPEDITED ACT
to:
(1) provide for an automatic distribution for account balances of $1,000 or less in the
Optional and Integrated Plans and the Elected Officials' Plan of the Employees'
Retirement System; and
(5) generally amend the law regarding the employees' retirement system.
By amending
Montgomery County Code
Chapter 33, Personnel and Human Resources
Sections 33-39, 33-44 and 33-45
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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Expedited Bill No. 7-12
1
Sec. 1. Sections 33-39, 33-44, and 33-45 are amended as follows:
33-39. Member contributions and credited interest.
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*
(
c)
*
*
Return ofmember contributions.
(1)
Refund after employee's separation under the optional and
integrated plans.
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*
*
*
Notwithstanding any other provision, if the member's
contributions and interest are $1,000 or less, the amount
must be distributed in
i!
lump sum as soon, as
administratively feasible after termination of employment
even if the member does not submit an application.
If
the
distribution cannot be made because the member cannot
be located, the member will forfeit the amount.
If
the
member later contacts the County, the member will
receive the forfeited amount.
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*
*
(h)
*
*
*
*
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33-44. Pension payment options and cost-of-living adjustments.
ill
Required commencement of benefit payments.
The distribution
of an elected officials' participant's retirement benefits must be
made no later than April 1 of the calendar year following the
later of the calendar year in which the elected officials'
participant attains age seventy and one-half (70
1/2)
or the
calendar year in which the elected officials' participant retires.
In the alternative, the payment of benefits to an elected officials'
participant must begin not later than such April 1 under a
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G
Fo\lAWlBILLS\!207
EmploY"'"
""i~"'"
'''''"''Bill 2.Doc
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Expedited Bill No. 7-12
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method of payment that, in accordance with the applicable
United States Treasury Regulations, provides for distribution of
the elected officials' participant's benefits over:
[(l)]
.cAl
[(2)]
!ID
The life of the elected official's participant;
The lives of the elected officials' participant and
the elected officials' participant's designated beneficiary;
[(3)]
IT)
A period not extending beyond the life expectancy
of the elected officials' participant; or
[(4)]
@
A period not extending beyond the life expectancy
of the elected officials' participant and the elected
officials' participant's designated beneficiary,
ill
Notwithstanding any other provision, an elected official's
account balance of $1,000 or less must be automatically
distributed in
~
lump sum as soon as administratively feasible
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after termination of employment without
request from the
elected official. If the distribution cannot be made because the
elected official cannot be located, the elected official will forfeit
the amount. If the elected official later contacts the County, the
elected official will receive the forfeited amount.
*
(q)
*
*
Direct rollover distributions.
A member or beneficiary may elect, in
any manner prescribed by the Chief Administrative Officer at any
time, to have any portion of eligible rollover distribution (as defined
in the Internal Revenue Code) paid directly to an eligible retirement
plan (as defined in the Internal Revenue Code) specified by the
member in a direct rollover. For purposes of this subsection, a direct
rollover is a payment from the retirement system to the eligible
G\
D
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Expedited Bill No. 7-12
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retirement plan specified by the member. A member may not elect
direct rollover if the eligible rollover distribution is less than $200.
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*
*
(b)
(1)
*
*
*
*
33-45. Vested benefits and withdrawal of contributions.
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Withdrawal ofcontributions for optional and integrated plans.
[If a member complies] In accordance with paragraph (2), the
County must refund a member's contributions with credited
interest to:
(A)
a member whose County service ends before the member
is eligible to vest; and
(B)
a member eligible to vest whose County service ends and
who voluntarily elects to withdraw, thus ceasing to be a
member.
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(2)
(A)
If
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member's contributions and interest are more than
$1,000, to obtain a refund of contributions, a member
must properly complete and submit an application for a
refund.
(B)
If a [member] member's contributions and interest are
more than $1,000, and the member does not properly
complete and submit an application for a refund, the
County must refund the contributions with credited
interest under the minimum distribution requirements of
the
Internal
Revenue
Code
and
corresponding
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regulations.
{Q!
Notwithstanding any other provision, if the member's
contributions and interest is $1,000 or less, the amount
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Expedited Bill No. 7-12
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must be distributed in
~
lump sum as soon as
administratively feasible after termination of employment
even if the member does not submit an application. If the
distribution cannot be made because the member cannot
be located, the member will forfeit the amount. If the
member later contacts the County, the member will
receive the forfeited amount.
(3)
If a vested member dies before the normal retirement date, the
County must pay the designated beneficiary a lump sum death
benefit equal to the member's contributions plus credited
interest.
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*
*
*
Sec. 2. Expedited 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:
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,99
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Roger Berliner, President, County Council
Date
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Approved:
Isiah Leggett, County Executive
Date
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LEGISLATIVE REQUEST REPORT
Expedited Bill 7-12
Employees' Retirement System
-
Automatic Distributions
DESCRIPTION:
The bill amends the County's retirement law to permit automatic
distribution of terminated participants in the Optional, Integrated, and
Elected Officials Plan of the Employees' Retirement System who have
account balances less than $1,000.
There is a significant cost associated with maintaining small account
balances for terminated participants of the Optional, Integrated, and
Elected Officials Plan of the Employees' Retirement System. Plan costs
will be reduced if these participant accounts are involuntarily distributed.
PROBLEM:
GOALS AND
OBJECTIVES:
To permit automatic distributions to terminated participants in the
Optional, Integrated, and Elected Officials Plan of the Employees'
Retirement System who have account balances less than $1,000.
COORDINATION:
Board ofInvestment Trustees and the Office of the County Attorney
FISCAL IMPACT:
Office of Management and Budget
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
Office of Management and Budget
N/A
N/A
SOURCE OF
INFORMATION:
Board ofInvestment Trustees
Office of the County Attorney
APPLICATION
WITHIN
MUNICIP
ALITIES:NIA
PENALTIES:
N/A
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OFFICES OF THE COUNTY EXECUTIVE
lsiah Leggett
County Executive
Timothy
L.
Firestine
ChiefAdministrative Officer
MEMORANDUM
January 30, 2012
TO:
FROM:
SUBJECT:
Roger Berliner, Council President
Isiah
Leggett,
County Executive
~~
I
~
Expedited Bill to Amend the County's Retirement Law
I am attaching for the Council's consideration a bill that would amend the
County's retirement law to pennit automatic distributions to tenninated participants in the
Optional, Integrated, and Elected Officials Plans of the Employees' Retirement System who have
account balances less than $1,000.
Current law requires that a tenninated participant request a distribution regardless
of the size of the account balance. The Internal Revenue Code (IRC) allows a plan sponsor to
distribute account balances of less than $1,000. Due to the administrative costS associated with
maintaining these small accounts, the Board of Investment Trustees is recommending adoption
of the IRC standard for distributing balances of less than $1,000 to terminated participants.
This bill is similar to Bill 54-10, Retirement - Investments, which was enacted by
the Council on November 30, 2010. Bill
S4~10
allowed similar distributions in the County's
other retirement plans, the Retirement Savings Plan and the Deferred Compensation Plan.
Thank you for your prompt consideration ofthis bill.
Attachments
c:
Linda Hennan, Director
Board of Investments Trustees
101 Monroe Street • Rockville, Maryland 20850
240-777-2500 • 240-777-2544 TTY • 240-777-2518 FAX
www.montgomerycountymd.gov
montgomerycountymd.gov/311
240-773-3556 TTY
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ROCKVILLE, MARYlAND
MEMORANDUM
March 21, 2012
TO:
Roger Berliner, President, County Council
Jennifer
A.
Hughes, Director, Office ofManagement and
Joseph F. Beach, DirectoT, Department of Finance
~
FROM:
SUBJECT:
Budge~
U
Expedited Bill 7-12 - Employees' Retirement System - Automatic Distributions
Attached please find the fiscal and economic impact statements for the above­
referenced legislation.
JAH:hv
c: Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices ofibe County Executive
Joy Nurmi, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Information Office
Linda Herman, Executive Director, Board of Investment Trustees
Alex Espinosa, Office ofManagement and Budget
Blaise DeFazio, Office of Management and Budget
Helen P. Vallone, Office ofManagement and Budget
Naeem Mia, Office of Management and Budget
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Fiscal Impact Statement
Expedited Bill 7-12 • Employees' Retirement System· Automatic Distributions
1. Legislative Summary
Expedited Bill 7-12 would provide for an automatic distribution for account balances of
$1,000 or less in the Optional and Integrated Plans and the Elected Officials' Plan of the
Employees' Retirement System. There is a significant cost associated with maintaining small
account balances for terminated participants of the Optional, Integrated. and Elected Officials
Plan of the Employees' Retirement System. This Bill would reduce Plan administrative costs
if
these participant accounts are automatically distributed.
2. An estimate of changes
in
County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in the recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
This bill has no impact to County revenues or expenditures.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
This bill has no impact to County revenues or expenditures.
4.
An
actuarial analysis through the entire amortization period for each bill that would
affect retiree pension or group insurance costs.
Not applicable.
S. Later actions that may affect future revenue and expenditures
if
the bill authorizes
future spending.
This change will not result
in
subsequent government action that will impact County future
revenues and expenditures.
6.
An
estimate of the staff time needed to implement the bill.
Not applicable.
7. An explanation of how the addition of new staff responsibilities would affect other
duties.
'
Not applicable.
8.
An
estimate of costs when an additional appropriation is needed.
Not applicable.
1
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9.
A description of any variable that could affect revenue and cost estimates.
Not applicable.
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
Not applicable.
11. H
a bill is likely to have no rlScal impact, why that
is
the case.
The bill provides the Board the authority to pennit the automatic distribution oftenninated
participants
in
the Optional. Integrated, and Elected Officials Plan ofthe Employees'
Retirement System who have account balances less
than
$l!>OOO.
12. Other fiscal impacts or comments.
Not applicable.
13. The following contributed
to
and concurred with this analysis:
Linda Hermatl; Executive Director, Board of Investment Trustees
Helen P . Vallone, Office of Management and Budget
Blaise DeFazio, Office ofManagement
and
Budget
Naeem Mia, Office ofManagement and Budget
Date
2
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Economic Impact Statement
Council Bill
7~
12, Employees' Retirement System - Automatic Distributions
Background:
This proposed legislation would provide for an automatic distribution of account balances.
of$l,OOO or less
in
the Optional and Integrated Plans and the Elected Officials' Plan of
the Employees Retirement System to tenninated participants. This bill would reduce
administrative costs if these participant aCCOl.mts are automatically distributed.
7
1. The sources of information, assumptions, and methodologies used.
Not applicable
2. A description of any variable that could affect the economic impact estimates.
Not applicable
3. The Bill's positive or negative effect,
if
any
on employment, spending, saving,
investment, incomes, and pro:perty values
in
the County.
The bill would have no significant economic impact as
it
affects very few people and
any amount distributed would be small relative to Montgomery County's entire
economy.
4.
If
a Bill is likely
to
have no economic impact, why
~
that the case?
The bill would have no significant economic impact as
it
affects very few people and
any amount distributed would be small relative to Montgomery County's entire
economy_
5. The following contributed to and concurred
with
this analysis: David Platt and Mike
Coveyou, Finance
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TESTIMONY FOR EXPEDITED BILL 7-12, COUNTY'S RETIREMENT LAW
Good afternoon, for the record, I am Linda Herman, Executive Director for the
Board of Investment Trustees which oversees the assets of the County's three retirement
plans. I am here today on behalf of the County Executive to testify in support of Bill 7­
12, Chapter 33 - Retirement
&
Investments.
The proposed Bill will amend the County's retirement law to permit automatic
distributions to terminated participants in the Optional and Integrated Plans and the
Elected Officials' Plan of the Employees' Retirement System, who have account balances
less than $1,000. This bill is similar to Bi1l54-1O, Retirement, enacted by the Council on
November 30, 2010, which allows similar distribution from the County's other retirement
plans, the Retirement Savings Plan and the Deferred Compensation Plan.
The County Code requires that a terminated participant request a distribution
regardless of the size of the account balance. The Internal Revenue Code (IRC) allows a
plan sponsor to distribute account balances of less than $1,000. Due to the administrative
costs associated with maintaining these small accounts, and the costs being borne by the
Trust Fund, the Board of Investment Trustees is recommending adoption of the IRC
provision to distribute terminated participant account balances of less than $1,000.
We look forward to working with the Council in its deliberations on this
legislation.