GO Item 2
April16,2012
Worksession
MEMORANDUM
April 12,2012
TO:
FROM:
SUBJECT:
Government Operations and Fiscal Policy
commi~
Robert H. Drummer, Senior Legislative Attorney
jlmrJ
Worksession:
Expedited Bill 8-12, Retirement Savings Plan - Amendments
Expected attendee:
Linda Herman, Executive Director for the Board of Investment Trustees
Expedited Bill 8-12, Retirement Savings Plan - Amendments, 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 8-12 would amend the Retirement Savings Plan to make changes requested by the
Internal Revenue Service in order to obtain a favorable determination letter that the Plan remains
tax qualified. The IRS requested the following changes: (a) delete outdated references to
Internal Revenue Code Section 415, which limits contributions and benefits; (b) insert a
provision relating to the definition of compensation in Internal Revenue Code Section 415; and
(c) provide the definition of an "eligible retirement plan" for rollover purposes rather than
incorporate by reference. The Bill would make these technical changes to the Code provisions
establishing the Retirement Savings Plan as requested by the IRS during the review process.
Public Hearing
The only witness at the March 27 public hearing, Linda Herman, Executive Director for
the Board of Investment Trustees, supported the Bill on behalf of the Executive
14).
Issues
The Internal Revenue Service periodically reviews government retirement plans for
compliance with the Internal Revenue Code requirements for qualified retirement plans. The
County Attorney's Office submitted the RSP to the IRS for review in 2010. The IRS issued a
favorable determination letter (©11-13) contingent upon the Council's approval of the technical
amendments made in Bill 8-12. These technical amendments would not require changes in the
administration or payment of benefits.
Council staff recommendation:
approve the Bill as
introduced.
 PDF to HTML - Convert PDF files to HTML files
This packet contains:
Expedited Bill 8-12
Legislative Request Report
Memo from County Executive
Fiscal and Economic Impact Statement
IRS Favorable Determination Letter
Testimony of Linda Herman
F:\LAW\BILLS\1208 Retirement Savings Plan\GO MemoDoc
Circle #
1
5
6
7
11
14
2
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No.
--,8~-..:..:12!::....-,-_~--:-:-_
Concerning: Retirement Savings Plan ­
Amendments
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. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request of the County Executive
AN EXPEDITED ACT
to:
(1)
amend the Retirement Savings Plan to remain tax qualified under the Internal
Revenue Code; and
(2)
generally amend the law regarding the employees' retirement system.
By amending
Montgomery County Code
Chapter 33, Personnel and Human Resources
Sections 33-118 and 33-120
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 hill.
The County Council for Montgomery County, Maryland approves the following Act.'
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 8-12
1
Sec.
1.
Sections 33-118 and 33-120 are amended as follows:
2
3
4
5
6
33-118.
Maximum annual contribution.
(a)
Annual Contribution Limitation
*
[(4)
*
*
County contributions that would be allocated to County
contributions accounts of participants but for the limitations of
this Section must be carried over to subsequent years and
allocated in order of time to the County contributions accounts
that would have received the contributions but for the
limitations in this Section.
However, if a participant whose
7
8
9
10
11
12
County contributions are carried over is not a participant in the
subsequent years, that portion of the carryover contributions
attributable to the participant must be allocated to the County
contribution accounts of all participants. Amounts carried over
must be allocated to a suspense account that must be invested in
a fund deemed prudent by the Board.
Any earnings of the
13
14
15
16
17
18
suspense account must be allocated ratably among the County
contributions accounts of all the participants except as
otherwise provided in this Section.]
(5)]
19
20
21
ill
[(6)]
ill
*
*
.L
2007~
*
*
*
*
22
23
24
25
26
(£)
Effective July
all contributions made to
£!
participant's
account within 2Y2 months after termination of employment or within
the limitation year that contains the termination from employment
must be considered compensation for purposes of Internal Revenue
Code Section 415, as amended.
27
33-120.
Distribution
of Benefit
F:\LAW\BILLS\l208 Retirement Sav.ings Plan\BilI 2.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 8-12
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
*
(g)
*
*
Direct rollover distributions.
Notwithstanding any provision of this
Division that would otherwise limit a participant's election under this
Section, a participant or beneficiary may elect in any manner
prescribed by the Chief Administrative Officer at any time to have
any portion of an 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
participant in a direct rollover. [For purposes of]
As used in this
subsection[,]~
ill
direct rollover
[is] means a payment from the retirement
savings plan to the eligible retirement plan specified by the
participant.
ill
eligible retirement plan
means:
(A) an individual retirement account described in Internal
Revenue Code Section 408(a), as amended;
.an
CQ.
ill}
an individual retirement annuity described in Internal
Revenue Code Section 408(b), as amended, (other than
an endowment contract):
g qualified trust;
an annuity plan described in Internal Revenue Code
Section 403(a), as amended;
tID
an eligible deferred compensation plan described in
Internal Revenue Code Section 457(b), as amended,
which is maintained
Qy
an eligible employer described in
Internal
Revenue
Code
Section
457(e)(1)(A),
as
amended; and
F:\LAw\BlLLS\1208 Retirement Savings PJan\BiII2.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 8-12
55
56
57
!El
an annuity contract described in Internal Revenue Code
Section 403(b), as amended.
ill
eligible rollover distribution
means any distribution to
~
58
59
participant of all or any portion of the participant's account
balance; except:
60
61
®
any distribution which is one of
~
series of substantially
equal periodic payments (not less frequently than
annually) made:
62
63
64
65
ill
for the life
(Qr
life expectancy) of the employee or
the joint lives (or joint life expectancies) of the
employee
and
the
employee's
designated
66
67
beneficiary; or
(ii)
for
~
specified period of
lQ
years or more; or
68
69
an
any distribution to the extent such distribution is required
under Internal Revenue Code Section 401 (a)(9), as
amended.
70
71
*
Sec. 3. Effective Date.
*
*
72
73
74
75
76
77
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. The amendments to Section 33-118 in Section 1 are effective on
July 1,2007.
Approved:
78
79
80
Roger Berliner, President, County Council
Date
F:\LAW\BILLS\1208 Retirement Savings Plan\Bi1l2.Doc
 PDF to HTML - Convert PDF files to HTML files
LEGISLATIVE REQUEST REPORT
Expedited Bill 8-12
Retirement Savings Plan
-
Amendments
DESCRIPTION:
The County submitted the Retirement Savings Plan (RSP) to the
IRS in order to receive a determination letter that the RSP remains
tax
qualified.
In connection with the determination letter request, the IRS
requested several technical changes. The IRS requested that the
RSP be amended to include and delete specific provisions of the
Internal Revenue Code.
The IRS requested the following changes: (a) delete outdated
references to Internal Revenue Code Section 415, which limits
contributions and benefits; (b) insert a provision relating to the
definition of compensation in Internal Revenue Code Section 415;
and (c) provide the definition of an "eligible retirement plan" for
rollover purposes rather than incorporate by reference.
PROBLEM:
GOALS AND
OBJECTIVES:
To amend the Retirement Savings Plan as requested by the IRS in
connection with receiving a favorable IRS determination letter.
COORDINATION: Office of Human Resources, County Attorney
FISCAL IMPACT: Office of Management and Budget
ECONOMIC
IMPACT:
EV ALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
Office of Management and Budget
N/A
N/A
Joseph Adler, Office of Human Resources
Amy Moskowitz, Office of the County Attorney
APPLICATION
WITHIN
MUNICIPALITIES:NIA
PENALTIES:
N/A
F:\LAW\BILLS\l208 Retirement Savings Plan\LRRDoc
 PDF to HTML - Convert PDF files to HTML files
OFFICE OF THE COUNTY EXECUTIVE
Isiah Leggett
County Executive
ROCKVILLE, MARYLAND 20850
MEMORANDUM
January 30, 2012
TO:
FROM:
SUBJECT:
Roger Berliner, President, County
CounCi~
Isiah Leggett,
CoWlty
Executive
~
-e
~~-­
Legislation relating to Retirement Savings Plan
I am transmitting for Council introduction a bill to update the Retirement Savings
Plan (RSP), as well as the Legislative Request Report and Fiscal and Economic Impact
Statement for the bill. In order for Montgomery County to receive a determination letter from
the Internal Revenue Service (IRS) that the RSP remains
tax
qualified, the County must make
several technical amendments to the RSP.
In a recent letter, the IRS requested the following changes:
(1)
delete outdated
references to Internal Revenue Code Section
415.
which limits contributions and benefits; (2)
insert a provision relating to the definition of compensation in Internal Revenue Code Section
415;
and (3) provide the definition of an "eligible retirement plan" for rollover purposes rather
than incorporate by reference. The attached bill makes all of these changes.
Thank you for your consideration of this matter.
Attachments: (Determination letter from the IRS)
(Draft legislation with technical changes to the RSP)
c:
Joe Adler, Director, OHR
Joe Beach, Director, Finance
Marc Hansen, County Attorney
Jennifer Hughes, Director, OMB
 PDF to HTML - Convert PDF files to HTML files
ROCKVILI_E, MARYIAND
MEMORANDUM
March 21,2012
~
TO;
FROM:
Roger Berliner, President, County Council
Jennifer A. Hughes, Director, Office of
Managemen~et
Joseph F. Beach, Director, Department ofFinance
~
Expedited Bill 8-12 - Retirement Savings Plan - Amendments
SUBJECT:
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 ofthe County Executive
Joy Nunni, Special Assistant to the County Executive
Patrick Lacefield, Director. Public Infonnation Office
Linda Hennan, Executive Director, Board ofInvestment 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
 PDF to HTML - Convert PDF files to HTML files
Fiscal Impact Statement
Expedited BiD 8-12 - Retirement Savings Plan - Amendments
1.
Legislative Summary
Expedited Bill 8-12 would amend the Retirement Savings Plan to make changes requested by
the Internal Revenue Service
in
order to obtain a favorable deten:nination letter
that
the
Plan
remains
tax
qualified. The
IRS
requested the following changes: (a) delete outdated
references to Internal Revenue Code Section 415, which
limits
contributions and benefits;
(b)
insert a provision relating to the definition ofcompensation
in
Internal Revenue Code
Section 415; and (c) provide the definition ofan "eligtole retirement plan" for rollover
purposes rather
than
incorporate by reference. The Bill would make these technical changes
to the Code provisions establishing the Retirement Savings
Plan
as
requested by the
IRS
during the review process.
2.
An
estimate of changes
in
County revenues and expenditures regardless of wbether the
revenues or expenditures are assumed in the recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
The proposed legislation
is
a technical amendment. There are no changes to County revenues
or
expenditures related to the legislation.
3. Revenue and expenditure estimates covering at least tbe next 6 fiscal years.
1bis
bill
has no impact to County revenues or expenditures.
4. An actuarial analysis througb 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
future spending.
a~d
expenditures
if
tbe bill authorizes
1bis change will not result in subsequent County action that will impact 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.
No change
in
staff responsibilities.
1
 PDF to HTML - Convert PDF files to HTML files
8. An estimate of costs when an additional appropriation
is
needed.
Not applicable.
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.
If
a bill
is
likely to have no fIScal impact, why that is the case.
There is no fiscal impact because the bill amends the Retirement Savings to retain tax­
qualified status under the Internal Revenue Code. There are no changes to plan design or
employer contributions to
~e
plan resulting from this proposed legislation.
12. Other fIScal impacts or comments.
Not applicable.
13. The foDowing contributed to and concurred with this analysis:
Linda Herman, Executive Director, Board of Investment Trustees
Helen P. Vallone, Office ofManagement and Budget
Blaise DeFazio, Office ofManagement and Budget
Naeem Mia, Office ofManagement and Budget
Date
2
 PDF to HTML - Convert PDF files to HTML files
Economic Impact Statement
Council Bil18-12, Retirement Savings Plan - Amendments
Background:
This
proposed legislation would amend the Retirement Savings Plan to make changes
requested by the Internal Revenues 'Service (IRS), U.S. Department ofthe Treasury,
in
order
to
obtain a favorable determination letter
that
the Plan remains tax. qualified. The
changes are technical changes
that
include or delete specific provisions ofthe Internal
Revenue Code. Those changes include (a) delete outdated references
to
m.S Code
Section
415,
which limits contnoutions and benefits;
(b) insert
a provision relating to the
definition of compensation in
IRS
Code Section
415,
and (c) provide
the
definition of
an
"eligible retirement plan" for rollover purposes rather
than
incorporate by reference.
1.
The sources ofinformation, 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 property values in the County.
The.
legislation has no economic impact, it is administrative
4. If
a
Bill is likely
to
have no economic impact, why is that the case?
The legislation is administrative only-it deals only
with
updates to
IRS
definitions
and code citations.
5.
The following contributed to and concurred
with
this analysis: David Platt and
Mike
Coveyou, Finance
J
e
h .
Beach, DIrector
Department
of Finance
 PDF to HTML - Convert PDF files to HTML files
INTERNAL REVENUE SERVICE
P. O. BOX 2508
CINCINNATI, OH 45201
DEPARTMENT OF THE TREASURY
Date
:DEC
2 0'2010
COUNTY MARYLAND
ATTORNEY'S OFFICE-3RD FL
ST
MD 20850-2540
Employer Identification Number:
52-6000980
DLN:
MONTGOMERY
C/O COUNTY
101 MONROE
ROCKVILLE,
17007036078019
Person to Contact:
ID# 31316
JENNIFER M THIMM1\DASIAH
contact Telephone Number:
(513) 263-4613
Plan Name:
MONTGOMERY COUNTY RETIREMENT
SAVINGS PLAN
Plan Number: 002
Dear Applicant:
We have made a favorable determination on the plan identified aboye based
on the information you have supplied. please keep this letter, the application
forms submitted to request this letter and all correspondence with the Internal
Revenue Service regarding your application for a determination letter in your
permanent records. You must retain this information to preserve your reliance
on this letter.
Continued qualification of the plan under its present form will depend
on its effect in operation. See section 1.401-1(b) (3) of the Income Tax
Regulations. We will review the status of the plan in operation periodically.
The enclosed publication 794 explains the significance and the scope of
this favorable determination letter based on the determination requests
selected on your application forms. Publication 794 describes the information
that must be retained to have reliance on this favorable determination letter.
The publication also provides examples of the effect of a plan'S operation on
its qualified status and discusses the reporting requirements for qualified
plans. Please read publication 794.
This letter relates only to the status of your plan under the Internal
Revenue Code. It is not a determination regarding the effect of other federal
or local statutes.
This determination letter gives no reliance for any qualification change
that becomes effective, any guidance published, or any statutes enacted, after
the issuance of the Cumulative List (unless the item has been identified in the
Cumulative List) for the cycle under which this application was submitted.
This letter may not
be
relied on after the end of the plan'S first
five-year remedial amendment cycle that ends more than 12 months after the
application was received. This letter expires on January 31, 2014. This letter
considered the 2007 .cumulative List of Changes in plan Qualification
Requirements.
-COUNty A'l"H.,
This determination letter is applicable for the amendment (s) executed
Letter 2002 (DO/CG)
29 JJL
\1
2J
46
 PDF to HTML - Convert PDF files to HTML files
MONTGOMERY COUNTY MARYLAND
on 2/9/09 and 7/7/08.
This determination letter is also applicable for the amendment(s) dated
on 6/28/08 and 12/17/07.
This determination letter is also applicable for the amendment{s) dated on
7/6/06 and 8/9/04.
This determination is subject to your adoption of the proposed amendments
submitted in your letter dated 11/4/10. The proposed amendments
should be adopted on or before the date prescribed by the regulations under
Code section 401{b).
This determination letter is based solely on your assertion that the plan
is entitled to be treated as a Governmental plan under section 414{d) of the
Internal Revenue Code.
The information on the enclosed addendum is an integral part of
this determination. Please be sure to read and keep it with this letter.
If you have questions concerning this matter, please contact the person
whose name and telephone number are shown above.
Sincerely,
elL
~~'
Andrew E. Zuckerman
Director, EP Rulings
&
Agreements
Enclosures:
Publication 794
Addendum
Letter 2002 (DO/CG)
@
 PDF to HTML - Convert PDF files to HTML files
MONTGOMERY COUNTY MARYLAND
This letter is also applicable for the amendment(s) executed
12/1/03,
7/10/03
and
3/24/03.
Letter 2002
(DO/CG)
 PDF to HTML - Convert PDF files to HTML files
TESTIMONY FOR EXPEDITED BILL 8-12, 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 8­
12, Chapter 33 - Retirement
&
Investments.
The proposed Bill will amend the County's retirement law related to the
Retirement Savings Plan based on changes requested by the Internal Revenue Service to
obtain a favorable determination letter reflecting that the Retirement Savings Plan
remains tax qualified. The IRS has requested the following changes: (a) delete outdated
references to Internal Revenue Code Section 415, which limits contributions and benefits;
(b) insert a provision relating to the definition of compensation in Internal Revenue Code
Section 415; and (c) provide the definition of an "eligible retirement plan" for rollover
purposes rather than incorporate by reference.
The amendments to the County Code are technical and do not require changes in
the administration or payment of benefits.
We look forward to working with the Council
legislation.
In
its deliberations on this