Agenda Item 14
March 6,2012
Introduction
MEMORANDUM
March 2, 2012
TO:
FROM:
SUBJECT:
County Council
0(\
Robert
H.
Drummer, Senior Legislative Attorney
~'j
Introduction:
Expedited Bill 7-12, Employees' Retirement System - Automatic
Distributions
Expedited Bill 7-12, Employees' Retirement System
Automatic Distributions,
sponsored by the Council President at the request of the County Executive, is scheduled to be
introduced on March 6, 2012. A public hearing is tentatively scheduled for March 27 at 1:30
p.m.
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.
This packet contains:
Expedited Bill 7-12
Legislative Request Report
Memo from County Executive
F:\LAW\BILLS\1207 Employee's Retirement System\Intro Memo.Doc
Circle #
1
6
7
 PDF to HTML - Convert PDF files to HTML files
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_ _ _ _ __
ChI _ _, 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) 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.
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:
 PDF to HTML - Convert PDF files to HTML files
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.
2
3
4
*
(
C)
*
*
Return ofmember contributions.
(1)
Refund after employee's separation under the optional and
5
6
7
integrated plans.
*
*
*
8
(ill
Notwithstanding any other provision, if the member's
9
10
11
12
contributions and interest are $1,000 or less, the amount
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.
13
14
15
16
17
18
19
20
21
*
*
*
*
33-44. Pension payment options and cost-of-living adjustments.
*
(h)
*
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 (70 112) 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
22
23
24
25
26
27
G
f,\LAWlBILLS\l207 Employoo',
Rori"""",
S,,_lBilI 2.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 7-12
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
method of payment that, in accordance with the applicable
United States Treasury Regulations, provides for distribution of
the elected officials' participant's benefits over:
[(1)]
[(2)]
®
The life of the elected official's participant;
The lives of the elected officials' participant and
lID
.cg
the elected officials' participant's designated beneficiary;
[(3)]
A period not extending beyond the life expectancy
of the elected officials' participant; or
[(4)]
ill}
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
~
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
Q
~
F:\LAW\BILLS\1207 Employee's Retirement System\Bill 2.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 7-12
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
retirement plan specified by the member. A member may not elect
f!
direct rollover if the eligible rollover distribution is less than $200.
*
*
(b)
(1)
*
*
*
*
33-45. Vested benefits and withdrawal of contributions.
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.
(2)
(A)
If
f!
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.
72
73
74
75
76
77
78
79
80
81
(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
regulations.
©
Notwithstanding any other provision, if the member's
contributions and interest is $1,000 or less, the amount
w
~
F:\LAWlBILLS\1207 Employee's Retirement System\BiIl2.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 7-12
82
83
84
85
86
87
88
89
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.
90
91
92
93
94
95
96
97
98
*
*
*
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:
·99
100
101
Roger Berliner, President, County Council
Date
102
Approved:
103
Isiah Leggett, County Executive
Date
G
F:\LAW\BILLS\1207 Employee's Retirement System\BiII 2.Doc
 PDF to HTML - Convert PDF files to HTML files
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 of Investment Trustees
Office of the County Attorney
APPLICATION
WITIDN
MUNICIP
ALITIES:NIA
PENALTIES:
N/A
F:\LAW\BILLS\1207 Employee's Retirement System\LRR (2).Doc
 PDF to HTML - Convert PDF files to HTML files
OFFICES OF THE COUNTY EXECUTIVE
Isiah Leggett
County Executive
Timothy L. Firestine
ChiefAdministrative Officer
MEMORANDUM
January 30, 2012
TO:
FROM:
SUBJECT:
Roger Berliner, Council President
Isiah
Leggett,
County Executive
~~
")
~
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 permit automatic distributions to terminated 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. Bil154-10 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 of this 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
 PDF to HTML - Convert PDF files to HTML files
Agenda Item 14
March 6,2012
Introduction
MEMORANDUM
March 2, 2012
TO:
FROM:
SUBJECT:
County Council
0(\
Robert
H.
Drummer, Senior Legislative Attorney
~'j
Introduction:
Expedited Bill 7-12, Employees' Retirement System - Automatic
Distributions
Expedited Bill 7-12, Employees' Retirement System
Automatic Distributions,
sponsored by the Council President at the request of the County Executive, is scheduled to be
introduced on March 6, 2012. A public hearing is tentatively scheduled for March 27 at 1:30
p.m.
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.
This packet contains:
Expedited Bill 7-12
Legislative Request Report
Memo from County Executive
F:\LAW\BILLS\1207 Employee's Retirement System\Intro Memo.Doc
Circle #
1
6
7
 PDF to HTML - Convert PDF files to HTML files
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_ _ _ _ __
ChI _ _, 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) 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.
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:
 PDF to HTML - Convert PDF files to HTML files
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.
2
3
4
*
(
C)
*
*
Return ofmember contributions.
(1)
Refund after employee's separation under the optional and
5
6
7
integrated plans.
*
*
*
8
(ill
Notwithstanding any other provision, if the member's
9
10
11
12
contributions and interest are $1,000 or less, the amount
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.
13
14
15
16
17
18
19
20
21
*
*
*
*
33-44. Pension payment options and cost-of-living adjustments.
*
(h)
*
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 (70 112) 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
22
23
24
25
26
27
G
f,\LAWlBILLS\l207 Employoo',
Rori"""",
S,,_lBilI 2.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 7-12
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
method of payment that, in accordance with the applicable
United States Treasury Regulations, provides for distribution of
the elected officials' participant's benefits over:
[(1)]
[(2)]
®
The life of the elected official's participant;
The lives of the elected officials' participant and
lID
.cg
the elected officials' participant's designated beneficiary;
[(3)]
A period not extending beyond the life expectancy
of the elected officials' participant; or
[(4)]
ill}
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
~
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
Q
~
F:\LAW\BILLS\1207 Employee's Retirement System\Bill 2.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 7-12
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
retirement plan specified by the member. A member may not elect
f!
direct rollover if the eligible rollover distribution is less than $200.
*
*
(b)
(1)
*
*
*
*
33-45. Vested benefits and withdrawal of contributions.
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.
(2)
(A)
If
f!
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.
72
73
74
75
76
77
78
79
80
81
(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
regulations.
©
Notwithstanding any other provision, if the member's
contributions and interest is $1,000 or less, the amount
w
~
F:\LAWlBILLS\1207 Employee's Retirement System\BiIl2.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 7-12
82
83
84
85
86
87
88
89
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.
90
91
92
93
94
95
96
97
98
*
*
*
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:
·99
100
101
Roger Berliner, President, County Council
Date
102
Approved:
103
Isiah Leggett, County Executive
Date
G
F:\LAW\BILLS\1207 Employee's Retirement System\BiII 2.Doc
 PDF to HTML - Convert PDF files to HTML files
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 of Investment Trustees
Office of the County Attorney
APPLICATION
WITIDN
MUNICIP
ALITIES:NIA
PENALTIES:
N/A
F:\LAW\BILLS\1207 Employee's Retirement System\LRR (2).Doc
 PDF to HTML - Convert PDF files to HTML files
OFFICES OF THE COUNTY EXECUTIVE
Isiah Leggett
County Executive
Timothy L. Firestine
ChiefAdministrative Officer
MEMORANDUM
January 30, 2012
TO:
FROM:
SUBJECT:
Roger Berliner, Council President
Isiah
Leggett,
County Executive
~~
")
~
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 permit automatic distributions to terminated 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. Bil154-10 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 of this 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