Agenda Item 11

March 27,2012

Public Hearing

MEMORANDUM

March 23,2012

TO:

FROM:

SUBJECT:

County Council

Robert

H.

Drummer, Senior Legislative Attorney

0

!

~CJ

Public Hearing:

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, was introduced on

March 6, 2012. A Government Operations and Fiscal Policy Committee worksession is

tentatively scheduled for April

16

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

Fiscal and Economic Impact Statement

F:\LAW\BILLS\1207 Employee's Retirement System\PH Memo.Doc

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Expedited Bill No. _7!--..w12=--_ _ __

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. _ __

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 brackets1

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:



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

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integrated plans.

*

*

*

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ill}

Notwithstanding any other provision, if the member's

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.

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*

*

(h)

*

*

*

*

33-44. Pension payment options and cost-of-Iiving adjustments.

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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

I

under a

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G

F,'LAWlBILLSII207 Emplo,='

R~i=m\

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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:

.cAl

[(2)]

fID

[(1)]

The life of the elected official's participant;

The lives of the elected officials' participant and

the elected officials' participant's designated beneficiary;

[(3)]

(Q

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

o

\.::.J

F:\LAW\BILLS\1207 Employee's Retirement System\Bill2.Doc



Expedited Bill No. 7-12

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retirement plan specified by the member. A member may not elect

!1

direct rollover if the eligible rollover distribution is less than $200.

*

*

(b)

*

*

*

*

33-45. Vested benefits and withdrawal of contributions.

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Withdrawal ofcontributionsfor optional and integrated plans.

(1)

[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

!1

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)

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Notwithstanding any other provision. if the member's

contributions and interest is $1,000 or less, the amount

F:\LAW\BILLS\1207 Employee's Retirement System\Bill2.Doc



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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101

Roger Berliner, President, County Council

Date

102

Approved:

103

Isiah Leggett, County Executive

Date

G

F:\LAW\BILLS\1207 Employee's Retirement System\BiII2.00c



LEGISLATIVE REQUEST REPORT

Expedited Bill 7-12

Employees' Retirement System Automatic Distributions

nESCRIPTION:

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:

SOURCE OF

INFORMATION:

Office of Management and Budget

N/A

N/A

Board of Investment Trustees

Office of the County Attorney

APPLICATION

WITIDN

MUNICIP

ALITIES:NI

A

PENALTIES:

N/A

F:\LAW\BILLS\1207 Employee's Retirement System\LRR (2).Doe



OFFICES OF THE COUNlY 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

...."Q

~

")

~

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 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, 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 Herman, Director

Board of Investments Trustees

lOt

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



ROCKVILLE, MARYLAND

MEMORANDUM

March

21, 2012

TO:

FROM:

SUBJECT:

Roger Berliner, President, County Council

Jennifer A. Hughes, Director, Office ofManagement

an.

d

Joseph F. Beach, Director, Deparbnent ofFinance

~

BUdge~

U

Expedited Bill

7-12 -

Employees' Retirement System - Automatic Distnbutions

Attached please

find

the fiscal and economic impact statements for the above­

referenced legislation.

JAH:hv

c: Kathleen Boucher, Assistant Chief Administrative Officer

Lisa Austjn, Offices ofthe 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 of.Management and Budget .

Blaise DeFazio, Office ofManagement and Budget

Helen P. Vallone, Office ofManagement and Budget

Naeem Mia, Office of Management and Budget



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 ofthe 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 (; rlScal 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

affeet retiree pension or group insurance costs.

Not applicable.

5. Later actions that may atlect 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.

I

Not applicable.

8. An estimate of costs when an additional appropriation is needed.

Not applicable.

1



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..

The bill provides the Board the authority to pennit the automatic distribution ofterminated

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 Herman, Executive Director, Board of Investment Trustees

HelenP. Vallone,

Office

of Management and Budget

Blaise

DeFazio, Office ofManagement and Budget

Naeem Mia, Office ofManagement and Budget

Date

2



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 $1,000 or less

in

the Optional and Integrated Plans and the Elected Officials' Plan of

the

Employees~

Retirement System to temrinated participants. 'This bill would reduce

administrative costs ifthese participant accounts are automatically distributed.

I _ The sources of information, assumptions, and methodologies used.

Not applicable

2. A description ofany 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~

values

in

the Coun:ty.

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 iro:pact, 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

(ij)