Agenda Item 12
March 27, 2012
Public Hearing
MEMORANDUM
March 23, 2012
TO:
FROM:
SUBJECT:
County Council
Robert H. Drummer, Senior Legislative Attorney
~
~
J
Public Hearing:
Expedited Bill 8-12, Retirement Savings Plan - Amendments
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
Government Operations and Fiscal Policy Committee worksession is tentatively scheduled for
April 16 at 1:30 p.m.
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 The IRS requested the following changes: (a) delete outdated references to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.
This packet contains:
Expedited Bill 8-12
Legislative Request Report
Memo from County Executive
Fiscal and Economic Impact Statement
IRS Favorable Determination Letter
F:\LAW\BILLS\1208 Retirement Savings Plan\PH Memo.Doc
Circle
#
1
5
6
7
11
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No.
_8~-.-.!.1==-2~-:-_~_
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=nc:::.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 bill.
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
33-118.
(
a)
Maximum annual contribution.
Annual Contribution Limitation
4
*
[(4)
*
*
5
6
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
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
12
13
14
15
16
17
suspense account must be allocated ratably among the County
contributions accounts of all the participants except as
otherwise provided in this Section.]
(5)] (1}
18
19
20
21
[(6)]
ill
*
*
2007~
*
*
*
*
~
22
23
24
25
{£}
Effective July
all contributions made to
participant's
account within 212 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.
26
27
33-120.
Distribution of Benefit
F:\LAW\BILLS\1208 Retirement Savings Plan\Bill 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[,t
ill
direct rollover
[is1 means a payment from the retirement
savings plan to the eligible retirement plan specified by the
participant.
ill
eligible retirement plan
means:
CA)
an individual retirement account described
Revenue Code Section 408Ca), as amended;
In
Internal
tID
an individual retirement annuity described in Internal
Revenue Code Section 408(b), as amended, (other than
an endowment contract);
©
~
qualified trust;
.em
ilil
an annuity plan described in Internal Revenue Code
Section 403(a), as amended;
an eligible deferred compensation plan described in
Internal Revenue Code Section 4S7(b), as amended,
which is maintained
12Y
an eligible employer described in
Internal
Revenue
Code
Section
4S7(e)(1)(A),
as
amended; and
0)­
F:\LAw\BILLS\1208 Retirement Savings Plan\Bill2.Doc
 PDF to HTML - Convert PDF files to HTML files
Expedited Bill No. 8-12
55
56
57
®
an annuity contract described in Internal Revenue Code
Section 403(b), as amended.
ill
eligible rollover distribution
means any distribution to
f!
participant of all or any portion of the participant's account
balance; except:
58
59
60
61
®
any distribution which is one of
f!
series of substantially
equal periodic payments (not less frequently than
annually) made:
62
63
ill
for the life (or life expectancy) of the employee or
the joint lives (or ioint life expectancies) of the
employee
and
the
employee's
designated
64
65
66
67
68
69
beneficiary; or
(ii)
ill}
for
f!
specified period of 10 years or more; or
any distribution to the extent such distribution is required
under Internal Revenue Code Section 401(a)(9), as
amended.
70
71
72
*
Sec. 3. Effective Date.
*
*
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:\LAWl.BILLS\1208 Retirement Savings PJan\Bil12.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 IMP ACT:
Office of Management and Budget
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
Office of Management and Budget
N/A
N/A
SOURCE OF
INFORMATION:
Joseph Adler, Office of Human Resources
Amy Moskowitz, Office of the County Attorney
.
APPLICATION
WITHIN
MUNICIP ALITIES:NIA
PENALTIES:
NI
A
F:\LAW\BILLS\1208 Retirement Savings Plan\LRR.Doc
 PDF to HTML - Convert PDF files to HTML files
OFFICE OF THE COUNTY EXECUTIVE
Isiah Leggett
ROCKVILlE, MARYLAND 208S0
County Executive
MEMORANDUM
January 30, 2012
TO:
FROM:
SUBJECT:
Roger Berliner, President, County CounCi;
~
Isiah
Leggett,
COlUlly
Executive
--e
~r.,.tJ--­
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 ofthese changes.
Thank you for your consideration ofthis matter.
Attachments: (Determination letter from the IRS)
(Draft legislation with teclmical 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
ROCKVILLE, MARYLAND
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 Bm 8-12 - Retirement Savings Plan - Amendments
~
T-'
SUBJECT:
Attached please find the fiscal and economic impact statements for the above­
refurenced legislation.
JAH:hv
c: Kathleen Boucher, Assistmrt ChiefAdministrative Officer
Lisa Austin, Offices ofthe County Executive
Joy Nunni, Special Assistant to the County Executive
Patrick Lacefield, Director. Public Infonnation Office
Linda Herman. Executive Director, Board ofInvestment Trustees
Alex Espinosa, Office ofMBnagement and Budget
Blaise DeFazio, Office of Management and Budget
Helen P. Val1one, Office of Management and Budget
Naeem Mia, Office ofManagement and Budget
(j)
 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 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 ofan "eligIole 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 whether 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 the next 6 fiscal years.
This bill has no impact to COlUlty 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.
5. Later actions that
may
affect future revenue
future spending.
a~d
expenditures
if
the bill authorizes
This change will not result in
subsequen~
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 isneeded.
Not applicable.
9. A description of any variable that could affect revenne 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 the plan resulting from
this
proposed legislation.
12. Other fIScal impacts or comments.
Not applicable.
13. The following contributed to and concurred with this analysis:
Linda
He~
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
 PDF to HTML - Convert PDF files to HTML files
Economic Impact Statement
Council Bill
8~
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 IRS Code
Section 415, which limits contributions 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 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 property values
in
the County.
The.
legislation has no economic impact, it is administrative
4. If a
Bill
is
likely to have no econorirlc 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 contdbuted to and concurred with this analysis: David Platt and Mike
Coveyou, Finance
J
e h . Beach, Drrector
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 THIMMADASIAH
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 above 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.
-CUUNtY
.A'~'.i:'i
•.
This determination letter is applicable for the amendment (s) executed
29
JJl.
11
~
46
Letter 2002 (DO/CG)
 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,
~ '2..~'
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)