HomeMy WebLinkAboutResolution 02-127-CCRESOLUTION ADOPTING AMENDMENT TO
Resolution Number 2002-127—CC
DEFERRED COMPENSATION PLAN
WHEREAS, the Grant County Commissioners
(hereinafter "Employer") heretofore established the Deferred Compensation Plan
( hereinafter "Plan"), and
WHEREAS, the Employer desires to amend the Plan to conform with the technical corrections to
the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") contained in the Job
Creation And Worker Assistance Act of 2002 ("Act"); and
WHEREAS, this amendment Is intended as good faith compliance with the requirements of the
Act and guidance issued thereunder, and
WHEREAS, this amendment shall supersede the provisions of the Plan to the extent those
provisions are inconsistent with the provisions of this amendment
NOW THEREFORE, BE IT RESOLVED, that, effective January 1, 2002, the Employer hereby
amends the Plan as follows:
"Includible Compensation - means compensation from the Employer, within the meaning of
Code Section 415(c)(3) and the regulations thereunder
Age 50+ Catch -Up Contribution - All Participants who have attained age 50 before the close of
the plan year shall be eligible to make catch-up contributions In accordance with, and subject to the
limitations of, Section 414(v) of the Code. Such contribution shall not, with respect to the year in which
the contribution is made, be subject to any otherwise applicable limitation contained in Section 457 of the
Code, or be taken into account in applying such limitations to other contributions or benefits under this
Plan or any other plan. The maximum amount that may be deferred under this Plan for any calendar year
by a Participant eligible for both the pre -retirement catch-up contribution under Section 457(b)(3) of the
Code and this age 50+ catch-up contribution is the greater of the maximum amount that may be deferred
under the contribution limit at Section 457(b)(2) of the Code, plus any age 50+ catch-up contribution
allowed under this section, or the pre -retirement catch-up contribution limit at Section 457(b)(3) of the
Code "
IN WITNESS WHEREOF, the Employer has executed this Plan Amendment this
20th day of August
MaTAIN
Attes(
r•
(Title) Pi
Job Creation And Worker Assistance Act of 2002
(Technical Correction) Amendment
Governmental 457 Plan
9nn?
by Grant County Commissioners
Its
(Witness)
(Title)
April 2002
April, 2002
Dear Plan Sponsor:
FGnty
mot
Early in March 2002, President Bush signed into law the Job Creation And Worker
Assistance Act of 2002 ("Act"). Among other items, the Act included technical
corrections to the Economic Growth and Tax Relief Reconciliation Act of 2001
("EGTRRA"). The Act redefines the meaning of the term "includible compensation".
The Act also clarifies the relationship between the pre -retirement catch-up contribution
limit and the age 50+ catch-up contribution limit. Both technical corrections are effective
January 1, 2002.
The Hartford believes you will want to take full advantage of these technical corrections.
To that end, we have prepared for you a specimen plan amendment that includes both
changes. Note that as a result of one of the technical corrections, the definition of
"includible compensation" now includes deferrals made to a 125 cafeteria plan, 401 (k)
plan, 4O3(b) plan and/or 457 plan and deferrals not included in gross income by reason of
132(f)(4). In the amendment, we updated the definition of "includible compensation" by
reference to the relevant Internal Revenue Code section and the associated regulations to
reduce the need for future amendments, should the Internal Revenue Code be changed.
You may use the enclosed document to amend your plan for the technical corrections.
Additionally, we will provide administration to your plan that is consistent with the
changes included in the specimen plan amendment.
Please keep in mind that this information is intended to assist you in your efforts to align
your program with the law. We recommend you discuss this matter with your own legal
advisor. If new information is made available from the Treasury that requires changes to
these materials, we will provide you with an update.
There are numerous other resources available to you from The Hartford to help you with
your decision making. Please feel free to contact your Plan Manager and/or local
Hartford Sales Management at any time for more information. We are here to help.
Thank you for being a valued Hartford customer.
Sincerely,
Hartford Life Insurance Company
Hartford Life insurance Companies
Retirement Plan Solutions
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Mailing Address. P.O. Box 1583
Hartford, CT 06144-1583
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A 457 legislative compliance update from Hartford Life Insurance Company
April, 2002 Vol. 5, Issue 2
IRS Issues Proposed Age 50+ Catch -Up Regulations
The IRS has issued proposed regulations regarding
catch-up contributions for individuals age 50 or
older. The proposed rules are generally effective
for tax years beginning on or after January 1, 2002
Beginning in 2002, eligible individuals may defer
an additional $1,000 to a 401(k), 403(b) or
governmental 457(b) plan. This limit increases
as follows:
50+ Catch -Up Contribution Schedule
2002
2003
2004
2005
2006
utilizing the Code section 457(b)(3) pre -retirement
catch-up provision (See Clarification oflnterplay
Between Age 50+ Catch -Up and 457 Pre -Retire-
ment Catch -Up).
Determination of Age 50+ Catch -Up Contributions —
The determination of whether a deferral is a catch-
up contribution is to be made at plan year-end.
Generally, a deferral is considered a catch-up
contribution once the deferral limit ($11,000 for
,�, ,2002) is reached.
$2,000
1 [ ftfarticipams in Multiple Plans of the Employer—
$3,000
$4,000 For purposes of determining whether deferrals
are in excess of a statutory limit, all deferrals made
$5,000 (indexed thereafter) ;; • ;,,
,done or more 457 plans of the employer are
The IRS notes that any final rule or sub
guidance, to the extent such guidance is
restrictive, will not have retroactive eff�t
following is a summary of the propos,
affecting governmental 457(b) platin;{
Eligibility for Age 50+ Catch -Up
For purposes of the catch-up
who will turn 50 years of age
calendar year is deemed to
of that year. Such participant
where he or she later dies or j
prior to reaching age 50. A pi
to apply the age 50+ tate
• gated against the underlying limit. The
tt of deferrals treated as catch-up contributions
a%ecapu c they exceed the statutory limit must not
cecd}tc•applicable dollar catch-up limit.
continued on page 2
F$' 1
50+ Catch -Up Regulations ....1-2
to 457 Deferral Limit ....... 2-3
Time Off Plans,
.......................................... 3
Notice For
Plans ........... ............. back cover
continued from page 1
Elective Deferral Limit: Participation in Plans of
Unrelated Employers — The proposed regulations allow
a catch-up eligible individual who participates in
plans of different employers to treat a deferral as a
catch-up contribution where it exceeds the deferral
limit (determined on an individual basis) even though
the deferrals did not exceed an applicable limit for
either employer's plan. Each employer is to make
catch-up contribution determinations for its plan
based upon the contributions made to its plan.
Catch-up eligible individuals participating in two or
more plans of unrelated employers may exclude from
gross income the aggregate amount of contributions
made to these plans up to the deferral and catch-up
limit for the taxable year. Therefore, the regulations
treat the catch-up limit as an individual as well as an
employer plan limitation.
Example: John participates in City R's 457(b) plan. In addition,
John works for Town X in the evening and participates in X's
457(b) plan. In 2002, John contributes $11,500 to R's plan and
$1,000 to X's plan. For plan R, there is a catch up of $500.
For X, there is no catch up. The maximum that may be
excluded from John's income is the combination of the 457(b)
limit ($11,000) and the catch-up limit ($1,000) or $12,000.
Of his $12,500 in contributions, John is eligible to exclude
$12,000 from his gross income.
Clarification of Interplay Between Age 50+ Catch -Up
and 457 Pre -Retirement Catch -Up —
The Job Creation and Worker Assistance Act of 2002
includes a technical correction to EGTRRA and
Internal Revenue Code Section 457 that helps clarify
Technical Correction Made
to 457 Deferral Limit
The Job Creation And Worker Assistance Act of 2002,
signed into law by President Bush on March 9, 2002,
includes a technical correction to the Economic
Growth and Tax Relief Reconciliation Act of 2001
the interplay between the age 50+ catch-up provision
and the 457(b)(3) pre -retirement catch-up provision.
Under the change, a governmental 457(b) plan may
allow a participant who is both age 50 or older and
eligible for the 457(b)(3) pre -retirement catch-up to
defer the greater of
• the standard limit plus the age 50+ catch-up; or
• the pre -retirement catch-up limit, i.e. the standard
limit plus any remaining previously unused limitation
up to double the standard limit.
Example: For 2002, a 64 year old participant earning $40,000
is eligible for the pre -retirement catch-up, but has only $800
remaining in previously unused limitation. The participant's
standard limit maximum plus the age 50+ catch-up limit is
$11,000 + $1,000 or $12,000. While the preretirement catch
up maximum is twice the standard limit of $11,000 or $22,000,
the participant's pre -retirement maximum contribution is the
standard limit of $11,000 plus the remaining previously unused
limitation of $800 or $11,800. This participant's maximum limit
for the year is the greater of the two limits or $12,000.
Other Age 50+ Catch-up Related Guidance —
In Announcement 2001-93, the IRS directs employers
to include catch-up contributions as they would an
employee's other deferrals on the W-2. Starting in 2002,
distributions from governmental 457(b) plans will be
reported on Form 1099-R. The IRS will address the
reporting of catch-up contributions in the 2002
instructions to the 1099-R Form. The IRS notes that
it does not anticipate any major changes.
The Hartford will keep you informed of any additional
guidance regarding this and other EGTRRA issues. 4
("EGTRRA'). Originally, EGTRRA increased the
deferral limit for 2002 to the lesser of $11,000 or 100%
of"includible compensation," i.e. compensation
currently includible in gross income or compensation
net of 457 and other deferrals. As a result, the deferral
limit was generally 509/o of compensation for
participants earning less than $22,000 a year.
IRS Ruling Addresses Paid Time Off Plans,
Deferral Elections
The Internal Revenue Service ("IRS") recently
provided clarification regarding the deferral of paid
time off. In Private Letter Ruling ("PLR") 200202027
the IRS ruled favorably where a paid time off or PTO
plan provided employees an opportunity to make an
election by December 1st of the current year to choose
from one of three options with respect to a limited
number of PTO hours to be earned in the next
calendar year. Employees may elect to:
take these hours as paid leave in the next year;
contribute/defer the cash equivalent of these hours
to the employer's 403(b) plan in the next year; or
receive the cash equivalent of these hours as
additional compensation in the next year.
While the deferrals were to be made to a 403(6) plan,
because the employer in question is a tax exempt
entity, the IRS examined whether the PTO plan itself
was a deferred compensation plan subject to the
requirements of Section 457 of the Internal Revenue
Code. Given the facts and circumstances presented,
the IRS ruled that, even with this election feature, the
PTO plan was a bona fide sick or vacation leave plan
not subject to the rules of section 457. While the PTO
plan provides for an election to defer a number of
future PTO hours over to a 403(b) arrangement, it
is not a plan that provides, on its own, for the deferral
of compensation to future taxable years.
The Job Creation And Worker Assistance Act of 2002
included a technical correction to this EGTRRA limit.
Effective January 1, 2002, the definition of "includible
compensation" aligns with the definition used to
determine the annual additions limit under 401
qualified defined contribution plans. This definition
of compensation includes, or adds back, deferrals
made to a 125 cafeteria plan, a 401(k), 403(6), and/or
r
This ruling is directed only to the taxpayer who
requested it. A private letter ruling may not be used
or cited by others as precedent. However, this PLR is
instructive with respect to how an employer may be
able to structure its paid time off plan to provide for
the deferral of a portion of the paid time off and
avoid subjecting the PTO plan to the requirements
of Code section 457. In this PLR, the IRS examined
when the election was made, i.e. before the paid time
off was earned or made available to the employee.
The IRS reviewed the design of the paid time off
plan to determine whether it was a bona fide paid
rime off plan or an arrangement for the deferral of
compensation subject to Code section 457.
While the facts and circumstances of this situation
involve deferrals to a Code section 403(b) plan, the
fot us of the PLR was on the tax questions related to
the PTO plan and the elective options available to
employees. A plan sponsor considering changes to its
sick or vacation paid leave plans to allow employees
an election to defer a portion of the next calendar
year's paid leave to a 401(k), 403(b) or 457(b) plan
should discuss the issues addressed by this ruling
with its legal counsel. 4
457(6) plan. Thus, the limit for 2002 is generally the
lesser of $11,000 or 100% of compensation. Note that
employers still need to consider other deductions such
as FICA withholding when deferring a participant's
compensation to a 457 plan. 4
IRS Issues Safe Harbor Tax
Notice for Governmental
457(b) Plans
The Economic Growth and Tax Relief Reconciliation
Act of 2001 ("EGTRRA') requires governmental 457(b)
plans to allow participants the opportunity to elect to
directly rollover any eligible rollover distribution to
another eligible retirement plan that accepts rollovers.
EGTRRA also applied the tax notice rules of Code
section 402(f) to governmental 457(b) plans. Under
the rules, participants must be provided with a notice
that explains their rollover rights and the mandatory
withholding rules. Following delivery of the notice,
plans must provide participants with at least 30 days
to make a decision regarding the direct rollover
option. After 90 days, a new notice must be provided.
participants may elect to waive the 30 day rule.
In Notice 2002-3, the IRS issued a safe harbor notice
that plan administrators of governmental 457 plans
may provide to participants receiving eligible rollover
distributions from the plan in order to satisfy Code
section 4020. The Hartford has developed a genetic
notice, based upon this safe harbor notice, that
accompanies all of The Hartford's governmental 457
plan benefit and withdrawal forms. If you would like
copies of these farms with the tax notice, please log on
to HartfardOrtline at http://retire.hartfordlife.com or
contact your plan Manager. 4
1NV'bS YMENTS. INSI' R \N( F. 190 YE \RS OF NVISDOM
Always thinking adead "'
TE
HARTFORD
"The Hartford" Is The Hartford Financial Services Group, Inc and its suhsldiams, Including Issuing company Hartford Life Insurance Company.
I
I Capitol Correspondent is published by
Hartford Life Insurance Company
„riff, 200 Hopmeadow Street,
* Simsbury, CT 06089
t4. ,
Editor. James Szostek 860-843-3327
Capitol Correspondent does not provide tax, accounting or legal advice Plan
sponsors are advised to consult their attorneys and/or tax advisors about now
issues addressed in Capitol Correspondent will affect their plans
N07 FOR USE WITH PARTICIPANTS
405683 Printed in U 5 A 02002 The Hartford, Hartford, CT 06115