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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 ir„ flannud do r 200 Hopmeadow Street r�... poia&lai, nv netma:, �., G-.,,;; .r�'�.rr r...n. iou(a �:ot yn Simsbur CT 06089 1'^[n,.„rrtt¢Imm,, �e�un+n(oiy .��l,,grif�;, �;-i� J �pxm��tre/.o; ', i„ u��ll✓�.,rd jiu�pox� Mailing Address. P.O. Box 1583 Hartford, CT 06144-1583 TRE ito HARTFORD Caplsm orresondent 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