CITY OF SIMI VALLEY
MEMORANDUM
September 11, 2023
TO: City Council
FROM: Office of the City Manager
SUBJECT: ADOPTION OF A RESOLUTION RATIFYING CERTAIN AMENDMENTS TO THE CITY’S 457 DEFERRED COMPENSATION PLAN
STAFF RECOMMENDATION
It is recomm ended that City Council adopt the attached Resolution No. 2023-40 (page 4) amending the City’s 457 Deferred Compensation Plan Document to add Roth provisions, change the timing of deferrals elections , and ratify the execution of the documents by the City Manager.
BACKGROUND AND OVERVIEW
The City of Simi Valley provides a 457 Deferred Compensation Plan (457 Plan) to non-Management employees, allowing employees to defer compensation on a pre-tax basis into a personalized retirement plan. Each calendar year the 457 Plan allows employees who are over age 50 the option make catch-up contributions to the 457 P lan (currently $7,500), w hich is in addition to the employees’ regular deferrals under the 457 Plan (currently $22,500).
Under the Consolidated Appropriations Act of 2023 (referred to as SECURE 2.0) , age 50 catch-up contribution s for employees who earn more than $145,000 annually (indexed) must be made on a Roth (after-tax) basis. The City’s 457 Plan does not currently provide for Roth contr ibutions. The City’s contribution - benefits consultant, Empower, advised the City that it must amend its 457 Plan Documents if it wishes to add Roth contributions to the 457 Plan effective as of January 1, 2024 (Exhibit “A”, page 5).
In order to have this provision implemented on a timely basis, Empower required that the election be made by August 15, 2023. If the election was not made by that date, Empower could not guarantee that Roth w ould be able to be implemented by January 1, 2024 and the City may incur costs if the City wished to implement Roth provisions at a later date. With the inability to meet City Council meeting deadlines to bring the issue to the Council for consideration and in order to meet the August deadline, t he Plan Administrator as the City Manager ’s designee executed the 457 Plan amendment documents. Staff is now seeking the City
AGENDA ITEM NO.
Consent (7)
2 Council’s ratification of th e execution of the 457 P lan document signed by the Plan Administrator.
FINDINGS AND ALTERNATIVES
The City’s current 457 Plan plan does not provide for Roth contributions effective January 1, 2 024. Therefore , employees who earn more tha n $145,000 (indexed) in a calendar year will not be able to make age 50 catch -up contributions and their deferrals will be limited to the current IRS amount of $22,500. Adding the proposed Roth provisions to the 457 P lan would allow all employees to make Roth contributions , eliminating the $145,000 threshold f or employees who are over age 50 . The City’s 401(k) plan (available to Management employees) currently allows Roth contributions .
The proposed change , adding the Roth provisions to the 457 Plan (available to non - Management employees), will provide a similar benefit to SEIU employees.
The 457 Plan currently requir es that any deferral elections or changes to deferral elections be made the month before compensation is paid. An additional optional change under SECURE 2.0 would allow employees to make or change deferral elections at any time before the payment of comp ensation. The change in the time when deferral elections can be made align 457 Plans with the timing of elections under 401(k) plans. This optional change has long been requested by employers that sponsor 457 Plans.
To meet the deadline imposed by Empower, staff executed the forms required in order to implement the changes by January 1, 2024. Staff recommends the City Council adopt the attached Resolution implementing the changes and ratify the execution of the documents by the City Manager’s designee.
The following Alternatives are available to the City Council:
1. Adopt the attached Resolution No. 2023 -40 amending the City’s 457 Deferred Compensation Plan Docu ment to add Roth provisions, change the timing of deferrals elections, and ratify the execution of the documents by the City Manager’s designee, the Plan Administrator;
2. Modify and adopt the attached Resolution No. 2023 -40 (page 4) amending the City’s 457 Deferred Compensation Plan Document to add Roth provisions, change the timing of deferrals elections, and ratify the execution of the documents by the City Manager’s designee, the Plan Administrator.
3. Provide further direction to staff.
Staff recommends Alternative No. 1.
3 SUGGESTED CITY COUNCIL MOTION
I move to adopt the attached Resolution No. 2023-40 amending the City’s 457 Deferred Compensation Plan Document to add Roth provisions, c hange the timing of deferrals elections, and ratify the execution of the documents by the Plan Administrator, the City Manager’s designee.
SUMMARY
The City of Simi Valley provides a 457 Deferred Compensation Plan (457 Plan) to non - Management employees, allowing employees to defer compensation on a pre -tax basis into a personalized retirement plan. Each calendar year the 457 Plan allows employees who are over age 50 the option make catch -up contributions to the 457 Plan (currently $7,500), which is in addition to the employees’ regular deferrals under the 457 Plan (currently $22,500). Under the Consolidated Appropriations Act of 2023 (referred to as SECURE 2.0), age 50 catch -up contributions for employees who earn more than $145,000 annually (indexed) must be made on a Roth (after -tax) basis. The City’s 457 Plan does not currently provide for Roth contributions. In order to i mplement changes to be consistent with the new law, the Plan Administrator as the City Manager ’s designee executed an amendment to the City’s 457 Plan. Staff is now seeking ratification of the execution of the 457 Plan document signed by the Plan Administrator. ____________________________________
Brian P. Gabler
City Manager
Prepared by Trevor Earle, Risk Manager
INDEX Page
Resolution No. 2023-40…………………………………………………….4
4 RESOLUTION NO. 2023-40
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SIMI VALLEY ADOPTING CERTAIN AMENDMENTS TO
THE CITY’S
457 DEFERRED COMPENSATION PLAN
WHEREAS, the City Council has previously establi shed a 457 Deferred Compensation Plan Document (Plan) for designated City employees; and WHEREAS, the City Council desires to amend the Plan in accordance with the attached election form (Exhibit “A”) regarding the adoption of certain optional provisions under the Consolidated Appropriations Act of 2023 (referred to as SECURE
2.0); and
WHEREAS, the City Council finds and determines that the election s in Exhibit “A” shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of the Plan.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SIMI
VALLEY DOES HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The City of Simi Valley’s 457 Defer red Compensation Plan Document is amended as indicated in Exhibit “A”.
SECTION 2. The effective date of these amendments to the 457 Deferred Plan Document shall be January 1, 2024.
SECTION 3. Any action previously taken by City’s Staff including its execution by the City Manager ’s designee, the Plan Administrator , regarding the adoption of Exhibit “A” shall be ratified.
SECTION 4. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the Office of the City Clerk.
PASSED and ADOPTED this ____th day of _________________ 2023.
Attest:
City Clerk Fred D. Thomas, Mayor of the City of
Lucy Blanco Simi Valley, California
Approved as to Form: Approved as to Content:
David L. Caceres, City Attorney Brian Paul Gabler, City Manager 5 Exhibit A – Copy of the executed Election Form
RES. NO. 2023-40
6 RES. NO. 2023-40
7 RES. NO. 2023-40