HomeMy WebLinkAboutOrdinance 10564.~
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ORDINANCE N0. / ~~./~
AN ORDINANCE AMENDING ORDINANCE NOS. 2999, 4060, 4250,
4304, 4354, 4430, 4860, 4861, 4873, 4875, 5226, 5259,
6393, 6556, 7056, 7317, 7875, 8674, 8843, 9247, 9532,
10081, 10291, 10369, AND 10385, CODIFIED AS CHAPTER 2,
ARTICLE VI, DIVISION 1, ENTITLED "EMPLOYEES' RETIREMENT
FUND", OF THE CODE OF THE CITY OF FORT WORTH (1986), AS
AMENDED, WHICH ORDINANCES ESTABLISH AND PROVIDE FOR A
RETIREMENT SYSTEM, RETIREMENT PLAN AND BENEFITS
THEREUNDER FOR EMPLOYEES OF THE CITY OF FORT WORTH;
PROVIDING FOR LIMITATIONS ON THE EARNINGS OF A MEMBER
THAT MAY BE USED IN COMPUTING BENEFITS; ACCORDING
NONFORFEITABLE RIGHTS TO ALL MEMBERS IN THE EVENT OF
THE TERMINATION OR PARTIAL TERMINATION OF THE FUND;
PROVIDING FOR ADDITIONAL CITY CONTRIBUTIONS TO THE FUND
OVER TEN YEARS; ESTABLISHING MAXIMUM BENEFIT
LIMITATIONS; PRECLUDING REVERSION OF FUNDS FROM THE
EXCLUSIVE BENEFIT OF MEMBERS AND THEIR BENEFICIARIES;
MAKING THIS ORDINANCE CUMULATIVE; PROVIDING A
SEVERABILITY CLAUSE; PROVIDING FOR ENGROSSMENT AND
ENROLLMENT; AND PROVIDING AN EFFECTIVE DATE.
BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FORT
WORTH, TEXAS;
That Ordinance No. 2999, passed and adopted by the City
Council of the City of Fort Worth on the 24th day of September,
A.D. 1952, as amended by Ordinance Nos. 4060, 4250, 4304, 4354,
4430, 4860, 4861, 4873, 4875, 5226, 5259, 6393, 6556, 7056, 7317,
7875, 8674, 8843, 9247, 9532, 10081, 10291, 10369, and 10385, be
and the same hereby is further amended as follows:
SECTION I.
That Chapter 2, Article VI, Division I, Section 2-202,
Subsection "Earnings" of the Code of the City of Fort Worth
(1986), as amended, be and is hereby amended by adding a sentence
at the end thereof and, after such addition, such sentence shall
read as follows, to wit:
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"Notwithstanding the foregoing, earnings in excess of
$200,000, if any (or such other amount as may be
determined by taking into account the cost-of-living
adjustment provided under Section 401(a)(17) of the
Code), shall be disregarded for alI purposes of this
Division."
SECTION II.
That Chapter 2, Article VI, Division I, Section 2-202,
Subsection "Vested" of the Code of the City of Fort Worth (1986),
as amended, be and is hereby amended by adding a sentence at the
end thereof, and after such addition, such sentence shall read as
follows, to wit:
"Such rights shall also accrue to all members of the
fund at the time of termination of the fund, at the
time of any complete discontinuance of the city's
contributions to the fund, and to members affected at
the time of any partial termination of the fund, but
only to the extent that the benefits of such members
have been funded."
SECTION III.
That Chapter 2, Division I, Section 2-202 of the Code of the
City of Fort Worth (1986), as amended, be and is hereby further
amended by adding Subsections "Annual Additions," "Annual
Benefit," "Code," "415 Compensation," and "Member's Account," and
after such addition, such Subsections shall read as follows, to
wit:
"Annual Additions" shall mean the sum of the following
amounts credited to a member's account or accounts
under any defined contribution plan or plans maintained
by the city for the calendar year:
(1) city contributions;
(2) member contributions, other than rollover
contributions from a plan maintained by an
employer other than the city;
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(3) forfeitures;
{4} amounts allocated after March 31, 1984, to an
individual medical account (if any were to be
established), as defined in Section 415(1)(2) of
the Code, that is part of a pension or annuity
plan maintained by the city; and
(5) amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending
after such date, that are attributable to post-
retirement medical benefits allocated to the
separate account of a member who is a key employee
as defined in section 419A(d)(3) of the Code,
under a welfare benefit plan, as defined in
Section 419(e) of the Code, maintained by the
city.
The amounts described in Paragraphs (4) and (5) are not
annual additions for the nt~rnn~a of rnmr~ntinrr the
percentage limitation
Furthermore, nothing i
construed as requiri:
benefits from the fund
the fund to provide
and approved by the Ii
calendar year beginnir
that portion of meml
lesser of member contr
of 415 compensation or
shall be considered
contributions to the
defined benefit plan
December 31, 1986, are
iescribed in Section 2-209(d}(1).
Z Paragraphs (4) and (5} shall be
-g the payment of any medical
unless and until an amendment to
uch benefits has been duly made
ternal Revenue Service. For any
g prior to January 1, 1987, only
per contributions equal to the
Lbutions in excess of six percent
one-half of member contributions
an annual addition. Member
fund or any other qualified
maintained by the city after
treated as annual additions.
"Annual Benefit" shall mean the aggregate benefit
attributable to city contributions payable annually
under the terms of the fund exclusive of any benefit
not required to be considered for purposes of applying
the limitations of Section 415 of the Code to the Plan,
payable in the form of a straight Life annuity
commencing at age 62 with no ancillary benefits. In
computing the limitations under the fund, the annual
benefit is adjusted to the equivalent of such a
straight life annuity pursuant to Section 2-209(d)(5).
"Code" shall mean the United States Internal Revenue
Code of 1986, as amended, and any successor thereof.
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"415 Compensation" shall mean a member's wages,
salaries, and other amounts received in connection with
personal services actually rendered in the course of
employment with the city during a calendar year, but
shall not include:
(1) contributions made by the city to a plan of
deferred compensation, or simplified employee
pension plan, to the extent such contributions are
excludable from the member's gross income;
(2) any distributions from a plan of deferred
compensation regardless of whether such amounts
are includable in the gross income of the member
when distributed, except any amounts received by a
member pursuant to an unfunded, non-qualified plan
to the extent such amounts are includable in the
gross income of the member;
(3) other amounts that received special tax benefits,
such as premiums for group term life insurance, to
the extent that the premiums are not includable in
the gross income of the member, or contributions
made by the city, including contributions toward
the purchase of an annuity described in Section
403(b) of the Code (whether or not contributed
pursuant to a salary reduction agreement and
whether or not the amounts are actually excludable
from the gross income of the member); and
(4) for any calendar year beginning after December 31,
1988, compensation in excess of $200,000, adjusted
in the manner permitted under Section 415(d) of
the Code.
"Member's Account" shall mean any account or accounts
established and maintained for a member with respect to
the member's total interest in a defined contribution
plan or plans maintained by the city resulting from
annual additions."
SECTION IV.
That Chapter 2, Article VI, Division I, Section 2-209,
"Retirement Pensions," of the Code of the City of Fort Worth
(1986), as amended, be and is hereby amended by adding
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Subsections (d) and (e) and after such addition, Subsections (d}
and (e) shall read as follows, to wit:
"(d) Maximum Benefits
(1} Limitation of annual benefits. Notwithstanding
any other provisions of this Division, the maximum
annual benefit payable in any calendar year to a
member of the fund shall not exceed the lesser of:
a. $90,000; or
b. 100 percent of a member's 415 compensation
averaged over the three consecutive calendar
years, or the actual number of calendar years
for a member whose total pension service is
less than three consecutive calendar years,
during which the member had the greatest
aggregate 415 compensation from the city.
(2) Reduction to be made first from benefit paid by
other plans. Benefits provided to a member under
the fund and under any other defined benefit plan
or plans maintained by the city shall be
aggregated for purposes of determining whether the
limitations in Section 2-209(d}(1) are met. If
the aggregate benefits payable from the fund and
any other defined benefit plan or plans maintained
by the city would otherwise exceed those
limitations, the reductions in benefits shall be
made to the extent possible from the other plan or
plans.
(3) Adjustments upon retirement.
a. If the annual benefit begins before a member
attains age 62, the $90,000 limitation, as
adjusted, shall be reduced in a manner
prescribed by the Secretary of the Treasury.
However, such adjustment shall not reduce the
member's annual benefit below $75,000, if
such member's benefit begins after age 55 (or
the actuarial equivalent of such $75,000
commencing at age 55 if benefits commence
before age 55). Furthermore, no such
adjustment shall reduce the annual benefit of
a qualified police or firefighter below
$50,000, regardless of the age at which the
benefit commences, nor shall such adjustment
cause the annual benefit or pension of a
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qualified police or firefighter who became a
member of the fund before January 1, 1990, to
be less than the Annual Benefit or pension
such member would have accrued under the
terms of Section 2-209 as in effect on
October 14, 1987. For purposes of this
subparagraph, a "qualified police or
firefighter" shall mean a member who retired
with at least 15 years of credited service as
a full-time employee of the police or fire
department (or both) including any credit for
full-time service in the Armed Forces of the
United States.
b. If the annual benefit begins after a member
attains age 65, the $90,000 limitation, as
adjusted, shall be increased so that it is
the actuarial equivalent of the $90,000
limitation at age 65.
c. The portion of a member's benefit that is
attributable to such member's own
contributions is not part of the annual
benefit subject to the limitations of Section
2-209(d)(1) above. Instead, the amount of
such contributions is treated as an annual
addition to a qualified defined contribution
plan maintained by the city.
(4) Annual adjustments to limitations.
a. The $90,000 dollar limitation on annual
benefits provided in Section 2-209(d)(1} and
the $50,000 limitation provided in Section 2-
209(d)(3) (but not the $75,000 limitation
provided in Section 2-209(d)(3)), shall be
adjusted annually as provided in Section
415(d) of the Code pursuant to the
regulations prescribed by the Secretary of
the Treasury. The adjusted limitation is
effective as of January 1 of each calendar
year.
b. The 100 percent limitation provided in
Section 2-209(d)(1) for a member who has
separated from service with a vested right to
a pension shall be adjusted annually as
provided in Section 415(d) of the Code
pursuant to the regulations prescribed by the
Secretary of the Treasury.
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(5) Interest rate assumptions.
a. For the purpose of adjusting the annual
benefit to a straight life annuity, the
interest rate assumption shall be five
percent unless a different rate is required
by the Secretary of the Treasury.
b. For the purpose of adjusting the $90,000
limitation after a member attains age 65, the
interest rate assumption shall be five
percent unless a different rate is required
by the Secretary of the Treasury, and no
adjustment for mortality shall be made to the
extent that a forfeiture does not occur at
death.
(6) No adjustment in certain cases.
a. For purposes of Section 2-209(d)(4), no
adjustment under Section 415(d) of the Code
shall be taken into account before the
calendar year for which such adjustment first
takes effect.
b. For the purpose of Section 2-209(d)(1) and
(4), no adjustment is required for the value
of qualified joint and survivor annuity
benefits, pre-retirement death benefits,
post-retirement medical benefits or post
retirement cost-of-living increases made in
accordance with section 415(d) of the Code
and section 1.415-3(c) of the Income Tax
Regulations.
(7) Total Annual Benefits not in excess of S10.000.
a. The fund may pay an annual benefit to any
member in excess of the member's maximum
annual benefit otherwise allowed if:
1. the annual benefit derived from the
city's contributions to the fund and all
other defined benefit plans maintained
by the city does not in the aggregate
exceed $10,000 for the calendar year or
for any prior calendar year; and
2. the city has not at any time maintained
a defined contribution plan in which the
member participated.
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b. For purposes of this paragraph only, member
contributions to the fund will not be
considered a separate defined contribution
plan maintained by the city.
(8) Less than 10 gears of membership or service.
a. If a member has less than 10 years of total
pension service in the fund at the time the
member begins to receive benefits under the
fund, the $90,000 limitation, as adjusted,
shall be reduced by multiplying the
limitation by a fraction in which the
numerator is the number of years of total
pension service and the denominator is 10;
provided, however, that the fraction shall in
no event be less than one-tenth.
b. The 100 percent limitation of Section 2-
209(d)(1) and the $10,000 limitation of
Section 2-209(d)(7) shall be reduced in the
same manner as provided in subparagraph a.,
above, except the numerator shall be the
number of years of service with the city
rather than years of total pension service.
c. To the extent provided in regulations
prescribed by the Secretary of the Treasury,
the reductions described in this paragraph
shall be applied separately with respect to
each change in the benefit structure of the
fund.
(9) Participation in both defined benefit and defined
contribution plans. If a member is or has been a
participant in one or more defined benefit plans
and one or more defined contribution plans
maintained by the city, the following provisions
shall apply:
a. The sum of the defined benefit plan fraction
and the defined contribution plan fraction
for any calendar year may not exceed 1.0.
b. The defined benefit plan fraction for any
calendar year is a fraction in which:
1. the numerator is the projected annual
benefit of a member, determined as of
the close of the calendar year pursuant
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to Section 1.415-7{b)(3) of the Income
Tax Regulations; and
2. the denominator is the lesser of:
(i) the product of 1.25 multiplied by
the maximum dollar limitation in
effect under Section 415(b)(1)(A)
of the Code, as adjusted, for the
calendar year; or
(ii) the product of 1.4 multiplied by
the amount that may be taken into
account under Section 415(b){1)(B)
of the Code for the calendar year.
c.
The defined contribution plan fraction for
any calendar year is a fraction in which:
1. the numerator is
additions to the
the close of the
the sum of the annual
member's account as of
calendar year; and
2. the denominator is the sum of the lesser
of the following amounts determined for
the calendar year and each prior
calendar year in which the member had
service with the city:
(i) the product of 1.25 multiplied by
the dollar limitation in effect
under Section 415(c)(1)(A) of the
Code for the calendar year,
determined without regard to
Section 415(c)(6) of the Code; or
(ii) the product of 1.4 multiplied by
the amount that may be taken into
account under Section 415(c)(1)(B)
of the Code for the calendar year.
For any calendar year beginning
before January 1, 1987, the annual
additions shall not be recomputed
to treat all member contributions
as an annual addition.
d. If the sum of the defined benefit plan
fraction and the defined contribution plan
fraction exceeds 1.0 in any calendar year for
any member of the fund, the administrator
shall limit, to the extent necessary, the
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annual additions to the member's account for
that calendar year. If after limiting to the
extent possible the annual additions to the
member's account for the calendar year, the
sum of the defined benefit plan fraction and
the defined contribution plan fraction still
exceeds 1.0, the administrator shall adjust
the benefits under the defined benefit plan
fraction so that the sum of both fractions
shall not exceed 1.0 in any calendar year for
the member.
(10) Combining of Plans. For purposes of determining
the limits provided in Section 2-209(d), all
qualified defined benefit plans ever maintained by
the city, whether terminated or not, shall be
treated as one defined benefit plan, and all
qualified defined contribution plans ever
maintained by the city, whether terminated or not,
shall be treated as one defined contribution plan.
(11) Internal Revenue Code application. Notwithstan
ding anything contained in Section 2-209(d), to
the contrary, the limitations, adjustments, and
other requirements prescribed in Section 2-209(d)
shall at all times comply with the requirements of
Section 415 of the Code, as amended, and all
regulations promulgated under the Code, the terms
of which are specifically incorporated into
Section 2-209(d) by reference.
(12) No Increase in Benefits. Section 2-209(d) shall
not be construed to provide a greater benefit to
any member than the benefit computed under Section
2-209(a). Furthermore, Section 2-209(d) shall
remain in effect only to the extent necessary to
satisfy the requirements of Section 415 of the
Code or its successor. Thus, if Section 415 of
the Code is repealed or made inapplicable to
governmental plans, Section 2-209(d) shall be
void.
(e) Commencement of Benefits. Notwithstanding any
other provision in this Division, monthly benefit
payments to a member shall commence no later than April
1, of the year after the year in which the member
attains age 70-1/2, or, if later, April 1 of the year
after the member retires. Monthly benefit payments to
any eligible dependent of a deceased member or deceased
retired member shall commence no later than one (1)
year after the death of such member or retired member."
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SECTION V.
That Chapter 2, Article VI, Division I, Section 2-216(d),
"Administrative expenses" of the Code of the City of Fort Worth
(1986), as amended, be and is hereby further amended by
substituting the following language for Paragraph 3 thereof, to
wit:
"(3) In addition to the city's contributions made
pursuant to Section 2-205, as amended, and any payments
described in Paragraph (1) above, the city shall also
pay the amount of $9,594,966.31 over a period of ten
(10) fiscal years, commencing with the fiscal year
beginning on October 1, 1990. Also commencing on
October 1, 1990, interest at the rate of eight percent
(8~) per annum shall begin to accrue on the unpaid
balance of the aforesaid $9,594,966.31. Not less than
ten (10) percent of the principal amount, plus accrued
interest on the unpaid balance, shall be paid in any
fiscal year commencing after September 30, 1990, until
such additional amount has been paid. Nothing shall
prevent the city from prepaying said amount at any time
with no further interest obligation beyond the date of
the prepayment."
SECTION VI.
That Chapter 2, Article VI, Division 1, Section 2-217,
"Exemption of Benefits from Judicial Process," of the Code of the
City of Fort Worth (1986) , as amended, be and is hereby further
amended by adding Subsection (e}, and after such addition,
Subsection (e) shall read as follows, to wit:
"(e) No part of the corpus or income of the fund shall
ever revert to the city or be used for, ar diverted to,
any purpose other than for the exclusive purpose of
providing benefits to members and their beneficiaries
in accordance with the terms of this Division I."
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SECTION VII.
CONTROLLING POWER OF ORDINANCE
The provisions of this ordinance shall be cumulative of and
in addition to all other ordinances of the City of Fort Worth
relating to pensions, which ordinances are hereby preserved and
continued in force and effect; provided, however, that, in the
event of any conflict, the provisions of this ordinance shall
control.
SECTION VIII.
VALIDITY OF ORDINANCE
If any provision, section, part, subsection, sentence,
clause, phrase or paragraph of this ordinance be declared invalid
or unconstitutional, the same shall not affect any other portion
or provision hereof, and all other provisions shall remain valid
and unaffected by any invalid portion, if any, and the City
Council now says that, if it had known at the time of the passage
of this ordinance that any portion of said ordinance was invalid,
it would not have adopted such invalid part.
SECTION IX.
PREREQUISITES TO ORDINANCE_
The City Council finds that all acts, conditions and things
required by provisions of the Constitution of Texas and the
Charter and Ordinances of the City of Fort Worth precedent to and
in the adoption of this ordinance have been done, have happened
and have been performed in proper and lawful time and manner.
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SECTION X.
ENGROSSMENT AND ENROLLMENT
The City Secretary of the City of Fort Worth is hereby
directed to engross and enroll this ordinance by copying the
caption and effective date of same in the minutes of the City
Council of the City of Fort Worth and by filing this ordinance in
the ordinance records of said City.
SECTION XI.
EFFECTIVE DATE
This ordinance shall be in full force and effect from and
after the date of its adoption and it is so ordained.
AP ROVED AS TO FO AND LEGALITY:
City Attorney
Date : ~ ~ I b - °~ ~p
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ADOPTED:
EFFECTIVE:
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DATE REFERENCE SUBJECT PAGE
NUMBER AMENDMENT TO RETIREMENT ORDINANCE 2
~- ]0-90 G-8551 i °r
RECOMMENDATION
It is recommended that the City Council adopt the attached ordinance amending
the City Retirement Ordinance which includes provisions relating to City
reimbursement of retiree health care expenses to the Retirement Fund and
those required by the Internal Revenue Code's qualification requirements.
BACKGROUND.
Revenue Service.
On September 19, 1989 (M&C G-8212), the City Council retained Gary B. Lawson
and the law firm of Godwin, Carlton & Maxwell as outside legal counsel
to consult with the City Council and represent the City in matters regarding
responsibility for retired City employees' health insurance and related
issues. Periodically, Mr. Lawson has met with the Council to give advice and
to provide an update on his review of these issues. This included the
recommendation that the City seek a determination letter from the Internal
The purpose of the determination letter is to establish that the Employees'
Retirement Fund of the City of Fort Worth is a qualified plan in the eyes of
the Service. In general, retirement plans are divided into qualified and
nonqualified plans for purposes of the Service's rules relating to Federal
tax treatment, with the Federal tax treatment accorded qualified plans being
much more advantageous than the Federal tax treatment accorded to nonquali-
fied plans. The City and retirement benefit recipients have treated the
Retirement Fund as a qualified plan, however, this status had never been
officially designated by the Service. In the opinion of Mr. Lawson,
amendments in two areas of the city's Retirement Ordinance were necessary to
achieve the qualified status from the Service.
The first area of amendment includes the cessation of the Retirement Fund's
transferring of funds to cover the cost of retirees' health care and a
provision for the City to reimburse the Retirement Fund for such transfers
occurri ng~ duri ng the fiscal years of 1984 through 1.989, plus i nterest . Th i s
amount for all City funds is established as being $9,594,966.31 on September
30, 1990. The repayment must be made over a period of ten fiscal years,
commencing October 1, 1990, with 8% interest accruing on any unpaid balance.
The second area of amendment, while extensive in language, is technical in
nature and will have little, if any, discernable impact on the Retirement
Fund. These a.men,dments are included in order to conform to the Service's
qualification requirements and govern the maximum benefits payable to a
member of the Fund..'
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DATE REFERENCE
NUMBER SUBJECT
AMENDMENT TO RETIREMENT ORDINANCE PAGE
2
2
4-10-90 G-8551 of
--
These amendments to the Retirement Ordinance were submitted to the Service as
part of the City's request for a determination letter. The Service has
responded favorably and granted the determination letter which establishes
the Retirement Fund as a qualified fund. Included in the Service's action is
the requirement that the amendment s to the Retirement Ordinance be adopted by
the City Council by April 21, 1990.
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APPROVED BY
CITY COUNCIL
RPR 1U 1990
~k~~~
City Secretary of th®
Ciry of Fon Worth, T®xett
SUBMITTED FOR THE
CITY MANAGER'S DISPOSIT{ON BY COUNCIL. PROCESSED BY
OFFICE BY
Ruth Ann McKinne 6125 ^ APPROVED
_
ORIGINATING ^ OTHER (DESCRIBE)
DEPARTMENT HEAD• ,I UQiSOCI BQIII f f 8 185 CITY SECRETARY
FOR ADDITIONAL INFORMATION
CONTACT Judson Bai1i
8185. Adoryted Ordinance N~a, ~
a DATE