Title
An Ordinance to Amend the Code of the City of Ann Arbor by Amending Section 1:552 adding New Subsection 1:552(28), 1:552(29) and 1:552(30), and adding New Sections which New Sections shall be Designated as Sections 1:595 and 1:596 of Chapter 18, Employees Retirement System, of Title I of the Code of the City Of Ann Arbor (Ordinance No. ORD-09-20)
Memorandum
Attached for your review and approval is an amendment of Chapter 18, which is the Employees Retirement System (Pension) ordinance. The recommended ordinance changes revise the pension & VEBA plans to establish appropriate language for transfers to meet current IRS regulations and consistency between the provisions of both Code Chapters
To meet IRS regulations, the City needs to address an issue with respect to certain transfer of excess earnings from the Pension system to the VEBA trust.
These transfers occurred in the years 2003 through 2006 and totaled $21.6 mil. The IRS has approved a plan to correct the transfers over a five year period, which includes credit for previous contributions, interest, or those contributions and re-directing approximately $17 million of future VEBA contributions to the pension system.
The effect of these corrections will be to increase pension funding and restrain VEBA pre-funding for the five years. In short, the funds are just being re-allocated within the two systems.
Outside pension counsel has drafted this amendment to conform with Internal Revenue Service requirements related to the funding of Health Benefit Funds. The amendment specifies how transfers to the Health Benefits Fund can be accomplished and limitations on the numbers and amounts of transfers and the allowable uses of transferred assets. The amendment makes the other relevant adjustments.
Staff
Prepared by: Nancy Niemela, Senior Assistant City Attorney; Mary Joan Fales, Senior Assistant City Attorney
Reviewed by: Stephen K. Postema, City Attorney; Tom Crawford, CFO/Finance and Administrat...
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