Loading...
HomeMy WebLinkAbout2011 02 14 Consent 208 Approval of Resolution 2011-04 to Allow Loans Against Employees 457 Deferred Compensation Retirement Plan COMMISSION AGENDA Consent X ITEM 208 Informational Public Hearing Regular February 14, 2011 MGR. /DEPT. ' Regular Meeting uthorization REQUEST: The City Manager and Finance Department requests the Commission approve Resolution 2011 -04 to allow loans against the employee's 457 Deferred Compensation retirement plan. Additionally, to authorize the City Manager and Finance and Administrative Services Director to execute any and all documentations required by ICMARC on behalf of the City of Winter Springs to facilitate such loans. SYNOPSIS: To gain approval from the City Commissioners to add the loan option to the agreements with ICMA -RC and Nationwide. This will provide the ability for active City employees to borrow, with limitations, from their individual deferred compensation plan account(s). CONSIDERATIONS: The City currently provides employees the opportunity to save for their retirement through deferred compensation plans offered by ICMA -RC and Nationwide Retirement Solutions, Inc (NRS). These plans are commonly known as a "457 Plan" to reflect the section of the IRS code that provides for the offering of such a plan. Section 457 provides that eligible governmental 457(b) plans may permit loans to Participants. This option must be approved by the City Commissioners to implement the loan programs. Based on the current economic environment, the City Manager and Finance and Administrative Services Director, (Plan Administrator), proposes the approval of the option of providing the employees the ability to borrow from their 457 plan accounts, with stipulations and limitations that are provided in the loan agreement. ICMA will administer and approve the loans. This will provide an additional resource for employees who are facing financial hardships and will be a means to attract, retain and motivate employees. Program highlights include: • Allows eligible employees to borrow from their 457 plan funds. • Loans will be administered by ICMA. • Maximum loan term is five years. Participants will be able to borrow for any cause; one • outstanding loan at a time, the maximum term over which a loan may be repaid is five • (5) years. Loans for principle residence must he repaid within 15 years. • The minimum loan amount is $1,000; maximum loan is 50% of the account balance(s) or • $50,000, whichever is less. • Loan repayments must be made by direct withdrawal (ACH) from employee's bank • accounts or payroll deduction (26 per year). • Terminating employees may continue to make monthly payments through ACH, unless • they withdraw their entire balance. • Processing fees, administrative fees, delinquents fees, or taxable events may be • incurred. • The current interest rate is Prime + .5% for ICMA. • The City has no responsibility for any outstanding loans taken by employees. FISCAL IMPACT: This action will have no fiscal impact to the City. COMMUNICATION EFFORTS: This Agenda Item has been forwarded to the Mayor and City Commission; City Manager; City Attorney /Staff; placed in Press Packets; placed in the City Hall (Lobby) City Commission Meeting binder; and will be available on the City's Website, LaserFiche, and the City's Server. Additionally, information related to this Agenda Item has been sent to media/press representatives who have requested Agendas /Agenda Item information, all Homeowner's Associations on file with the City, all individuals who have requested Agendas /Agenda Item information, Department Directors; and also posted outside City Hall; posted inside City Hall with additional copies available for the general public; and posted at five (5) different locations around the City. RECOMMENDATION: It is the recommendation of the City Manager and the Finance Department that the City Commission approve Resolution 2011 -04 to allow loans from the employees 457 Deferred Compensation Plan and to authorize the City Manage~ and Finance and General Administrative Service Director to execute any and all documentations required by ICMARC on behalf of the City of Winter Springs to facilitate such loans. ATTACHMENTS: Resolution 2011 -04 Exhibit A, ICMA 457 Plan Loan Program Implementation Packet for Employers (includes Loan Guidelines Agreement for a Retirement Plan and Loan Administration Agreement for Section 457 Deferred Compensation Plans) 12.13.10_COMM_ Informational _101_FY10_FourthQuarter Financial_Report RESOLUTION NO. 2011 - O A RESOLUTION BY THE CITY OF WINTER SPRINGS, FLORIDA, TO AMEND THE CITY'S RETIREMENT PLAN TO PERMIT LOANS IN ACCORDANCE WITH THE LOAN GUIDELINES AGREEMENT ATTACHED HERETO AS EXHIBIT "A "; AUTHORIZING THE CITY MANAGER TO IMPLEMENT THE LOAN GUIDELINES; PROVIDING FOR REPEAL OF PRIOR INCONSISTENT RESOLUTIONS, SEVERABILITY RESTRICTION, AND AN EFFECTIVE DATE. WHEREAS, the City of Winter Springs has established a 457 deferred Compensation Retirement Plan ( "Plan ") for City employees; and WHEREAS, the City of Winter Springs desires to permit eligible participants in the Plan to take loans from the Plan in accordance with applicable loan guidelines; and WHEREAS, this Resolution is in the best interests of the City employees and the citizens of Winter Springs, Florida; and NOW, THEREFORE, BE IT RESOLVED by the City Commission of the City of Winter Springs, Seminole County, Florida, as follows: Section 1. Recitals. The foregoing recitals are hereby fully incorporated herein by this reference and are deemed a material part of this Resolution. Section 2. Loan Guidelines. The City Commission hereby authorizes City employees to take loans from the Plan in accordance with the Loan Guidelines Agreement attached hereto as EXHIBIT "A" and fully incorporated herein by this reference ( "Agreement "). The City Manager is hereby authorized to execute said Agreement and to execute such other documents necessary to implement the Agreement. Further, the City Manager is also authorized to adopt administrative rules in furtherance of and consistent with the Agreement. Section 3. Repeal of Prior Inconsistent Resolutions. All prior resolutions or parts of resolutions in conflict herewith are hereby repealed to the extent of the conflict. Section 4. Severability Restriction. If any section, subsection, sentence, clause, phrase, word, or portion of this resolution or Agreement is for any reason held invalid or unconstitutional by any court of competent jurisdiction, this Resolution and Agreement shall be deemed terminated and null and void. Section 5. Effective Date. This Resolution shall become effective immediately upon adoption by the City Commission of the City of Winter Springs. DONE AND ADOPTED in regular session of the City Commission of the City of Winter Springs, Florida, this 14 day of February 14, 2011. CITY OF WINTER SPRINGS, FLORIDA CHARLES LACEY, Mayor ATTEST: ANDREA LORENZO- LUACES, City Clerk Approved as to legal form and sufficiency for The City of Winter Springs only: rj ANTHONY A. GARGANESE, City Attorney • City of Winter Springs Resolution 2011 -' Page 2 of 2 s EXHIBIT LOAN GUIDELINES AGREEMENT FOR A RETIREMENT PLAN ICS Building Retirement &curio, ICMA -RC INSTRUCTIONS (Please refer to the previous section, "A Guide to implementing a Loan Program ") These Loan Guidelines must be completed before loans can be made from your retirement plan. You should consider each option carefully before making your selections because your selections will apply to all loans made while the selection is in effect. If you later change any provision, the changes will apply only to loans made after the change is adopted. Loans in existence at the time of any future changes will continue to operate under the guidelines that were in effect at the titre the loan was originally made. Note: If loans are available to your employees from other plans (e.g. other Section 457 deferred compensation plans or other Sec- tion 401 plans), calculation of the maximum loan amount must consider the aggregate of all loans from all 401 and 457 plans in which the employee participates. See the Maximum Loan Amount Worksheet on page 7 ofA Guide to Implementing a Loan Program, found in this packer. 1 { i4 2 • Loan Guidelines Agreement Name of Plan (please state the Employer's complete name, including state): • Plan Type: 0 401(a) Money Purchase Plan 0 401 Profit- Sharing Plan 547 Deferred Compensation Plan ICMA -RC Plan Number: Soy 3 q 4 1. Purpose The purpose of these guidelines is to establish the terms and conditions under which the Employer will grant Loans to participants. This is the only official Loan Provision Document of the above named Plan. 11. Eligibility Loans are available to all active employees, Loans will not be granted to participants who have an existing loan in default. Loans will be pro -rated among all the funds in which the participant is invested at the time the loan is made. For 401 plans only: Loans are available from the following sources: [select one or both] 0 Employer Contribution Account (vested balances only) 1 /Participant Contribution Accounts (pre- and post -tax, if applicable, including Employee Mandatory, Employee Voluntary, Employer Rollover, and Portable Benefits Accounts, but excluding the Deductible Employee Contribution /Qualified Volun- tary Employee Contribution Account) For Roth 401(k) plans only: '1 A participant's Designated Roth Account balance can be used to secure a participant loan. Designated Roth Account balances [select one) 0 will not (default option) be available as a source for loans under the Plan. 0 will be available as a source for loans under the Plan. (Note: Using the Roth source for loans may have negative tax con- sequences for participants.) For all plan types: 111. Loon Purpose Loans are available for the following purposes and must be requested in the corresponding method (select one): leAll purposes Online, through Direct Loan Application and Loans by Call Center: All loans must be requested either online by em- ployees through ICMA -RC's Account Access site at www icmarc.org, or through the Direct Loan application, both of which require preauthorization by the Employer as outlined in italics under Section IV. Application Process. The Loans by Call Center service will allow plan participants to request loans directly over the phone with an Investor Services Associate. 0 Hardship Only: Loans shall only be granted in the event of a participant's hardsup or for the purpose of enabling a participant to meet certain specified financial situations. The employer shall approve the participant's loan application after determining, based on all relevant facts and circumstances, that the amount of the loan is not in excess of the amount required to relieve the fi- 3 • ICMA -RC nancial need. Por this purpose, financial need shall include, buy not be limited to: unreimbursed medical expenses of the par - ticipant or members of the participant's immediate family, establishing or substantially rehabilitating the principal residence of the participant, or paying for a college education (including graduate studies) for the participant or his/her dependents. (Note: Online, Direct Loans, or Loans by Call Center not applicable with this option. Pardcipant must complete the loan application for employer approval.) IV. Application Process If an employee is married at the time of application, and spousal consent is required by the Plan for the loan, the employee's spouse must consent, in writing, to the loan and the consent must be witnessed by a plan representative or notary public. Such consent must be received in writing by ICMA -RC no more than ninety (90) days before the loan request is submitted through Account Access. In the case of the Direct Loan Application, spousal consent should be sent along with the application. The promissory note, truth -in- lending rescission notice, and disclosure statement are mailed to the employee along with the issued loan check. The employee confirms receipt 4nd acceptance of these documents and terms at the time the endorsed check is presented for payment. The Employer hereby authorizes all future Loans requested through the online process via Account Access, as well as any re- quests that employees submit on paper firms, pending review of the application by 1011A-RC. Notice of loan issuance will be provided to the Employer via reports posted on the FZJ ink site. The loan amount will generally be redeemed from the employee's account on the same day as either ICMA -RC receipt of loan application (complete and in good order), the completion of a loan request via telephone with an Investor Services representative, or the employee's successful submission of the loan request through Account Access, if it is submitted prior to 4:00 p.m. ET on a business day. If not, the loan amount will be redeemed on the next business day following submission. The loan check is generally issued on the next business day following redemption, and will be 1 . mailed directly to the employee. The employee's presentment of the loan check for payment constitutes an acknowl- edgment that the employee has received and read the loan disclosure information provided by ICMA -RC and agrees to the terms therein. Loan repayment will begin as soon as practicable following the employee's presentment of the loan check for payment. V. Frequency of loans [select one) Participants may receive one loan per calendar year. Moreover, participants may have only one (1) outstanding loan at a time. 0 Participants may receive one loan per calendar year. Moreover, no participant may have more than five (5) loans outstanding at one time. VI. Roan amount The minimum loan amount is $1,000. The maximum amount of all loans to the participant from the plan and all other plans sponsored by the Employer that are qualified employer plans under section 72(p)(4) of the Code is the lesser of (1) $50,000, reduced by the highest outstanding balance of all loans from any 401 or 457 plans for that participant during the one -year period ending on the day before the date a loan is to be made, or (2) one half of the participant's vested account balance, reduced by the current outstanding balance of all 401 and 457 loans from all plans for that participant. If a participant has any loans outstanding at the time a new loan is requested, the new loan will be limited to the maximum amount calcu- lared above reduced by the total of the outstanding loans. 4 • • • Loan Guidelines Agreement A loan cannot be issued for more than the above amount. The participant's requested loan amount is subject to downward adjustment without notice due to market fluctuation between the time of application and the time the loan is made. VII. Length of loan A loan must be repaid in substantially equal installments of principal and interest, at least monthly, over a period that does not exceed five (5) years. Loans for a principal residence must be repaid in substantially equal installments of principal and interest, at least monthly, over a period that does not exceed 15 [state number of years] years (maximum 30 years). VIII. Loan repayment process Loan repayments for active employees must be through (choose one): Q Payroll deduction only PL642(2) .. 2 (� ACH debit only.* P1642(2) = 0 td Employee may choose either payroll deduction or ACH debit.* PL642(2) = 1 * Please note that a $20 processing fee will be assessed to a participant's ICMA -RC account when a scheduled loan repayment(s) via ACH is rejected due to insufficient funds, invalid bank account information, or account closure in the participant's desig- nated payment account. If payroll deduction repayment is allowed, and the employee wishes to use this method, the employee must notify the Employer so that the Employer can ensure that repayment will begin as soon as practicable on a date determined by the Employer's payroll cycle. Failure to begin payroll deduction in a timely way could lead to the employee's loan entering delinquency status. Payroll deduction should begin within two payroll cydes following the employee's receipt of the loan. Repayments through payroll deduction will be sent via check or wire by the Employer to ICMA -RC on the following cycle (choose one): V 4s 2 y vi/'' CBi- weekly (26 per year) ID Semi - monthly (24 per year) Monthly (12 per year) If ACH debit repayment is allowed, debits from the employee's designated bank account will begin approximately one month fol- lowing the date the employee's signed ACI-I authorization form is received and processed by ICMA -RC, or in the case of online loans, approximately one month following the date the loan check has been cleared for payment. Debits will normally be made on a monthly basis. Loans outstanding for former employees or employees on a leave of absence must be repaid on the same schedule as if payroll deductions were still being made unless they reamortize their loans and establish a new repayment schedule that provides that sub- stantially equal payments are made at least monthly over the remaining period of the loan. Loan payments, including loan payments from former employees, are allocated to the participant's current election of investment options on file with ICMA -RC. The participant may pay off all or a portion of the principal and interest early without penalty or additional fee. Extra payments are applied forward to both principal and interest as specified in the original repayment schedule, unless the additional payment is for the balance due. 5 ICMA -RC IX. Loan interest rate The rate of interest for loans of five (5) years or less will be based on prime plus 0.5 %. The rate of interest for loans for a principal residence will be based on the FHA/VA rate. Interest rates are determined on the last business day of the month preceding the month the loan is disbursed. The interest rate is locked in at the time a loan is approved and remains constant throughout the life of the loan. The prime interest rate is determined on the last business day of each month using www,nfsn,com as the source. The FHA/VA interest rate is also determined on the last business day of each month using www.bankofamerica.com as the source. Loan interest rates for new loans taken in different months may fluctuate upward or downward monthly, depending on the move- ment of the prime and PHA/VA interest rates, The employer may modify the manner in which loan interest rates will be determined, but only with respect to future loans. X. Security /Collateral That portion of a participant's account balance that is equal to the amount of the loan is used as collateral for the loan. The col - lateral amount may not exceed 50 percent of the participant's account balance at the time the loan is taken. Only the portion of the account- balance that corresponds to the amount of the outstanding loan balance is used as collateral. XI. Acceleration [select one] 11 All loans are due and payable in full upon separation from service. 0 All loans are due and payable when a participant receives a distribution of all of his/her account balance after separa- tion from service. The amount of the outstanding loan balance will be reported as a distribution in addition to the amount of cash distributed from the plan. S All loans are due and payable when a participant receives a distribution of part of his /her account balance after separa- tion from service. The amount of the outstanding loan balance will be reported as a distribution in addition to the amount of cash distributed from the plan. XII. Reamortitation Any outstanding loan may be reamortlzed. Reamortization means changing the terms of a loan, such as length of repayment peri- od, interest rate, and frequency of repayments. A loan may not be reamortized to extend the length of the loan repayment period to more than five (5) years from the date the loan was originally made, or in the case of a loan to secure a principal residence, beyond the number of years specified by the employer in Section V above. A participant must request the reamortization of a loan in writing on a reamortization application acceptable to the plan adminis- trator. Upon processing the request, a new disclosure statement will be sent to the employer for endorsement by the participant and approval by the employer. The executed disclosure statement must be returned to the plan administrator within 10 calendar days from the date it is signed. The new disclosure statement is considered an amendment to the original promissory note, therefore a new promissory note will not be required. A reamortization will not be considered a new loan for purposes of calculating the number of loans outstanding or the one loan per calendar year limit. • X111. Refinancing existing loans If a participant has one outstanding loan, that loan may be refinanced. If a participant has more than one outstanding loan, no i loans may be refinanced. Refinancing means concurrently repaying an existing loan and borrowing an additional amount through a new loan. Refinancing includes any situation in which one loan replaces another loan and the term of the replacement loan does not exceed the latest permissable term of the replaced loan. 6 Loan Guidelines Agreement In order to refinance an existing loan, a participant must request this in writing on an application approved by the plan administra- tor. Such request must be made at a time when the participant is eligible to obtain a loan as defined by the employer in Section III above. The amount of the additional loan amount requested for the purpose of refinancing is subject to the loan limits specified in Section IV above. Because a refinancing is considered a new loan, only active employees may refinance an outstanding loan. Residential loans are not eligible for refinance. XIV. Reduction of Loan If a participant dies prior to full repayment of the outstanding loan(s), the outstanding loan balance(s) will be deducted from the account prior to distribution to the beneficiary(ies). The unpaid loan amount is a taxable distribution and may be subject to early withdrawal penalties. The participants estate is responsible for taxes or penalties on the unpaid loan amount, if any. A beneficiary is responsible for taxes due on the amount he or she receives. A Form 1099 will be issued to both the beneficiary and the estate for these purposes. XV. Deemed Distribution Loan repayments must be made in accordance with the plan document, plan loan guidelines, and as reflected in the promissory note signed by the participant. If a scheduled payment is not paid within 30, 60, and /or 90 days of the due date, a notice will be sent to both the employee and the employer. A loan will be deemed distributed when a scheduled payment is still unpaid at the end of the calendar quarter following the.calen- dat quarter in which the payment was due. lithe total amount of any delinquent payment is not received by ICMA -RC by the end of the calendar quarter following the calendar quarter in which they payment was due, the loan is considered a taxable distribution, and the principal balance, in addition to any accrued interest, is reported as a distribution to the IRS. However, no money is paid in this distribution, because the participant already has the loan proceeds. The loan is deemed distributed for tax purposes, but it is not an actual distribution and therefore remains an asset of the partici- pant's account. Interest continues to accrue. The outstanding loan balance and accrued interest are reported on the participant's account statement. Repayment of a deemed distribution will not change or reverse the taxable event. The loan continues to be outstanding, and to accrue interest, until it is repaid or offset using the participant's account balance. An offset can occur only if the participant is eligible to receive a distribution from the plan as outlined in the plan document. Participants are required to repay any outstanding loan which has been deemed distributed before they can be eligible for a new loan, The deemed distribution and any interest accrued since the dare it became a taxable event is taken into account when deter - mining the maximum amount available for a new loan. New loans must be repaid through payroll deduction. The employer is obligated by federal regulation to comply with the loan guideline requirements applicable to participant loans, and to ensure against deemed distribution by monitoring Ioan repayments, regardless of the method of repayment, and by advising em- ployees if loans are in danger of being deemed distributed. The tax - qualified status or eligibility of the entire plan may be revoked in cases of frequent repayment delinquency or deemed distribution. XVI. Fees Fees may be charged for various services associated with the application for and issuance of loans. All applicable fees will be debited from the participant's account balance and/or from the participant's loan repayments prior to crediting the repayment of principal and interest to the participant's account. A schedule of fees applicable to this plan is specified in ICMA -RC's current publication of Making Sound Investment Decisions: A Retirement Investment Guide. 7 ICMA•RC XVll. Other The employer has the right to set other terms and conditions as it deems necessary for loans from the plan in order to comply with any legal requirements. All terms and conditions will be administered in a uniform and non - discriminatory manner. In Witness 'Whereof, the employer hereby caused these Guidelines to be executed this day of , 20 EMPLOYER Accepted: ICMA RETIREMENT CORPORATION By: By Title: Title: Attest: Attest: • 8 LOAN ADMINISTRATION AGREEMENT FOR SECTION 457 DEFERRED COMPENSATION PLANS ICMA -RC 457 LOAN ADMINISTRATION AGREEMENT This Agreement is not required if you have 1) only one 457 plan provider or 2) more than one plan provider each with its own plan document and provisions unique to each provider. The Agreement only applies if you have adopted a single 457 plan document under which ICMA -RC and one or more other provider(s) must operate. Please refer to pages 5-6 ofA Guide to Implementing Loan Program for more details. This Agreement shall serve as an Addendum to the Loan Guidelines established by the Employer identified below as an Addendum to the Administrative Services Agreement (ASA) made by and between the ICMA Retirement Corpora - tion (ICMA-RC) and the Employer. The Employer currently sponsors a section 457 deferred compensation plan administered by two or more providers (co- provider plan). In order to ensure the efficient administration of the loan program established by the Employer, the Employer hereby agrees and declares that (I) For purposes of issuing loans from the plan, that portion of the plan's assets administered by ICMA-RC will be treated as though it were a separate and distinct plan. (2) The Employer shall calculate the amount a participant may borrow from the ICMA-RC administered portion of the plan. No loan amount may exceed the lesser of (a) the maximum loan amount specified in Internal Revenue Code section 72(p)(2)(A) or (b) 50% of the participant's ICMA -RC- administered account balance, (3) All loan repayments must be made to the participant's ICMA-RC- administered account for the life of the loan. AGREED as of the day of , 20 Name of Employer: Authorized Official - Print Name State: Employer Plan Number © 0 Elm Signature of Authorized Official ICMA RETIREMENT CORPORATION 4,14 d. t, - � 't 1,14 •. Angela Montez Assistant Secretary Mail this Agreement and the completed 457 Plan Loan Guidelines to: ICMA-RC Attention: New Business Analyst 777 North Capitol Street, NE Washington, DC 20002 -4240 . 4 4 IAN WAN/REF F PAC ICM erection 457 Deferred Cam salrc n,. PIan r� Building Retirement Security 41°1( cM , RC Building Retirement Security BEFORE YOU BORROW .. • Did you know that borrowing from your retirement plan account may have a major impact on your ability to retire with sufficient funds? Before you decide to borrow against your account, you should consider the following: 1. While a loan meeting the Internal Revenue Code requirements is not treated as a taxable plan distri- bution, in the event you default on the loan, it will be treated as ordinary taxable income to you. For those nearing retirement, this increase in income for the tax year resulting from a loan default may influence decisions concerning Social Security and Medicare benefits. 2. Loan payments are made from your after -tax proceeds, unlike retirement plan contributions, which may be made on a pre -tax basis. While pre -tax contributions may help reduce your taxable income for a given year, loan repayments are, in fact, taxed twice — the second time being when the account is finally distributed. The loan is also not tax deductible and does not offer any tax advantages. 3. The money you borrow — or take out of— your retirement plan account no longer appreciates in value. Therefore, you have less money available to invest and you may have less market value appre- ciation over time. While the interest repaid to the plan through loan repayments may seem substan- tial when compared to the rates offered for savings and /or money market accounts, it may actually provide less potential return than the equity markets. The example below perhaps best demonstrates the impact of taking a loan from your retirement plan. The amount that has been borrowed from the retirement plan account — $25,000 — is not available to generate tax- deferred earnings. The decrease in the account balance significantly reduces these tax- deferred earnings, even though the loan is be- ing repaid. Upon closer examination, you will see that, over time, the ending value without the im- pact of the loan is over $110,000 more than the account with a loan balance over five years. Further, the cost of having a loan balance over 15 years results in a $250,000 difference when compared to the ending balance of the account without a loan. Effect of Loans on a Retirement Plan Ending Balances $900,000.00 - • $872,634.61 • $800,000.00 - I N $766,802.88 0 o • $700,000.00 - 1 I $625,938.59 Q • $600,000.00 - • Without Loan $500,000.00 - 7 WIL > • With 5 year Loan Win $400,000.00 - • ; 1 With 15 year loan 11112 i a Beginning $300,000.00 : ' 1 a Account Balance: $200,000.00 $50,000 $100,000.00 r Beginning Loan Malaltalinaganaalltala Balance: $25,000 $0.00 Beginning N N Investment Balance: $24,950 30 Year Projection Given the expenses and opportunity costs associated with borrowing against your retirement plan, you may want to consider other sources of funds to meet any current needs. 4. Repayment delinquency can have serious consequences. A loan typically is deemed a distribution when scheduled repayments are not made and are outstanding at the end of the calendar quarter fol- lowing the calendar quarter in which the payment was due. For example, if a loan repayment is due February 1 and is not remitted, the loan is considered delinquent. If the total amount of all delin- quent payments is not received by the end of the calendar quarter following the calendar quarter in which the payment was due (June 30 in the February 1 example), the loan is deemed a distribution. In a deemed distribution, the principal balance, in addition to any accrued interest, is reported as a distribution to the IRS. However, the taxable distribution is not the only event in conjunction with a deemed distribution. The following negative consequences occur as a result of a deemed distribution: • The deemed distribution is a taxable event. However, it is not an actual distribution and therefore remains an asset of the participant's account. The outstanding loan balance and accrued interest are reported on the participant's statement. • Repayment of a deemed distribution will not change or reverse the taxable event. • The loan continues to be considered outstanding until it is repaid or "offset" using the participant's account balance. An offset can occur only if the participant is eligible to receive a distribution from the plan as outlined in the employer's plan document. • ICMA -RC requires participants to repay any outstanding deemed distribution of the loan before they can become eligible for a new loan. The deemed distribution of the loan and any interest ac- crued since the date it became a taxable event is taken into account when determining the maxi- mum amount available for a new loan. 2 Your employer has chosen to make loans available from your 457 deferred compensation plan, administered by ICMA -RC. The loan provision is a valuable feature, giving you the opportunity to borrow from your account balance and repay the loan through payroll deduction or direct (ACH) debit, if applicable to your employer's plan. The loan is actually an investment of a portion of your account balance in a promissory note which you will sign upon receiving the loan funds. All loans bear interest that you pay and is credited to your account. Loan modeling is available online at www.icmarc.org. The amount you receive as a loan is not treated as a taxable plan distribution unless you default on the loan or if the loan fails to conform with the Loan Guidelines or with Internal Revenue Code Section 72(p), at any time. You may wish to consider other sources for small loans, as the expense of record keeping loans in a 457 plan results in fees which may be significant in relation to the size of the loan. Steps to Follow 1. Obtain Loan Guidelines from your employer. The Loan Guidelines contain the specific provisions adopted by your employer relating to permissible loans, such as: Eligibility. Loans are available to active employees. Your employer may limit the purpose for which loans are available, including only in the event of hardship. Loan Frequency. Generally, loans may be taken only once per calendar year; your employer may restrict the total number of loans you can have outstanding at one time. Loan Amount. Generally, the minimum permitted loan amount is $1,000. The maximum loan amount is set by the Internal Revenue Code. The regulations state that, at the time the loan is made, the principal amount of the loan cannot exceed the lesser of: (1) $50,000, reduced by the highest outstanding loan balance during the previous 12 months of all 401 and 457 loans from all plans, or (2) 50% of the value of your account balance, reduced by the current outstanding loan balance of all 401 and 457 loans from all plans. A worksheet for calculating this amount is included on page 6 of this brochure. Length of Loan. Loans must be repaid in substantially equal installments of principal and interest, at least monthly, over a period that does not exceed five years. The only exception that your employer may permit is a longer repayment period for a loan used to acquire a primary residence. Separation from Service. Although some employers' loan guidelines allow participants to continue loan repayments after separation from service, this is rare. More often, the plan will require that the loan be paid in full before separation. Outstanding loan balances are usually considered to be in default after separation from service and are treated as a taxable distribution at that time. In these cases, ICMA -RC is- sues tax reporting on a Form 1099 for the tax year in which the default occured. You may owe additional taxes on this amount as a result. 3 Loan Repayment Process. You begin repaying your loan as soon as administratively practical. Repay- ment methods include payroll deduction; some employers offer (or require) the method of direct (ACH) debit from your bank account. You may continue to repay the loan while on leave of absence. Some em- ployers' Loan Guidelines permit participants to continue loan repayments after separation from service. Your loan repayment is prorated according to your most recent election of investment option(s). You may pay all or a portion of the principal and interest obligation early without penalty or additional fee. However, extra payments do not allow you to "pay ahead" or skip repayments. You are still required to make a payment every scheduled period that is at least equal to the repayment amount stated in the promissory note. Loan Interest Rate. The loan interest rates are set for regular loans at the prime rate (the often - quoted rate that banks charge their best customers) plus 0.5 %, and for principal residence loans at the FHA/VA rate. The method for setting these rates is established in the employer's Loan Guidelines. Loan interest rates are locked in at the time of approval and remain fixed throughout the life of the loan. The total finance charge consists of the interest rate. There is also a loan maintenance fee, deducted annu- ally from your account. The charges are detailed on the Disclosure Statement of your loan documents. 2. Determine whether the amount you wish to borrow is within federal tax code requirements. You may calculate the maximum amount available to you by using the Maximum Loan Worksheet on page 6. ICMA -RC cannot issue a loan for more than allowed by the Internal Revenue Code. Your requested loan amount is subject to downward adjustment without notice due to changes in your account balance between the time of application and the time the loan is made. 3. Complete the attached form - 457 Loan /Refinance Form. This form is used to apply for a new loan or to refinance an existing loan (increase the amount of the outstanding loan balance). You may apply for a new loan if (1) your employer permits only one loan and you have no loans outstanding or (2) your employer permits up to five loans and you have fewer than five loans outstanding. You may apply to refinance a cur- rent loan if you only have one outstanding loan and wish to borrow additional funds. In refinancing a loan, you are not permitted to extend the loan repayment period beyond the length of the payment period permit- ted for the original loan. 4. Submit the completed form to your employer. You must complete the form according to the instruc- tions provided. Please do not submit your application directly to ICMA -RC as this will delay processing. Your employer will review and approve the application. If your application is denied, your employer will provide the denial in writing. If approved, your employer will send the completed, approved application to ICMA -RC. 5. Receive loan documents and check from ICMA -RC through your employer. After reviewing the loan for conformance with the Internal Revenue Code, Plan Document and Loan Guidelines, ICMA -RC will send the loan documents listed below and a check to your employer, who will notify you that you may execute the documents and receive the check. ICMA -RC sends out loan documents and checks within three business days after receipt of complete and approved applications. Executed loan documents must be returned by your employer to ICMA -RC within ten days of issuance. Loan documents include: Disclosure Statement and Amortization Schedule. The Disclosure Statement contains all of the terms of your loan, including the annual percentage rate (cost of loan as a yearly rate), finance charge (total interest paid over life of loan), amount financed (loan amount), total repayments (principal plus interest) and frequency of repayment. The Disclosure Statement also covers some additional provisions, such as 4 default, prepayment, non - assignment and arrearages. An Amortization Schedule, listing each payment date and the amount of principal and interest due on that date, is part of the Disclosure Statement. You must sign the Disclosure Statement; your employer will return the original to ICMA -RC, and you should keep a copy. This is a legal document and your signing of the Promissory Note indicates your agreement to these terms. Promissory Note. This document pledges your account balance in your employer's plan as security for the loan you are receiving. You must sign the Promissory Note in order to receive the check. If you have any concerns or questions, do not sign the Promissory Note until they are resolved. Truth -in- Lending Rescission Notice. You may cancel your loan obligation in writing within three business days of receipt of the loan documents and check. The loan check should be returned with the Truth -in- Lending Rescission Notice. 6. Begin loan repayments. Your employer will begin to make payroll deductions for your loan repayments in accordance with the Amortization Schedule provided to you. If you are eligible to repay through direct debit, and you have selected this method, these payments will begin following acceptance of your bank in- formation and your presentment of the loan check for payment. Debits will occur on a monthly basis. Important Additional Information How much will 1 be charged for the loan? A standard, nonrefundable loan application fee is due when your loan application for a new, refinanced or reamortized loan is received by ICMA -RC. It will be deducted from your account, if applicable to your employer's plan. In addition, a standard annual maintenance fee is deducted from your account (on the first day of the quarter containing the anniversary of the loan issuance) after each year the loan is outstanding. Please call ICMA -RC toll free at 1- 800 - 669 -7400 for the most current information about loan fees. What happens if I die before the loan is paid of? If you die prior to full repayment of your outstanding loan(s), the outstanding loan balance(s) will be deducted from your account prior to distribution to your beneficiary(ies). The unpaid loan amount is a taxable distri- bution. Your estate is responsible for taxes or penalties on the unpaid loan amount, if any. Your beneficiary is responsible for taxes due on the amount he /she actually receives. A Form 1099 will be issued to both your beneficiary and your estate for these purposes. What happens ifI separate from service before my loan is paid off? Your employer's Loan Guidelines specify whether loans are due and payable when (1) you separate from ser- vice (not permitting you to continue repaying the loan), (2) you separate from service and receive a distribu- tion of all of your account balance or (3) you separate from service and receive a distribution of any part of your account balance. My loan is for a primary residence purchase. Can I deduct the interest on my federal tax return? While ICMA -RC does not provide tax advice, you should be aware that the instructions for completion of Schedule A, Form 1040 require that a condition of deductibility of home mortgage interest is that the loan is secured by the property. The security of your deferred compensation plan loan for a residence is your ac- count balance, rather than the property itself. 5 How are my loan repayments treated for tax purposes? Your loan repayments will be made on an after -tax basis. At the time that funds were transferred from your account to the investment in the Promissory Note, no taxable income was reported. When you repay your loan, the repayments are credited back to your account. Because the amounts credited replace amounts already identified as to taxability, the repayment is made on an after -tax basis. A second tax deduction for replacing the funds, which will retain their pre -tax status, would amount to the same funds in the account having resulted in a tax deferral twice. How does this appear on my statement? Your quarterly statement will include a loan summary report, detailing the crediting of repayments to your account and presenting the outstanding loan balance amount. Whom can I call for assistance? Assistance is available from ICMA -RC's Investor Services staff from 8:30 a.m. to 9:00 p.m. Eastern Time. Please call ICMA -RC toll -free at 1- 800 - 669 -7400. Para asistencia en Espanol llame al 1- 800 - 669 -8216. Maximum Loan Amount Worksheet (R, undL1 the 1„tL,,,.di (:, >d,) To estimate the maximum amount of a loan for which you may be eligible, calculate each step and select the lesser of the total of Step 1 or Step 2. If you have had no outstanding 401 or 457 plan loans in the last 12 months, you may enter $50,000 as the total in Step 1 and proceed to Step 2. Step 1. $50,000 A. $50,000 is the maximum. B. Enter your highest outstanding loan balance during the previous 12 months from 457 and 401 plan loans. Y � ViY l *bttact e B from the A. k\ Step 2. C. Enter 50% of the present value of your total account balance in the 457 plan including any outstanding loan balance. D. Enter your current outstanding 401 and /or 457 plan loan balance(s). 0- r 4 Line. fomri* C, .: • ... ��` �, ... ,..,, ;4:474-'"1" Step 3. E. Enter the lesser of Step 1 and Step 2 totals. The actual amount you may borrow will be calculated using your account balance on the day the loan is made. 6 457 LOAN /REFINANCE FORM �CM �XpR � - Use this form to apply for a new loan or to refinance an existing loan. • Please carefully read the instructions before completing this form. Missing information will result in a delay in processing. Building Retirement Security - IMPORTANT- REMEMBER TO PRINT LEGIBLY IN BLACK OR BLUE INK Employer Plan Number Employer Plan Name 1 Participant Q - - -- Information Social Security Number Daytime Phone Number: Marital Status - -- -- - - -- ( - - -) --- - - ❑ Married Area Code ❑ Single Name of Participant Last Name First Name M.I. Mailing Address City State -- Zip Code 2 A. Check one: New Loan/ (1) ❑ New Loan Loan Amount: $ OR ❑ maximum dollar amount available Refinance (2) ❑ Loan Refinance Additional Amount: $ OR ❑ maximum dollar amount available Information For Refinance, please indicate the Loan Number of the loan you wish to refinance: Loan # B. Loan Term Requested (specify number of MONTHS per instructions): OR ❑ Maximum term available C. Loan Type: ❑ Conventional ❑ Primary Residence Loan (attach signed Buyer /Seller agreement) D. Purpose of Loan: 3 I hereby apply for a loan, subject to and in accordance with the terms and provisions of my employer's plan. I un- derstand that this application will result in a loan origination fee being deducted from my account balance, if such Participant fee is applicable to my employer's plan. I also understand that any amortization schedule or loan data received Signature prior to receipt of the actual loan documents was for illustrative purposes only. As required by law and under pen- alty or perjury, I certify that the Social Security Number (Taxpayer Identification Number) I provided is correct and that I have read the instructions before completing this form. Participant Signature Date 4 Method of Repayment: ❑ Payroll Deduction ❑ ACH Debit (Monthly) Repayment (Note: if repayment method will be through ACH debit, Method your loan guidelines include this feature. Also, you must complete and attach an ACH Debit Authorization Form.) 5 A. Payroll Frequency: ❑ Monthly (12) ❑ Bi- weekly (26) ❑ Semi- monthly (24) ❑ Weekly (52) Employer's Authoriza- B. In order for ICMA -RC to synchronize the participant's amortization schedule with your payroll cycle, we need to tion know the first pay date available for this loan. Next f ayroll Date: _ _ / _ _ / C. Signature of Employer Authorized Official Date Name of Employer Authorized Official (please print) Phone Number ICMA - RC • P.O. Box 96220 • Washington, DC 20090 - 6220 • Toll Free 1 - 800 - 669 - 7400 • En Espanol Ilame al 1 - 800 - 669 - 8216 • www.icmarc.org 8/2006 457 LOAN /REFINANCE FORM INSTRUCTIONS 1. Participant Information The maximum allowable term for a nonresidential You must currently be an active employee in this em- loan is five years and the maximum allowable term for ployer's plan to request a new loan or refinance an exist- a primary residence loan is variable by plan, but may ing loan. Please complete all participant information to not exceed 30 years. Check with your employer for the avoid a delay in processing. maximum loan term for primary residence loans for your plan. If you are repaying through payroll deduc- 2. New Loan /Refinance Information tion, ICMA -RC will convert the term of your loan to the number of required the appropriate ro either erboxeAvailabili loan s subject to by he frecwng of your employer's payroll. ents based upon the frequency PP P Availability 1 quency restrictions stated in your plan's Loan Guidelines. The loan amount requested cannot exceed the dollar C.) Loan Type: This information is needed since some amount restrictions contained in the Loan Guidelines. employers allow loans only for specific purposes. A The amount you actually receive may be adjusted due to primary residence loan is allowed only for a purchase of a changes in your account balance on the day the loan is primary residence. Proof of intent to purchase a primary made. residence must be attached to the loan application. Proof of intent includes a contract to buy /sell real estate including signatures of BOTH buyer and seller. An application for a loan refinance is allowed if you have only one outstanding loan and you wish to borrow an D.) Purpose of Loan: Your employer may limit the pur- additional amount. If you are selecting a loan refinance, pose for which loans are available, including only in the the loan amount requested refers to the additional loan event of hardship. amount desired. 3. Participant Signature B.) The loan term requested is the number of months over which you wish to repay the loan. This period Sign and date this application. of time may not exceed the maximum allowable term according to your employer's Loan Guidelines. A loan 4. Repayment Method refinance is subject to the same restrictions as a new Indicate payroll deduction if this is the only option avail - loan. For example, you want to refinance a two -year, able ',I your plan. If your plan includes an ACH option, nonresidential loan you were issued on January 1, 2004. and you choose this method, please complete an ACH You may extend the loan term repayment period, but not Debit Authorization Form. beyond January 1, 2009, the maximum allowable term of the original loan. If you do not wish to borrow an ad- 5. Authorized Signature ditional amount, use the 457 Loan Reamortization Form. Once you have completed and signed this form, please A loan for a primary residence cannot be refinanced, but submit it to your employer. Your employer will: may be reamortized. The loan term requested is the time period, expressed in A. Provide the payroll frequency. months, of the life of the loan. To assist you: B. Provide the first available payroll date for your loan payments to begin. C. Have an authorized signer approve the loan request. 12 months = 1 year 60 months = 5 years 24 months = 2 years 120 months = 10 years Additional Information 36 months = 3 years 240 months = 20 years The interest rate on new and refinanced loans is deter - 48 months = 4 years 360 months = 30 years mined by using the prevailing rate as specified in the Loan Guidelines. Loan Guidelines are available from your employer. Loan documents and checks will be mailed daily to your employer for signature and distribu- tion. Repayments will be scheduled to begin following the issuance of the loan. . ,, ICMARC ICMA RETIREMENT CORPORATION P.O. BOX 96220 WASHINGTON, DC 20090 -6220 1- 800 - 669 -74A EN ESPANOL LLAME AL 1- 800 - 669 -8216 WWW.ICMARC.ORG • PKT570- 020. 200608 -C214 RESOLUTION NO. 2011 -04 A RESOLUTION BY THE CITY OF WINTER SPRINGS, FLORIDA, TO AMEND THE CITY'S RETIREMENT PLAN TO PERMIT LOANS IN ACCORDANCE WITH THE LOAN GUIDELINES AGREEMENT ATTACHED HERETO AS EXHIBIT "A "; AUTHORIZING THE CITY MANAGER TO IMPLEMENT THE LOAN GUIDELINES; PROVIDING FOR REPEAL OF PRIOR INCONSISTENT RESOLUTIONS, SEVERABILITY RESTRICTION, AND AN EFFECTIVE DATE. WHEREAS, the City of Winter Springs has established a 457 deferred Compensation Retirement Plan ( "Plan") for City employees; and WHEREAS, the City of Winter Springs desires to permit eligible participants in the Plan to take loans from the Plan in accordance with applicable loan guidelines; and WHEREAS, this Resolution is in the best interests of the City employees and the citizens of Winter Springs, Florida; and NOW, THEREFORE, BE IT RESOLVED by the City Commission of the City of Winter Springs, Seminole County, Florida, as follows: Section 1. Recitals. The foregoing recitals are hereby fully incorporated herein by this reference and are deemed a material part of this Resolution. Section 2. Loan Guidelines. The City Commission hereby authorizes City employees to take loans from the Plan in accordance with the Loan Guidelines Agreement attached hereto as EXHIBIT "A" and fully incorporated herein by this reference ( "Agreement "). The City Manager is hereby authorized to execute said Agreement and to execute such other documents necessary to implement the Agreement. Further, the City Manager is also authorized to adopt administrative rules in furtherance of and consistent with the Agreement. Section 3. Repeal of Prior Inconsistent Resolutions. All prior resolutions or parts of resolutions in conflict herewith are hereby repealed to the extent of the conflict. Section 4. Severability Restriction. If any section, subsection, sentence, clause, phrase, word, or portion of this resolution or Agreement is for any reason held invalid or unconstitutional by any court of competent jurisdiction, this Resolution and Agreement shall be deemed terminated and null and void. Section 5. Effective Date. This Resolution shall become effective immediately upon adoption by the City Commission of the City of Winter Springs. DONE AND ADOPTED in regular session of the City Commission of the City of Winter Springs, Florida, this 14 day of February, 2011. CITY OF WINTER SPRIN S, FLORIDA CHA ES LACE , M or AT EST: • N i °: LUACES, City Clerk Appr i ved as to legal form and sufficiency for The • ity of . inter prings only: . / A1 i NTHO GAR P ES City Attorney City of Winter Springs Resolution 2011 -04 Page 2 of 2 EXHIBIT LOAN GUIDELINES AGREEMENT FOR A RETIREMENT PLAN I Buikling Retirement Security ICMA -RC INSTRUCTIONS (Please refer to the previous section, "A Guide to Implementing a Loan Program ") These Loan Guidelines must be completed before loans can be made from your retirement plan. You should consider each option carefully before making your selections because your selections will apply to all loans made while the selection is in effect. If you later change any provision, the changes will apply only to loans made after the change is adopted. Loans in existence at the time of any future changes will continue to operate under the guidelines that were in effect at the time the loan was originally made. Note: If loans are available to your employees from other plans (e.g. other Section 457 deferred compensation plans or other Sec- tion 401 plans), calculation of the maximum loan amount must consider the aggregate of all loans from all 401 and 457 plans in which the employee participates. See the Maximum Loan Amount Worksheet on page 7 of Guide to Implementing a Loan Program, found in this packet. 2 Loan Guidelines Agreement Name of Plan (please state the Employer's complete name, including state): Plan Type: Q 401 (a) Money Purchase Plan 0 401 Profit- Sharing Plan Ig 457 Deferred Compensation Plan ICMA -RC Plan Number: 304 39 0 I. Purpose The purpose of these guidelines is to establish the terms and conditions under which the Employer will grant loans to participants. This is the only official Loan Provision Document of the above named Plan. 11. Eligibility Loans are available to all active employees. Loans will not be granted to participants who have an existing loan in default. Loans will be pro -rated among all the funds in which the participant is invested at the time the loan is made. For 401 plans only Loans are available from the following sources: [select one or both] 0 Employer Contribution Account (vested balances only) "Participant Contribution Accounts (pre- and post -tax, if applicable, including Employee Mandatory, Employee Voluntary, Employer Rollover, and Portable Benefits Accounts, but excluding the Deductible Employee Contribution /Qualified Volun- tary Employee Contribution Account) For Roth 401(k) plans only: A participant's Designated Roth Account balance can be used to secure a participant loan. Designated Roth Account balances [select one] 0 will not (default option) be available as a source for loans under the Nan. 0 will be available as a source for Loans under the Plan. (Note: Using the Roth source for loans may have negative tax con- sequences for participants.) For all plan types: 111. Loan Purpose Loans are available for the following purposes and must be requested in the corresponding method (select one): 151 All purposes Online, through Direct Loan Application and Loans by Call Center: All loans must be requested either online by em- ployees through ICMA -RC's Account Access site at www icmarc.org, or through the Direct Loan application, both of which require preauthorization by the Employer as outlined in italics under Section IV. Application Process. The Loans by Call Center service will allow plan participants to request loans directly over the phone with an Investor Services Associate. 0 Hardship Only Loans shall only be granted in the event of a participant's hardship or for the purpose of enabling a participant to meet certain specified financial situations. The employer shall approve the participant's loan application after determining, based on all relevant facts and circumstances, that the amount of the loan is not in excess of the amount required to relieve the fi- 3 ICMA -RC nancial need. For this purpose, financial need shall include, but not be limited to: unreimbursed medical expenses of the par- ticipant or members of the participant's immediate family, establishing or substantially rehabilitating the principal residence of the participant, or paying for a college education (including graduate studies) for the participant or his /her dependents. (Notes Online, Direct Loans, or Loans by Call Center not applicable with this option. Participant must complete the loan application for employer approval.) IV. Application Process If an employee is married at the time of application, and spousal consent is required by the Plan for the loan, the employee's spouse must consent, in writing, to the loan and the consent must be witnessed by a plan representative or notary public. Such consent must be received in writing by ICMA -RC no more than ninety (90) days before the loan request is submitted through Account Access. In the case of the Direct Loan Application, spousal consent should be sent along with the application. The promissory note, truth -in- lending rescission notice, and disclosure statement are mailed to the employee along with the issued loan check. The employee confirms receipt and acceptance of these documents and terms at the time the endorsed check is presented for payment. The Employer hereby authorizes all future loans requested through the online process via Account Access, as well as any re- quests that employees submit on paper firms, pending review of the application by ICMA -RC Notice of loan issuance will be provided to the Employer via reports posted on the R77ink site. The loan amount will generally be redeemed from the employee's account on the same day as either ICMA -RC receipt of loan application (complete and in good order), the completion of a loan request via telephone with an Investor Services representative, or the employee's successful submission of the loan request through Account Access, if it is submitted prior to 4:00 p.m. ET on a business day. If not, the loan amount will be redeemed on the next business day following submission. The loan check is generally issued on the next business day following redemption, and will be mailed directly to the employee. The employee's presentment of the loan check for payment constitutes an acknowl- edgment that the employee has received and read the loan disclosure information provided by ICMA -RC and agrees to the terms therein. Loan repayment will begin as soon as practicable following the employee's presentment of the loan check for payment. V. Frequency of loans [select one) Participants may receive one loan per calendar year. Moreover, participants may have only one (1) outstanding loan at a time. Ia Participants may receive one loan per calendar year. Moreover, no participant may have more than five (5) loans outstanding at one time. VI. loan amount The minimum loan amount is $1,000. The maximum amount of all loans to the participant from the plan and all other plans sponsored by the Employer that are qualified employer plans under section 72(p)(4) of the Code is the lesser of: (1) $50,000, reduced by the highest outstanding balance of all loans from any 401 or 457 plans for that participant during the one -year period ending on the day before the date a loan is to be made, or (2) one half of the participant's vested account balance, reduced by the current outstanding balance of all 401 and 457 Loans from all plans for that participant. If a participant has any loans outstanding at the time a new loan is requested, the new loan will be limited to the maximum amount calcu- lated above reduced by the total of the outstanding loans. 4 Loan Guidelines Agreement A loan cannot be issued for more than the above amount. The participant's requested loan amount is subject to downward adjustment without notice due to market fluctuation between the time of application and the time the loan is made. VII. Length of loan A loan must be repaid in substantially equal installments of principal and interest, at least monthly, over a period that does not exceed five (5) years. Loans for a principal residence must be repaid in substantially equal installments of principal and interest, at least monthly, over a period that does nor exceed j S [state number of years] years (maximum 30 years). VIII. Loan repayment process Loan repayments for active employees must be through (choose one): Payroll deduction only. PL642(2) = 2 i� ACH debit only.* PL642(2) - 0 'Employee may choose either payroll deduction or ACH debit.* PL642(2) = 1 * Please note that a $20 processing fee will be assessed to a participant's ICMA -RC account when a scheduled loan repayment(s) via ACH is rejected due to insufficient funds, invalid bank account information, or account closure in the participant's desig- nated payment account. If payroll deduction repayment is allowed, and the employee wishes to use this method, the employee must notify the Employer so that the Employer can ensure that repayment will begin as soon as practicable on a date determined by the Employer's payroll cycle. Failure to begin payroll deduction in a timely way could lead to the employee's loan entering delinquency status. Payroll deduction shoutd begin within two payroll cycles following the employee's receipt of the loan. Repayments through payroll deduction will be sent via check or wire by the Employer to ICMA -RC on the following cycle (choose one): EBi- weekly (26 per year) 0 Semi - monthly (24 per year) 0 Monthly (12 per year) If ACH debit repayment is allowed, debits from the employee's designated bank account will begin approximately one month fol- lowing the date the employee's signed ACH authorization form is received and processed by ICMA RC, or, in the case of online loans, approximately one month following the date the loan check has been cleared for payment. Debits will normally be made on a monthly basis. Loans outstanding for former employees or employees on a leave of absence must be repaid on the same schedule as if payroll deductions were still being made unless they reamortize their loans and establish a new repayment schedule that provides that sub- stantially equal payments are made at least monthly over the remaining period of the loan. Loan payments, including loan payments from former employees, are allocated to the participant's current election of investment options on file with ICMA -RC. The participant may pay off all or a portion of the principal and interest early without penalty or additional fee. Extra payments are applied forward to both principal and interest as specified in the original repayment schedule, unless the additional payment is for the balance due. 5 ICMA -RC IX. Loan interest rate The rate of interest for loans of five (5) years or less will be based on prime plus 0.5 %. The rate of interest for loans for a principal residence will be based on the FHANA rate. Interest rates are determined on the last business day of the month preceding the month the loan is disbursed. The interest rate is locked in at the time a loan is approved and remains constant throughout the life of the loan. The prime interest rate is determined on the last business day of each month using www.nfsn.com as the source. The FHA/VA interest rate is also determined on the last business day of each month using www.bankofamerica.com as the source. Loan interest rates for new loans taken in different months may fluctuate upward or downward monthly, depending on the move- ment of the prime and FHA/VA interest rates. The employer may modify the manner in which loan interest rates will be determined, but only with respect to future loans. X. Security /Collateral That portion of a participant's account balance that is equal to the amount of the loan is used as collateral for the loan. The col- lateral amount may not exceed 50 percent of the participant's account balance at the time the loan is taken. Only the portion of the account - balance that corresponds to the amount of the outstanding loan balance is used as collateral. XI. Acceleration (select one) (I All loans are due and payable in frill upon separation from service. Q All loans are due and payable when a participant receives a distribution of all of his /her account balance after separa- tion from service. The amount of the outstanding loan balance will be reported as a distribution in addition to the amount of cash distributed from the plan. SK/All Loans are due and payable when a participant receives a distribution of part of his /her account balance after separa- tion from service. The amount of the outstanding loan balance will be reported as a distribution in addition to the amount of cash distributed from the plan. XII. Reamortization Any outstanding loan may be reamortized. Reamortization means changing the terms of a loan, such as length of repayment peri- od, interest rate, and frequency of repayments. A loan may not be reamortized to extend the length of the loan repayment period to more than five (5) years from the date the loan was originally made, or in the case of a loan to secure a principal residence, beyond the number of years specified by the employer in Section V above. A participant must request the reamortization of a loan in writing on a reamortization application acceptable to the plan adminis- trator. Upon processing the request, a new disclosure statement will be sent to the employer for endorsement by the participant and approval by the employer. The executed disclosure statement must be returned to the plan administrator within 10 calendar days from the date it is signed. The new disclosure statement is considered an amendment to the original promissory note, therefore a new promissory note will not be required. A reamortization will not be considered a new loan for purposes of calculating the number of loans outstanding or the one loan per calendar year limit. XIII. Refinancing existing loans If a participant has one outstanding loan, that loan may be refinanced. If a participant has more than one outstanding loan, no loans may be refinanced. Refinancing means concurrently repaying an existing loan and borrowing an additional amount through a new loan. Refinancing includes any situation in which one loan replaces another loan and the term of the replacement loan does not exceed the latest permissable term of the replaced loan. 6 Loan Guidelines Agreement In order to refinance an existing loan, a participant must request this in writing on an application approved by the plan administra- tor. Such request must be made at a time when the participant is eligible to obtain a loan as defined by the employer in Section III above. The amount of the additional loan amount requested for the purpose of refinancing is subject to the loan limits specified in Section IV above. Because a refinancing is considered a new loan, only active employees may refinance an outstanding loan. Residential loans are not eligible for refinance. XIV. Reduction of Loan If a participant dies prior to full repayment of the outstanding loan(s), the outstanding loan balance(s) will be deducted from the account prior to distribution to the beneficiary(ies). The unpaid loan amount is a taxable distribution and may be subject to early withdrawal penalties. The participant's estate is responsible for taxes or penalties on the unpaid loan amount, if any. A beneficiary is responsible for taxes due on the amount he or she receives. A Form 1099 will be issued to both the beneficiary and the estate for these purposes. XV. Deemed Distribution Loan repayments must be made in accordance with the plan document, plan loan guidelines, and as reflected in the promissory note signed by the participant. If a scheduled payment is not paid within 30, 60, and /or 90 days of the due date, a notice will be sent to both the employee and the employer. A loan will be deemed distributed when a scheduled payment is still unpaid at the end of the calendar quarter following the.calen- dar quarter in which the payment was due. If the total amount of any delinquent payment is not received by ICMA -RC by the end of the calendar quarter following the calendar quarter in which they payment was due, the loan is considered a taxable distribution, and the principal balance, in addition to any accrued interest, is reported as a distribution to the IRS. However, no money is paid in this distribution, because the participant already has the Loan proceeds. The loan is deemed distributed for tax purposes, but it is not an actual distribution and therefore remains an asset of the partici- pant's account. Interest continues to accrue. The outstanding loan balance and accrued interest are reported on the participant's account statement. Repayment of a deemed distribution will not change or reverse the taxable event. The loan continues to be outstanding, and to accrue interest, until it is repaid or offset using the participant's account balance. An offset can occur only if the participant is eligible to receive a distribution from the plan as outlined in the plan document. Participants are required to repay any outstanding loan which has been deemed distributed before they can be eligible for a new loan. The deemed distribution and any interest accrued since the date it became a taxable event is taken into account when deter- mining the maximum amount available for a new Ioan. New loan must be repaid through payroll deduction. The employer is obligated by federal regulation to comply with the loan guideline requirements applicable to participant loans, and to ensure against deemed distribution by monitoring loan repayments, regardless of the method of repayment, and by advising em- ployees if loans are in danger of being deemed distributed. The tax- qualified status or eligibility of the entire plan may be revoked in cases of frequent repayment delinquency or deemed distribution. XVI. Fees Fees may be charged for various services associated with the application for and issuance of loans. All applicable fees will be debited from the participant's account balance and/or from the participant's loan repayments prior to crediting the repayment of principal and interest to the participant's account. A schedule of fees applicable to this plan is specified in 1CMA -RC's current publication of Making Sound Investment Decisions: A Retirement Investment Guide. 7 ICMA -RC XVII. Other The employer has the right to set other terms and conditions as it deems necessary for loans from the plan in order to comply with any legal requirements. All terms and conditions will be administered in a uniform and non - discriminatory manner. In Witness Whereof, the employer hereby caused these Guidelines to be executed this day of ,20 EMPLOYER Accepted: ICMA RETIREMENT CORPORATION By: B Title: Title: Attest: Attest: 8 LOAN ADMINISTRATION AGREEMENT FOR SECFION 457 DEFERRED COMPENSATION PLANS ICMA -RC 457 LOAN ADMINISTRATION AGREEMENT This Agreement is not required if you have 1) only one 457 plan provider or 2) more than one plan provider each with its own plan document and provisions unique to each provider. The Agreement only applies if you have adopted a single 457 plan document under which ICMA -RC and one or more other provider(s) must operate. Please refer to pages 5 -6 of A Guide to Implementing a Loan Program for more details. This Agreement shall serve as an Addendum to the Loan Guidelines established by the Employer identified below as an Addendum to the Administrative Services Agreement (ASA) made by and between the ICMA Retirement Corpora- tion (ICMA -RC) and the Employer. The Employer currently sponsors a section 457 deferred compensation plan administered by two or more providers (co- provider plan). In order to ensure the efficient administration of the loan program established by the Employer, the Employer hereby agrees and declares that (1) For purposes of issuing loans from the plan, that portion of the plan's assets administered by ICMA RC will be treated as though it were a separate and distinct plan. (2) The Employer shall calculate the amount a participant may borrow from the ICMA -RC administered portion of the plan. No loan amount may exceed the lesser of (a) the maximum loan amount specified in Internal Revenue Code section 72(p)(2)(A) or (b) 50% of the participant's ICMA -RC- administered account balance. (3) All loan repayments must be made to the participant's ICMA -RC- administered account for the life of the loan. AGREED as of the day of , 20 Name of Employer: Authorized Official - Print Name State: Employer Plan Number 1 31 0 i 1 1 1 Signature of Authorized Official IC MA RETIREMENT CORPORATION / t.A $ 4. 1. • Angela Montez Assistant Secretary Mail this Agreement and the completed 457 Plan Loan Guidelines to: ICMA -RC Attention: New Business Analyst 777 North Capitol Street, NE Washington, DC 20002 -4240