HomeMy WebLinkAboutResolution - 3788STATE OF CALIFORNIA)
COUNTY OF RIVERSIDE)ss
E CITY OF SAN JACINTO )
RESOLUTION NO. 3788
RESOLUTION APPROVING AND ADOPTING A REVISION TO THE
EXISTING DEFERRED COMPENSATION PLAN(S)
WHEREAS, by Resolution No. 1931 adopted on February 19, 1991, the City of San
Jacinto estabished a Deferred Compenstion plan for its employees and authorized
execution of relevant Agreements with Lincoln Life (no longer a City offered plan), Mass
Mutual and ICMA Retirerment Corporation. In 2016, CaIPERS 457 was added as an third
City offered Deferred Compensation plan.
WHEREAS, a recent fidiciary review of the three City offered Deferred Compensation
plans determined the ICMA plan does not offer Roth and Loan options as the other City
plans do.
WHEREAS, by Resolution No. 98-23 adopted on May 7, 1998, the City of San Jacinto
estabished the assets of the Plan shall be held in trust with the Finance Director serving
as trustee, for the exclusive benefit of the Plan participants and their Beneficiaries, and
the assets shall not be diverted to any other purpose. The City of San Jacinto beneficial
ownership of Plan assets held in the Lincoln Life and ICMA Retirement Corporation trusts
shall be held for the further exclusive benefit of the Plan participants and their
Beneficiaries. Notwithstanding the foregoing, all Plan provisions creating trusts to hold
all the assets of the plan for the exclusive benefit of the Plan participants and Beneficiaries
shall become gffective once the appropriate body makes the necessary amendments
pemitting the establishment and maintenance of such trusts.
NOW THEREFORE, BE IT RESOLVED, determined, and ordered by the City Council of
the City of San Jacinto, California as follows:
SECTION 1. The City Council/City Manager hereby amend the ICMA Plan as set forth in
Exhibits A & B.
SECTION 2. The Assets of the City Deferred Compensation Plans shall be held in trust
with the Deputy City Manager serving as trustee, for the exclusive benefit of the Plan
participants and their Beneficiaries, and the assets shall not be diverted to any other
purpose. The City of San Jacinto beneficial ownership of Plan assets held in the Lincoln
Life, Mass Mutual, ICMA and CalPERS 457 trusts shall be held for the further exclusive
benefit of the Plan participants and their Beneficiaries. Notwithstanding the foregoing, all
Plan provisions creating trusts to hold all the assets of the plan for the exclusive benefit
of the Plan participants and their Beneficiaries shall become effective once the
appropriate body makes the necessary amendments pemitting the establishment and
F-1 maintenance of such trusts.
SECTION 3. The Deputy City Manager agrees to serve as trustee under the Plan(s).
SECTION 4. The Deputy City Manager is authorized to execute all agreements
necessary to effectuate the Resolution.
SECTION 5. The City Clerk of the City of San Jacinto shall certify the adoption of this
resolution, and thenceforth and thereafter the same shall be in full force and effect.
PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council
of the City of San Jacinto on the 18th day of February 2020, by the following vote:
AYES:
Ledezma, Lopez, Ruiz, Utz
NAYS:
None
ABSENT:
Kotyuk
ABSTAIN:
None
CITY OF SAN JACINTO:
Andrew Kotyuk, ayor
ATTEST:
An el� -7Ito , City Clerk
APPROVED AS TO FORM:
BEST BEST & KRIEGER LLP
Michael J. Maurer, City Attorney
7
STATE OF MIFORNIA)
COUNTY OF RIVERSIDE) ss
CITY OF SAN JACINTO)
CERTIFICATION
I, Angela Walton, duly appointed City Clerk of the City of San Jacinto, do hereby
certify that the foregoing Resolution No. 3788 was duly passed, approved and adopted
at a regular meeting of the City Council of the City of San Jacinto on the 18th day of
February 2020 by the following vote:
AYES:
Ledezma, Lopez, Ruiz, Utz
NAYS:
None
ABSENT:
Kotyuk
ABSTAIN:
None
WITNESS MY HAND AND OFFICIAL SEAL the 18t" day of February 2020.
4AnWUalt6on�, City Clerk
City of San Jacinto
L
Exhibit A
C
r
ROTH AMENDMENT ADOPTION PACKAGE
ICMA C 457 Deferred Compensation Plans
8•ifdret 1Prnmrrrnr Seearrilr
TABLE OF CONTENTS
par
Introduction- Roth Provisions Amendment.................................................2
Change Summary: In -flan Roth Conversions................................................3
RothProvisions: Overview...............................................................4
■ ICMA-RC's Plan Document ........................... .................................5
For plans using ICMA-RC's 457 Governmental Deferred Comprmation Plan d, Trust document
• Instructions
• Statement of Intent
• Suggested Affirmative Statement
• Suggested Resolution
• Roth Provisions Amendment (separate PDF, not included in this packet%
■ Individually Designed Plan Documents...................................................9
For plans using an individually designed plan document
• Instructions
• Statement of Intent
AC: 22216-201410-929
INTRODUCTION — ROTH PROVISIONS AMENDMENT
Iris packet provides information and instructions for amending your 457 deferred compensation plan to incorporate changes
to the In -Plan Roth Conversion provision that were made by the American Taxpayer Relief Act of 2012 ("ATRA"), also
known as the "Fiscal Cliff' legislation. 'Ihe enclosed statement of intent documents can be used if you wish to offer the Roth
provisions or change how ICMA-RC administers the provisions within your plan.
Negative Election Adoption Process
As with prior plan document updates related to legislative and regulatory changes, we are utilizing a negative election adoption
process, which enables most employers to adopt the updated Roth Provisions Amrudmenr without taking any formal action.
If your plan uses the ICMA-RC plan document, the amendment will be automatically adopted as of December 31, 2014.
Action is required on your part only if any of the following apply.
• You are required by your legislative body or plan administrative committee to take formal action to adopt the plan
document amendment. {Sampk documents provi4d on pages l and 8.)
• Your plan uses an individually designed plan document (see below).
• You are currently using the ICMA-RC 457 Deferred Compensation Plan & Trust document but you intend to
notify ICMA RC in writing that you will not be adopting the Roth amendment and intend to move forward with an
individually designed plan.
Mandatory Amendment
The ICMA-RC plan document, which includes Roth provisions that plan sponsors can elect to make available, must be
amended to reflect changes enacted by ATRA. Plans that make the Roth provisions available should note that participants can
request in -plan Roth conversions at any time. Prior to ATRA, only participants who were eligible to withdraw funds from the
plan, typically after separation from service, were eligible to request an in -plan Roth conversion. For additional information,
see the "Change Summary" on the following page.
Individually Resigned Plan Documents
If your plan uses an individually designed plan document, the negative election adoption process does not apply to your plan.
Please check with your plan's legal counsel to ensure your document is amended in a timely fashion.
Adoption Made Easy
We hope you find the information in this packet makes the adoption process straightforward and easy for your plan. If
you have any questions regarding the information in this packet, please contact ICMA-RC's Plan Sponsor Services team at
500-326-7272.
1o/2014
(HANGS SUMMARY: IN -PLAN ROTH CONVERSIONS
The following information summarizes the In -Plan Roth Conversion provision and the changes that were included in ATRA.
ICMA RC's Roth Provisions Amendment (October 2014) incorporates the ATRA changes into the 457 Governmental
Deferred Compensation Plan & Trust document.
What is an in -plan Rolh conversion?
An in -plan Roth conversion is the process of converting pre-tax retirement plan assets to Roth assets without removing the
assets from the plan. Participants are subject ro income taxes on the pre-tax amounts they convert. Because the resulting tax
liability may be significant, ICMA-RC recommends that participants consult with a qualified tax professional before
requesting an in -plan Roth conversion.
How did ATRA change in -plan Roth conversions?
Under ATRA, all participants are eligible to request an in -plan Roth conversion at any time, regardless of whether or not they
are otherwise eligible to withdraw assets from the plan, provided that the plan offers in -plan Roth conversions.
Prior to the change, only participants who were eligible to withdraw funds from the plan, typically after separation from
service, were eligible to request an in -plan Roth conversion. This allowed participants whose accounts were eligible for a direct
rollover to a Roth IRA to do a similar Roth conversion without transferring the assets out of the plan.
Additional guidance released in 2013, after ICMA.-RC began administering in -plan Roth conversions under the ATRA
rules, indicated that plan administrators may elect to administer the provision under the more restrictive pre ATRA rules
(i.e., only participants eligible to withdraw funds as part of an eligible rollover distribution may request an in -plan Roth
conversion). ICMA-RC's plan document reflects the more flexible ATRA rules, with all participants eligible to request in -plan
Roth conversions regardless of whether or not they are otherwise eligible to withdraw assets from the plan.
When was the ATRA change effective?
The change was effective as of January 1, 2013, and ICMA-RC began administering in -plan Roth conversions under the new
rules in 2013, for plan sponsors requesting that we process conversions in their plans under the new rules. Plans are permitted
to operate under the ATRA rules prior to formally amending their plan documents, but their plan documents must be
amended in a timely fashion. Guidance issued by the IRS indicated that plans allowing in -plan Roth conversions under the
ATRA rules should be amended by December 31, 2014.
How do participants request an in -plan Roth conversion?
Participants should contact ICMA RC and request the in -Plan Roth Conversion Form.
More detailed information ,elating to the above provisions can be found in the
457 Plan Roth Provisions Questions c 'Answers document.
10/2014
ROTH PROVISIONS: OVERVIEW
ICMA RC often refers to Roth Elective Deferrals and In -Plan Roth Conversions collectively as the "Roth provisions." A
summary of each provision is shown below.
1. Roth Elective Deferrals
This provision allows participants to make Roth (after-tax) contributions to your 457 deferred compensation plan. Roth
contributions and associated earnings can be withdrawn tax-free if certain criteria are met (see below).
Distributions of Roth assets will be tax-free if the following requirements for a "Qualified" distribution are satisfied:
• Five years have passed since January 1 of the year of the participant's first Roth contribution, and
• 'The participant is at least 59ih years old (or disabled or deceased).
Default Election: Provision is not offered (or no change to your plan's previous election)
'This provision was not made operational in your plan unless you elected to offer it. No change
will be made to your previous election (e.g., if you previously elected to offer the provision, it will
continue to be offered).
Required Action: None
If you want to change your previous election and either begin offering Roth contributions or stop
offering this provision, please complete the applicable Statement of Intent (enclosed) and return a
copy to 1CMA RC.
2. In -Man Roth Conversions
This provision allows participants to convert pre-tax retirement plan assets to Roth assets without removing the assets from
the plan. Participants are subject to income taxes on the pre-tax amounts they convert. Since the resulting tax liability may be
significant, ICMA RC recommends that participants eorualt with a qualified tax professional before requesting an in -plan
Roth conversion.
Default Election: Provision is not offered (or no change to your plan's previous election)
This provision was not made operational in your plan unless you elected to offer it. No change
will be made to your previous election (e.g., if you previously elected to offer the provision, it will
continue to be offered). If you elect to offer Roth Elective Deferrals in your plan, the In -Plan Roth
Conversion provision is made operational by default. Note that this provision cannot be made
available without also electing to allow Roth Elective Deferrals.
Required Action: None
If you want to change your previous election and either begin offering In -Plan Roth Conversions or
stop offering In -Plan Roth Conversions, please complete the applicable Statement of Intent (enclosed)
and return a copy to ICMA-RC. (NOTE: If you are electing to offer Roth Elective Deferrals for
the first time, but do not wish to allow the In -Plan Roth Conversion provision, you must specifically
indicate such an election on the applicable Statement of Intent.)
10/2014
ICMA-RC PLAN DOCUMENT AMENDMENT INSTRUCTIONS
ICMA RC Plan Document: The Roth Provisions Amendment (October 2014) will automatically be adopted and become
part of the ICMA-RC 457 Governmental Deferred Compensation Plan & Trust document as of December 31, 2014
NOTE: ICMA-RC only requires you to take action if either of the following is truce
• Roth provisions are not offered in your plan and you want to make a change.
• Roth provisions are offered in your plan and you want to make a change.
INTERESTED IN OFFERING ROTH CONTRIBUTIONS AND IN -PLAN ROTH CONVERSIONS?
STEP 1: Review the information in this packet, the 457 Plan Roth Options Questions 6Answers document, and
the Roth Provisions Amendment.
STEP 2: Determine whether or not you want to proceed with offering the Roth provisions.
STEP 3: Determine whether any formal action is required by your legislative body and/or plan administrative
committee to offer the Roth provisions in your plan. If formal action is required, please refer to the suggested
affirmative statement or suggested resolution (as applicable) on pages 7 and 8, respectively.
STEP 4: Return a copy of the statement of intent, on page 6, to ICMA-RC (retain the original for your records):
Fax to: OR Man t,q;
202-962-4601 ICMA-RC
ATTN: NBS Analyst ATTN: NBS Analyst
777 North Capitol Street, NE
Washington, DC 20002-4240
STEP 5: We will notify you when the Roth provisions become operational in your plan and work with your payroll
personnel to ensure they are prepared to submit Roth contributions. Participants will receive information
with their quarterly statements about the ability to make Roth contributions.
Please retain original copies of any documents you return to ICMA RC for your records. These documents will be part
of your formal plan document.
QUESTIONS
If you have any questions regarding the amendment process, or the Roth provisions in general, please contact flan Sponsor
Services toll -free at 800-3267272.
1o/2014
STATEMENT OF INTENT: PLAN ADMINISTRATION - ROTH PROVISIONS
Plan Numbers 30 0 110 F1
Name of Employer: States
I. Employer Instructions Regarding Plan Administration
The employer instructs ICMA-RC to administer the Plan in accordance with the below elections as of the effective
date specified in Section III below.
[I. Roth Provisions
a. The Plan will offer Designated Roth Accounts as described in Article X.
J Yes (default option) I .. No
(Note: If you want to offer In -Plan Roth Conversions and/or Roth Elective Deferrals, you must check "Yes" above. If
No is selected, skip the remainder of this section.]
b. The Plan will allow In -Plan Roth Conversions as provided in Section 10.05.
El Yes (defauk option) ❑ No
e. Designated Roth Accounts will be available as a source for loans under the Plan (only applicable to plans that offer loans):
❑ Yes ❑ No or NIA (default option)
III. Effective Date
'Phis statement of intent shall be effective as of the following date: — / - .— 4_ _ __
M" D.y YM
IV, Employer Signature
NAME OF OFPICIAL PLAT! COORDINATOR PLEASE PRINT):
SIGNATURE:
TITLE:
TELEPHONE NVMEER:.
DATE: _
EMAIL ADDRESS:
A copy of the completed statement of intent should be rewmed to ICMA RC (retain the original for your records)t
Fax to: OR Mail tm
202-962-4601 ICMA-RC
ATTN: NBS Analyst ATTN: NBS Analyst
777 North Capitol Street, NE
Washington, DC 20002-4240
1012014
6
SUGGESTED AFFIRMATIVE STATEMENT
Plan Numbers 30 C ❑ ❑ E
Name of Employer:._,_, States
As a duly authorized agent of the above named Employer, I hereby
NOW THEREFORE BE IT RESOLVED that the Employer hereby amends the deferred compensation plan (the "Plan") in
the form of (select one)
❑ The ICMA Retirement Corporation 457 Governmental Deferred Compensation Plan & Trust
OR
❑ The Plan and Trust and any associated amendments provided by the Employer
(executed copies attached hereto)'
SPECIFY that the assets of the Plan shall be held in trust, with the Employer serving as trustee ("Trustee"), for the exclusive
benefit of the Plan participants and their beneficiaries, and the assets shall not be diverted to any other purpose. The Trustee's
beneficial ownership of Plan assets held in VantageTrust shall be held for the exclusive benefit of the Plan participants and
their beneficiaries;
AND AFFIRM that the Employer hereby agrees to serve as Trustee under the Plan.
DATE:
(TITLE OF DESIGNATED AGENT]
(SIGNATU l!)
' If you are amending your own individually designed plan document, this executed resolution should be returned to ICMA-RC as instructed
below.
Fax to-, OR
202-962-4601
ATTN: NBS Analyst
Man tos
ICMA-RC
ATTN: NBS Analyst
777 North Capitol Street, NE
Washington, DC 20002-4240
lo/2014
ICMA RETIREMENT CORPORATION
GOVERNMENTAL 457 DEFERRED COMPENSATION PLAN 8 TRUST
ICAAC ROTH PROVISIONS AMENDMENT
i - ly (WOOER 2014)
Pursuant to Article XIII of the ICMA Retirement Corporation 457 Governmental Deferred Compensation Plan & Trust (the
"Plan"), ICMA Retirement Corporation, as Plan Administrator, hereby adopts this Amendment on behalf of all adopting
Employers to provide for In -Plan Roth Conversions of otherwise nondistributable amounts pursuant to the American Taxpayer
Relief Act of 2012 ("ATRA"). This Amendment shall modify and restate Article X of the Plan, which provides for Roth Elective
Deferrals and In -Plan Roth Conversions. This Amendment is effective as of January 1, 2013, or, if later, the date that the
Employer elects to allow Roth Elective Deferrals and In -Plan Roth Conversions under the Plan.
Amide X. Roth Provisions
This Article X has no effect unless and until the Employer affirmatively elects to offer Designated Roth Accounts.
10.01 Definidons. The following definitions shall apply for purposes of this Article X.
(a) Designated Roth Account. A bookkeeping account established and maintained to record the Participant's Roth
Elective Deferrals, In -Plan Roth Conversions, rollovers from designated Roth accounts under other eligible
retirement plans, and the income gains and losses thereon. Unless specifically stated otherwise, all references
in the Plan to a Participant's Account shall include a Participants Designated Roth Account.
(b) In Plan Roth Conversion. (1) A distribution from a Participant's Pre -Tax Account that is rolled over to the
Participant's Designated Roth Account under the Plan, as described in Code section 402A(c)(4)(B); or (2) a
transfer from an amount in the Participant's Pre -Tax Account not otherwise distributable from the Plan to the
Participant's Designated Roth Account under the Plan, as described in Code section 402A(c)(4)(E), to the
extent permitted by Section 10.05(e).
(c) Per. Tax Account. A bookkeeping account established and maintained to record the portion of the Participant's
Account attributable to amounts other than Roth Elective Deferrals, in -Plan Roth Conversions, rollovers
from designated Roth accounts under other eligible retirement plans, and the income gains and losses
thereon. Unless specifically stated otherwise, all references in the Plan to a Participant's Account shall include
a Participant's Prc-Tax Account.
(d) Qw4fii ed Roth Contribution Pmgmm. A program described in paragraph (1) of Code section 402A(b), under
which a Participant may make Roth Elective Deferrals in lieu of all or a portion of the elective deferrals the
Participant is otherwise eligible to make under the Plan.
(e) Roth Erctive Deferrals. Deferred Includible Compensation contributed pursuant to Section 10.02 by a
Participant, which amounts are:
(1) designated irrevocably by the Participant at the time of the deferral election as a Roth elective deferral
that is being made in lieu of all or a portion of the pre-tax deferrals the Participant is otherwise eligible to
make under the Plan; and
(2) treated by the Employer as includible in the Participant's income at the time the Participant otherwise
would have received that amount as Includible Compensation.
10.02 Permitted Roth Elective Deferrals
(a) As of the effective date, a Participant shall be permitted to make Roth Elective Deferrals from his or her
Includible Compensation in such amount or percentage as may be specified in the Joinder Agreement. A
Participant's Roth Elective Deferrals will be allocated to a separate Designated Roth Account maintained for
such deferrals as defined in Section 10.01(a) above.
(b) Unless specifically stated otherwise, Roth Elective Deferrals will be treated as Deferred Compensation for all
purposes under the Plan.
AQ 22453-1014-1499
10.03 Separate Accounting
(a) Contributions and withdrawals of Roth Elective Deferrals, In -Plan Roth Conversions and rollovers from
a designated Roth account under an eligible retirement plan will be credited and debited to a Participant's
Designated Roth Account.
(b) The Plan will maintain a record of the amount of Roth Elective Deferrals, In -Plan Roth Conversions, and
rollovers from a designated Roth account under an eligible retirement plan in each Participant's Designated
Roth Account.
(c) Gains, losses, and other credits or charges must be separately allocated on a reasonable and consistent basis to
each Participant's Designated Roth Account and Pre -Tax Account under the Plan.
(d) No contributions other than Roth Elective Deferrals, In -Plan Roth Conversions, and rollovers from a
designated Roth account under an eligible retirement plan and properly attributable earnings thereon will be
credited to each Participant's Designated Roth Account.
10.04 Direct Rollovers
(a) Notwithstanding anything to the contrary in the Plan, a direct rollover of a distribution from a Designated
Roth Account under the Plan shall be made only to another designated Roth account under an eligible
retirement plan described in section 402A(e)(1) of the Code or to a Roth IRA described in section 408A of
the Code, and only to the extent the rollover is permitted under the rules of section 402(c) of the Code.
(b) Notwithstanding anything to the contrary in the Plan, unless otherwise provided by the Employer in the
Adoption Agreement, the Plan will accept a rollover contribution to a Designated Roth Account only if it is
a direct rollover from another designated Roth account under an eligible retirement plan described in section
402A(e)(1) of the Code, or if the rollover is an In -Plan Roth Conversion defined in Section 10.05.
(c) Eligible rollover distributions from a Participant's Designated Roth Account are taken into account in
determining whether the total amount of the Participant's Account balances under the Plan exceeds $1,000
for purposes of mandatory distributions from the Plan.
10.05 In -Plan Roth Conversions. Unless otherwise elected by the Employer, as of the effective date of this Article the Plan
shall allow for In -Plan Roth Conversions.
(a) Tax Treatment. The amount of an In -Plan Roth Conversion shall be includible in the Participant's gross
income, as though it were not part of a qualified rollover contribution.
(b) Irrevocability. Any election made by the Participant pursuant to Section 10.05(2) to do an In -Plan Roth
Conversion shall be irrevocable.
(c) Treatment of Loans. Outstanding plan loans shall be excluded from In -Plan Roth Conversions.
Notwithstanding anything herein to the contrary, an In -Plan Roth Conversion shall not accelerate or
otherwise cause a Participant to defaulr on an outstanding plan loan.
(d) Spousal Consent. Notwithstanding anything herein to the contrary, if the Plan requires spousal consent for
a distribution, a married Participant shall not be required to obtain spousal consent in connection with an
election to make an In -Plan Roth Conversion.
(e) In -Plan Roth Conversions of Non -Distributable Amounts. A Participant may transfer, as part of an In -Plan Roth
Conversion, an amount that is not otherwise distributable from the Participant's Pre -Tax Account to the
Participant's Designated Roth Account. Such transfer shall be treated as a distribution which was contributed
in a qualified rollover contribution within the meaning of Code section 408A(e). Any distribution restrictions
that were applicable to the amount before the In -Plan Roth Conversion shall apply to such amount (and
earnings and losses thereon) in the Participant's Designated Roth Account. If the Participants Account or
a portion of the Account is subject to a vesting schedule, an In -Plan Roth Conversion is available only if
the Account or portion of the Account is fully vested. The Participant may not transfer under this Section
10.05(e) any portion of the Account that is partially vested.
10.06 Availability of Loans from Designated Roth Accounts. A Participant's Designated Roth Account balance can be
included to determine a Participant loan amount under Article VIII. However, unless the Employer elects otherwise,
Designated Roth Accounts will not be available as a source for loans under the Plan.
By the addition ofArticle X regar&ng Roth Provisions, former Articles X (Non Auigmbritty) through XJV (Gender and Number) of
the Plan have been re -numbered XI throughXV.
Exhibit B
ICMA-KC
BUILDING PUBLIC SECTOR
RETIREMENT SECURITY
c
Loan Implementation Package for
451(b)/401(a)/403(b) Plan Sponsors
TABLE OF CONTENTS
Introduction and Summary Instructions...........................................2
Basic inhmnmtior► aad irn� for implementing your planss W pntgram.
Loan Guidebnes Agreement Instructions...........................................3
Important k(owtion ondh§Wons for wmpl6 q 6 tamn Guide w 4wmeat
Loan Guidelines Agreement....................................................7
fomplete this agreunnent to establish the gaiddines for ynwphaa's loan program.
Maximum lean Amount Worksheet.............................................13
the this warkslueet to mlcrdate the maximum lama Daunt that a partidpant is eligible
to receive.
Suggested Resolution.......................................................14
for we by plans whm pwn ing body mgr>rores that a resohr m be passed
457(b) Plan Loan Administration Agreement .............................. I .......15
4570) bu Only4 if ynm have multiple 4540) pka providers, yuw mast complete
and MA" this &Wont to IGyIAK
Loan Amendment 1401(a) Mans Only) ..................... I ................ • • • • • 16
401(a) Mons 0*. 9 you are mmendrng ymt+r wdsttng plan to add a loon program, you
most rompkm and return Ow doamretrt to IGHq K
Loan Amendment (403(b) Plate Only)...........................................17
4030) l4Orrs ft.. if you► are amenebrtg your eAft plen to odd loan PWOR, you nxd complete and
return d* docc wnt to 101014K
Introduction and Summary Instructions for 457(b), 401(a), and 403(b) Plan
Sponsors
Making a loan program available in your retirement plan will provide eligible plan participants with the ability to borrow
money from their accounts. As the administrator of your loan program, ICMA RC will attempt to minimize the amount of
resources you need to devote to the program. However, there are administrative and fiduciary responsibilities associated with
offering loans which, as a practical matter, cannot be delegated to ICMA-RC.
Please review all of the information in this packet carefully prior to submitting the applicable forms to implement the loan
program in your plan.
The below instructions provide you with easy -to -follow steps to implement a loan program in your ICMA RC 457(b) or 401(a)
plan.
STEM 1: Review the Loan Guidelines Agreement Instructions carefully prior to returning the required forms to implement
your plan's loan program.
STEP 2: Complete the Loan Guidelines Agreement.
STEP 3: Determine whether any formal action is required by your legislative body and/or plan administrative committee
to implement a loan program. If formal action is required, you may want to use the suggested resolution in this
packet.
STEP 4: Complete the following documents (ifapplicable)
• 457(b) Plan Loan Administration Agreement -- If you have multiple 457(b) plan providers, you must
complete and return this document to ICMA-RC.
• Loan Amendment (401(a)/403(b) Plans Only) — If you are amending your existing 401(a)/403(b) plan to
add loan provisions, you must complete and return this document to ICMA-RC.
STEP 51 Return copies of the following documents to ICMA RC (please be sure to submit all pages and retain the
originals for your records):
• Loan Guidelines Agreement
• Loan Amendment to the 401(a) Plan Adoption Agreement (ifapplicable)
• 457(b) Plan Loan Administration Agreement (rfappheable)
• Suggested Resolution (if applicable)
FAx To: OR MAIL TO:
Workflow Management Team ICMA-RC
202-682-6439 ATTN: Workflow Management Team
P.O. Box 96220
Washington, DC 20090-6220
STEP 6: Please allow 5 7 business days for ICMA-RC to establish your plan's loan program.
Please retain original copies of any documents you return to ICMA-RC for your records.
If you have any questions relating to the adoption process, please contact your Plan Sponsor Services team at 800 326-7272.
40002.1218489
Lon Impim tm u PAuni FoN 4570/401(0/403(6) PLAN SPONSOU 1 2
Loan Guidelines Agreement Instructions
The information in this packet is intended to assist you
with implementing a loan program within your ICMA RC
457(b), 401(a), or 403(b) plan(s). The packet provides an
overview of the issues and complexities of establishing and
maintaining a loan program under the most common types
of retirement plan arrangements. It is not intended to be all
inclusive. Special situations and/or solutions not discussed
in this document will need to be reviewed on a case -by -cast
basis.
The instructions contain information that will help you
understand the decisions you will need to make when you
establish your loan program and help you complete the
Loan Guidelines Agreement. Please carefully review the
information in this section and complete all applicable
sections of the Loan Guidelines Agreement.
Here are a few of the elections that you will need to make:
• Will loans be available for all purposes or only in
hardship situations?
• How many loans will participants be allowed to have
outstanding at one time? (up to Five)
• How long will participants have to repay a loan used to
purchase a new primary residence? (up to 30 years)
• How will participants repay their loans? (payroll
deduction. ACH payments from their bank accounts,
or both)
In order to offer loans within your retirement plan, the
Internal Revenue Code requires that you establish written
guidelines that govern the Plan's loan program. You may
elect to use the Loan Guidelines Agreement to serve this
purpose for your Plan.
If you have any questions relating to the process of
implementing a loan program, please contact your Plan
Sponsor Services team at 800-326-7272.
Section l: Employer Plan information
Enter the name of your employer plan. Also specify the
plan type and your ICMA-RC plan number.
Section II: Eligibility & Loan Source
Loans are available to all active employees, except those
with an existing loan in default.
Loan Source — Use this section to specify the sources that
will be available for participant loans.
Sectien III: Loan Purpose
Specify whether loans may be taken for (A) all purposes
or (B) only in the case of hardship. If you choose the "all
purposes" option, more of your employees are likely to
request loans than if you select the "hardship only" option.
(A) All Purposes
(B) Hardship Only
401(4)(k)1403(6) Plans. Under the Code, only employers
can authorize a loan for hardship purposes. Generally,
for loan purposes, the IRS defines "hardship" situations
for these purposes to include, but not to be limited to:
unreimbursed medical expenses, buying or rehabilitating
the participant's principal residence, and paying for
college education for the participant or his/her qualified
dependents. Car loan, car repairs, and the purchase
or repair of a vacation or rental property would not be
included in the hardship definition.
Employers have the ability to make their plan's loan
program more restrictive under both of the above options.
Section IV: Application Process
No action is required in this section. The application
process available to participants will vary depending on the
option you select in Section III (Loan Purpose).
Section V: Maximum Number of Loans
Specify whether participants may have only one (1) or up
to five (5) loans outstanding at one time. The option you
choose in this section will have a significant impact on the
number of loans made from your plan. Regardless of your
election, a participant may receive a maximum of one (1)
loan per calendar year.
Notet If you select Payroll Deduction as a repayment option
for your participants in Section V III, each loan repayment
for each pay period must be armunted for separately. As such,
repayments of multiple loans arc a much larger burden on
your payroll system (and personnel) than a repayment of a
single loan.
Section VI: Loan Amount
No action is required in this section. 'The Maximum Loan
Amount Worksheet includes instructions you can use to
calculate the maximum loan amount for a participant.
The loan modeling option on ICMA-RC's Account
Access website can also be used to calculate a participant's
maximum loan amount.
4002-12114ff
Leo IMPLE&ElIlA1011 FAMSE FOR 457(00110/403(bl FuE SpoesaEs 1 3
Section VII: Length of Lean
Loans must be repaid in substantially equal installments of
principal and interest over a period that does not exceed five
(5) years. However, if the participant will be using the loan
to purchase a principal residence, the five (5) year time limit
may not apply. In this section of the form, you specify the
maximum repayment period for principal residence loans,
with 30 years being the maximum term.
In determining the maximum repayment period for
residential loans, you should be mindful that the loan term
may extend beyond the period the participant is employed
by you. If you allow employees to continue to pay their
loans after they separate from service (see the Acceleration
section), repayments would continue by the participant,
through you, for the entire term of the loan (e.g., 30 years).
Every payroll period, the participant (former employee)
will be required to give you a check for the periodic loan
repayment amount. You then include this amount with
your next contribution submittal to ICMA-RC. Loan
repayments may not be made directly to ICMA-RC by the
participant, unless you choose ACH debit as a repayment
option in Section Vlll.
Section NIII: Loan Repayment Process
Specify the repayment merhod(s) and repayment frequency
your plan will use.
Repayment Method — You can allow repayments to be
made via payroll deduction and/or ACH payments from a
participant's bank account.
(1) Payroll Deduction — With this option, you will
include the loan repayment detail when you remit
contribution detail to ICMA-RC via the EZLink
website.
Initiating Payroll Deduction
Payroll deduction should begin within two payroll
cycles following the date the loan is processed by
ICMA-RC. Employees using this method must notify
the Employer immediately so that repayments will
begin as soon as practicable, on a date determined by
the Employers payroll cycle. Failure to begin payroll
deduction in a timely manner could lead to the
employee's loan entering delinquency status.
(2) ACH — With this option, participants authorize
ICMA RC to debit loan repayments directly from the
participant's bank account via Automated Clearing
House (ACH). Ibis feature frees you of the burden
of establishing and monitoring loan repayments via
payroll deduction.
ADDITIONAL LOAN REPAYMENTS AND EARLY PAY-OFF
A participant may pay off all of the principal and intcrest
early without penalty or additional fee. If a loan is paid
in full prior to the end of the term of the loan, no further
interest will accrue. Please note that no payment date
may be "skipped" even if the employee has made a large
payment or submitted multiple payments.
Section IX: Loan Interest Rate
No action is required in this section. It simply describes the
interest rate that will be used for participant loans.
Section X: Searity/Collateral
No action is required in this section. It simply describes the
amount that will be used as collateral for participant loans.
Section XL Acceleratiea
Specify whether participants who have separated from
service will be able to continue loan repayments until they
have withdrawn their entire account balance from the plan,
or if outstanding loans will be due and payable at the time
participants separate from service.
You should consider the options in this section carefully,
since your election will impact when outstanding loans
become taxable to participants. If a participant does not
repay the outstanding loan amount at the time it is due, the
loan is "foreclosed," and the outstanding loan amount must
be reported by ICMA-RC as a taxable distribution in the
year of the foreclosure.
Given the burdens associated with collecting loan
repayments from former employees, you may not wish to
maintain a potentially long term "relationship" with former
employees (especially in the can of residential loans).
Section XII: Reamorthation
No action is required in this section. Ir simply provides
information related to the reamortization of participant
loans.
Section XIIk Refinance
No action is required in this section. It simply provides
information related to the refinancing of participant loans.
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Lou IrrlEMINTAt101 PmAsi rot 431100110/4030) Put Sroosoas 1 4
Section XIV: Reduction of loan
No action is required in this section. It simply describes
how outstanding loans will be handled in the event of a
participant's death.
Section XV: Deemed Distributions
No action is required in this section. However you should
familiarize yourself with this information and note that
loan repayments must be made in accordance with the plan
document, plan loan guidelines, and as rcflccted in the
promissory note signed by the participant. Failure to make
loan repayments according to the loan terms will result in
the outstanding loan balance being deemed distributed and
taxable to the participant.
TIMING
A loan will be deemed distributed when a scheduled
payment is still unpaid at the end of the calendar quarter
following the calendar quarter in which the payment was
due. For example, if a participant does not make a loan
payment that was scheduled to be made on February 1, the
maximum cure period for the repayment is June 30. If the
total amount of all delinquent payments is not received by
the end of the cure period, the loan is deemed distributed.
CONSEQUENCES OF DEEMED DISTRIBUTED LOANS iEMPLOYERSI
Employers who do not ensure proper loan repayment
practices in their retirement loan programs risk not
only having individual participant loans being deemed
distributed, but also potentially jeopardize the tax -
favored status of the entire plan. In the extreme, plans
with mismanaged loan programs — a high occurrence of
deemed distributed loans, and/or program participants in
default, for example — may be disqualified (in the case of
401(a)1403(b) plans) or classified as ineligible (for 457(b)
plans) by the IRS. Disqualification results in the loss of tax -
deferred status for all contributions and a possible increase
in the taxable income for participating employees.
It is a plan sponsor's fiduciary obligation to properly manage
the retirement plan and its benefits. Mismanagement of
a loan program may be considered failure to meet this
fiduciary obligation and may expose a plan sponsor to
litigation, in addition to being in violation of applicable
laws and regulations.
Employers, as plan sponsors and fiduciaries, have an
obligation to comply with plan document and loan
guideline requirements applicable to participant loans. In
this regard, loan payments must be made in accordance
with the plan document, plan loan guidelines, and as
reflected in the promissory note signed by the participant.
Employers retain this obligation if there is a loan program
associated with their retirement plan, regardless of the
provisions governing the loan program.
CONSEQUENCES OF DEEMED DISTRIBUTED LOANS (PARTICIPANTS)
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 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 continue to be reported on
the participant's account statements.
• 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 your plan document.
• Participants are required to repay any outstanding
deemed distributed loan before they can become
eligible for a new loan. The deemed distributed loan
and any interest accrued since the date it became a
taxable event is taken into account when determining
the maximum amount available for a new loan.
• A participant who has had a prior deemed distribution
must make repayments to a new loan through payroll
deduction, or provide proof of adequate security.
Section XVI: Fees
No action is required in this section. It simply provides that
fees may be charged for various services associated with the
application for and issuance of loans. Participants should
review the Annual Service and Fee Disclosure notice(s) for
your plan for more information on the applicable fees.
Section XVII: Signatures
Please have an authorized plan representative sign and date
this section of the agreement.
SPECIAL CIRCUMSTANCES
Emergency Withdrawals (451(b) Plans Only)
457(b) Plans: Loans must be coordinated with unforeseeable
emergency withdrawals. The emergency withdrawal
40082•1418.484
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regulations under Section 457(b) of the Code require that
an emergency withdrawal be a resource of the "last resort."
If the participant is able to take a loan or refinance a
current loan from your ICMA-RC 457(b) plan or any other
plan you sponsor, the participant has resources available
to meet, or partially meet, the financial need. 'Therefore,
a participant will be required to take or refinance a loan
before taking an emergency withdrawal.
Many emergency withdrawals are not approved because the
financial need, while serious, may not meet the conditions
itemized in the 457(b) regulations. The ability to take a
loan allows participants to have access to money that is not
otherwise available. And the repayment process for loans
ensures that participants replenish their accounts, thereby
preserving their retirement savings.
Qualified Joint and Survivor Annuity
(Applies to Some 401(a)/403(b) Plans Only)
If your plan uses the Qualified Joint and Survivor Annuity
as the default form of payment, married participants must
obtain spousal consent prior to obtaining a 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
1CMA-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.
Please be advised, that some statesrecognize a status, such as a
civil union or registered domestic partnership, to carry the same
rights and obligations as marriage under state late►.
Multiple Plans/Providers
If you have more than one retirement plan which offers
loans, including "co -administered" or "co -provider" plans,
ICMA-RC will administer your loan program in your
plan(s) with ICMA-RC, but you will have to perform some
loan verification activities. You will need to perform these
activities if loans are available to your employees from
several like retirement plans, such as two separate qualified
plans, or if you have different types of retirement plans (e.g.
Section 457(b) deferred compensation, 403(b) and section
401(a) qualified plan). The degree of your involvement will
depend on your situation.
1. MULTIPLE PLANS
The Code sets a maximum on the aggregate of all
loans from all retirement plans in which the employee
participates. If you offer retirement plans through multiple
plan providers, no provider will be able to calculate, by
itself, the maximum amount that a participant may borrow
at any point in time. Since only you, the employer, can
determine the current outstanding loan balance and the
highest outstanding loan balance in the past 12 months
from all loans from any retirement plans, you will have to
calculate the maximum amount that may be borrowed.
This will involve obtaining all loan amounts currently
outstanding and repaid in the last 12 months. Please refer
to the Maximum Loan Amount Worksheet for instructions
you can use to calculate the maximum loan amount for a
participant.
Participants are asked to input all outstanding loan balances
in their online workshect so that the program can properly
calculate the maximum amount. Participants are on the
"honor system" when they enter other loan amounts;
ICMA-RC is unable to verify any loan amounts associated
with plans administered by other providers. However, if
there are any outstanding loans in other plans administered
by ICMA-RC, our online program will take them into
account.
2. SINGLE RETIREMENT PLAN/MULTIPLE PROVIDERS
If you have adopted a single retirement plan with one
master plan document under which ICMA RC and
your other administrator(s) must operate, then you may
ultimately have to self-administer your loan program, unless
you require:
• that the maximum that may be borrowed from any
provider is 50 percent of the balance with that provider
and
• that the loan must be repaid only to the provider from
which the loan was made.
3. MULTIPLE TYPES OF RETIREMENT PLANS/MULTIPLE PROVIDERS
If you make loans available to your employees from all
of your retirement plans (e.g. Section 457(b) deferred
compensation plan, 403(b) and Section 401(a) qualified
plan), no administrator will be able to calculate, by itself,
the maximum amount that a participant may borrow at any
point in time. This is because the Code sets a maximum on
the aggregate of all loans from all 401(a), 403(b), and 457(b)
plans in which the participant participates. Since only you,
the employer, can determine the current outstanding loan
balance and the highest outstanding loan balance in the
past 12 months from all loans from any 401(a), 403(b),
or 457(b) plans, you will have to calculate the maximum
amount that may be borrowed. This will involve obtaining
all loan amounts currently outstanding and repaid in the
last 12 months. Please refer to the Maximum Loan Amount
Worksheer for instructions you can use to calculate the
maximum loan amount for a participant.
40082.1218.489
LOAD IYFIENENTA1101 PACEAN FOE 451(00110V40316) Ptu SremseeS 1 6
icnnn�R� LOAN GUIDELINES AGREEMENT
The purpose of this agreement is to establish the terms and conditions under which the Employer will grant loans to participants. 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.
Please read the irtttruesiorrs and ear9%Hy complete all sections of this alwement.
New Loan Program Amendment to Loan Program
I. EMPLOYER PLAN INFORMATION
Name of Plan (Enter she complete Employer name. including state):
Plan Type: 457(b) Deferred Compensation Plan 401(a)(a) Money Purchase Plan 401(a) Profit -Sharing Plan
403(b) Retirement Plan
ICMA-RC Plan Number:
II. ELIGIBILITY & LOAN SOURCE
Loans are available to all active employees, except those with an existing loan in default.
401(a)/403(b) Plans — If your 401(a)1403(b) plan is funded by a combination of Employer and Employee contributions, you must
specify whether one or both of the following can be used as a source for participant loans. (Urcroneor both options below)
Employer Contribution Account (vested balancer only.}
Participant Contribution Accounts (pre- and post -tax, ifapphrabli including Employee Mandatory, Employee Vdunwry, Employer Rollo:,,,
and Portable Benefits Accounts, but excluding the Deductible Employer ContributionlQualifred voluntary Employee Contribution Acround
Roth Assets (fapplicable) — If your 457(b), 403(b), or 401(a)(k) plan allows Roth contributions, a participants Designated Roth Account
balance will be included when calculating the amount a participant is eligible to borrow. However, you must specify whether or not a
participant's Designated Roth Account can be used as a source for participant loans. (Sorter one option below)
A participant's Designated Roth Account will not be available as a source for loans under the plan (default option)
A participant's Designated Roth Account jdH be available as a source for loans under the Plan.
Note: If Roth assets are available aS a Source for lams, a loan that is deemed distributed will not satisfy Ae requirements for a qualified (tax-free)
distribution of Roth even. Ibis may result in participants paying taxes on assets that would otherwise be available tax f w.
III. LOAM PURPOSE
Loans are available for the following purposes and must be requested in the corresponding method (Select one):
Ml Purposes — With this option, participants can request a loan for any reason. Participants will be able to request new loans or
refinance existing loans using the Online Loans option.
Hardship Only — With this option, loans shall only be granted in the event of a participant's hardship or for the purpose of enabli ng
a participant to meet certain specified financial situations. Two options are available for hardship only loans:
1) participants will need to complete the loan application form for your plan and obtain your approval (Online Loans is not
available)
a) 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 financial need, as defined by the employer. For
this purpose, financial need shall include, but not be limited to: unreimbursed medical expenses of the participant or members
of the participants 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.
2) participants may complete an application using the ICMA-RC website at www;icmarc.org and you allow the participant to attest
that the loan will be used for hardship purposes.
40082-1218.409
Lou Ittntrmunas PAtim rot 4510/40101/403(h) Put Smsots I T
LOAN GUIDELINES AGREEMENT
Iv. APPLICATION PROCESS
The loan application process will vary depending on the option you selected in Section III above (Loan Purpom).
(A) ALL PURPOSES
Loans — Participants can request a new loan or to refinance an existing loan using
the ICMA-RC wcbsite at www.icmarc.org.
+ Direct Check Issuance — ICMA-RC sends loan documents with the loan proceeds (via check or ACH) to the participant. The
participant agrees to the terms of the loan prior to the loan documents and proceeds (check or ACH) being generated.
(R) HARDSHIP ONLY
Application Procas
• Employer Review — A loan application must be completed, signed by the participant and approved by you, the employer.
• Online —A loan application may be completed using the ICMA-RC website at www.icmarc.org and you, the employer, allows
the participant to attest that the loan will be used for hardship purposes.
The loan amount will generally be redeemed from the employee's account on the same day as either ICMA-RC receipt of a loan request/
application (complete and in good order), if it is submitted prior to market close on a business day. If not, the loan amount will be
redeemed on the next business day following submission, The loan proceeds for an all purpose loan is generally issued on the next
business day following redemption, and will be sent to the participant based on their option during the loan application process.
V. MAXIMUM NUMBER OF LOANS (SELECT ONE)
Participants may receive one loan per time period defined in the plan document (e.g., calender or plan year), please specify whether
participants may have only one (1) or up to five (5) loans outstanding at one time. Maximum number of loans is one (1) by default.
you want to allow a different amount, enter a value of 1 through 5 in the Other Section.
One (1). Participants may have only one (1) outstanding loan at a time (default).
Other. Participants may have up to (enter 2, 3, or 4) loans outstanding at one time.
V1. LOAN AMOUNT
..F� - - �_ -- ���±.". ]i � '!. S.ri_-'- - .._- .... .Y _ ��31f.4}- y .1. �i.��:'yJ�. ._•y�_ _.:�7.. '1F 3'{=4i+.
Maximumr The maximum amount of all loans to a participant from the Plan and all other pkns of shot Employer that arc either eligible
deferred compensation plans described in section 457(b)(b) of the Code or qualified employer plans under Section 72(p)(4) of the Code
(e.g., 401(a)(41403(b) plans) shall not exceed the hirer of
(1) $50,000, or
(2) One-half of the value of the Participant's interest in all of his or her Accounts under this Plan.
When calculating the maximum amount a participant is eligible to borrow from his/her account, the lesser value of (1) or (2) above must
be reduced by the participant's highest outstanding loan balance over the past 12 months.
Minimums The minimum loan amount is $1.000.
A loan cannot be issued for more than the maximum amount. The participants 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 issued.
Loan amounts will be taken pro -rats from all of a participant's investments.
40002-1218.4"
Lock Irertu nimsen PAum rot 4570/401(a)/40301 PLAN SPONSM I A
LOAN GUIDELINES AGREEMENT
V11. LENGTH OF LOAN
Loans must be repaid in substantially equal installments of principal and interest over a period that does not exceed five (5) years,
Principal Residence Loans
If the participant will be using the loan to purchase a principal residence, the five (5) year time limit may not apply. Participants can
repay a principal residence loan over a period of up to 30 years. Please specify the maximum repayment period for principal residence
loans from your plan below.
Maximum repayment period for principal residence loans = (Enters nam6erofystars, up to30)
V111. LOAN REPAYMENT PROCESS
Specify the repayment method(s) and repayment frequency your plan will use. Note that loan amounts plus interest, minus applicable
fees paid to ICMA-RC, are repaid to participant accounts and not to ICMA-RC. You can allow repayments to be made via payroll
deduction and/or ACH payments from a participant's bank account. Loan repayments must be made at least monthly (457(b)) or
quarterly (401(a)/403(b)).
Repayment Method (Wet 0n0
Payroll deduction only.
ACH debit only.'
*ACHPayment Refeeted Fee — If a Imn repayment scheduled to be paid sda ACH&bir is related due to innrgieient funds, ins fid 6ank amount
information, or arraunt closure, a fee will be c1mrged to the participant's account. 7Lt fee it $20 f iir the fsnt omtrrence and $50 for each m6wiment
ft"rrmee.
Repayment Frequency (5eleet Oxe)s
Repayments through payroll deduction will be sent via check, wire or ACH debit by the Employer to ICMA-RC on the following cycle
choost ones
L, Weekly (52 per year}
❑ Si -weekly (26 per year)
❑ Semi, monthly (24 per year)
❑ Monthly 02 per year)
❑ Quarterly (4 per year) ...- Available to 401(a)1403(b) plans only.
Initiating Repaymentst
• ACH debits from the employee's designated bank account will begin approximately one month following the date the loan is
processed by ICMA-RC. Debits will normally be made on a monthly basis.
• Payroll deduction should begin within two payroll cycles following the date the loan is processed by ICMA-RC. Employees using
this method must notify the Employer immediately so that repayments will begin as soon as practicable, on a date determined
by the Employers payroll cycle. Failure to begin payroll deduction in a timely manner could lead to the employee's loan entering
delinquency status.
Investment of Loan Repayments
All loan repayments are invested according to the instructions the participant has on file for the investment of contributions to his/her
account.
Additional Loan Repayments and Early Pay -Off
A participant may pay off all of the principal and interest early without penalty or additional fee. if a loan is paid in full prior to the end
of the term of the loan, no further interest will accrue. Please note that no payment date may be "skipped" even if the employee has made
a large payment or submitted multiple payments.
40082.1218.489
Lott larumaunu Pttt+ut Fit W(b/401(4/4091b) FUN SrotSati 1 9
LOAN GUIDELINES AGREEMENT
VIII. LOAN REPAYMENT PROCESS (au )
Loans in Default
Participants using the ACH repayment option may default on their loans for lack of repayment more frequently than those using the
payroll deduction method. For this reason, you may choose to require that certain participants use the payroll deduction repayment
method.
Multiple Loans
If a participant has multiple loans outstanding from the plan, each loan repayment must be separately reported to ICMA-RC.
Former Employees and Leave of Absence
Former employees and employees on a leave of absence must repay their loans on the same schedule that would have applied had they
continued employment.
Your plan may allow terminated employees to continue to repay their loans either through ACH, or by giving/sending you a check each
repayment period (see the Acceleration section). If you allow terminated employees to repay loans by giving/sending you a check, you
will include the repayment amounts in your next regular employee contribution remittance to [CMA-RC.
In certain situations, employers may suspend loan repayments for a period of time for employees on a leave of absence or military leave.
Please refer to Treasury Regulation section 1.72(p)-[, Q&A-9 for more information.
Repayments Must Continue
In implementing a loan program you should be aware that some employers have had to contend with the inability of some participants
to repay their loan(s). You should be aware that you may not stop taking loan repayments from the employee's paycheck — even if the
employee asks that repayments be stopped. Failure to payroll -deduct loan repayments on schedule could both jeopardize the eligibility or
qualification of the entire plan as well as create a taxable event for the participant. Likewise, if an employee is repaying the loan through
ACH debit of his/her bank account, and the employee fails to make payments, this could jeopardize the eligibility of your retirement
plan. Employers are ultimately responsible for ensuring that loans are repaid according to the loan terms.
ICMA-RC will notify both you and the employee if a payment has not been received.
It LOAN INTEREST RATE
The loan interest rates are set for non-residential loans at the prime rate plus 0.5%. and for principal residence loans at the FHA/VA rare.
The interest rate for new loans fluctuates from month -to -month. The rates for the following month are determined on the last business
day of the month using Money Cafe (prime rate) and Citi Mortgage (principal residence rate).
When a new loan is approved, the interest rate is locked in and remains constant throughout the life of the loan.
X. SECURITY/COLLATERAL
At the time a loan is taken, 50 percent of the participant's account balance or the amount of the loan, whichever is less, will be used as
collateral for the loan.
%I. ACCELERATION (kwOi1d _7A:
Please specify whether participants who have separated from service will be able to continue loan repayments until they have
withdrawn their entire account balance from the plan, or if outstanding loans will be due and payable at the time the participant
separates from service.
All outstanding loans shall be due and payable by a participant upon:
Separation from service. All loan repayments must stop following an employee separating from service.
Distribution of his/her entire account balance. Employees can continue making loan repayments until they have withdrawn their
entire account balance.
Outstanding loan balances that are not repaid will be reported as distributions to the participant. See the Deemed Distributions section
for additional information.
40082.1219 460
LOAN ISK111111s11411 PwAGE rot 457(b/401(o)/4031b) PLAN Sroosots 1 10
LOAN GUIDELINES AGREEMENT
Reamortization changes the terms of an outstanding loan (e.g., repayment period, interest rate, frequency of repayments). Any
outstanding loan may be reamortized.
Reamortization cannot extend the repayment period beyond five (5) years from the date the loan was originally issued. Or, in the case of
Principal Residence Loans, beyond [the number of years specified in Section Vill years from the date the loan was originally issued.
Participants can use a loan reamortization form to request that an outstanding loan be reamortized. 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.
Note.- A loan reamortization will not be towidered a new tarn f er purports of calculating the number of loans outstanding or the one loam per calendar
year limit.
XIII. REFINANCERr�4-
Refinancing involves a new loan replacing an employee's outstanding loan. The refinanced loan must be repaid over a period that does
not exceed five (5) years from the date when the original loan was issued.
Actively employed participants with one (1) outstanding loan may elect to refinance the outstanding loan for an additional amount,
subject to the loan amount limitations outlined in Section VI, provided that the participant has not yet taken Out a loan during the
calendar year. Participants with multiple outstanding loans, and those who are no longer employed, are not eligible to refinance an
existing loan.
Notes Principal residence loans are not eligible f or reftnanet.
XIV. REDUCTION OF LOAN
If a participant dies prior to full repayment of the outstanding loan(s), the outstanding loan balances) will be deducted from the account
prior to distribution to the benefic'tary(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 and 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 tax reporting purposes.
XV. DEEMED DISTRIBUTIONS"'P`"'�'+►�`
A loan will be deemed distributed when a scheduled payment is still unpaid at the end of the calendar quarter following the calendar
quarter in which the payment was due. When a loan is deemed distributed, the principal balance and any accrued interest is reported to
the IRS as a taxable distribution. However, since the participant received the loan amount previously, no money is actually paid to the
participant as part of a deemed distribution.
The loan is deemed distributed for tax purposes, but it is not an actual distribution and therefore remains an asset of the participant's
account. Interest continues to accrue. The outstanding loan balance and accrued interest are reported on the participant's account
statements.
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 determining the maximum
amount available for a new loan. New loans must be repaid through payroll deduction.
Important Note: 71te employer is okUpted by federal regulation to comp* with the loan guideline requirements applitable to participant loans, and to ensure
against deemed distribution by monitoring loan repayments, regardleu of the method of repayment, and by advising emploJ & if loans are in danger of being
deemed dhoi6ated. Me tau-qualthed staters or eligibility oft6e entireplan maybe revoked in rases offrequent repayment delinquency or deemed distribution.
To assist plan sponsors whose plan options include loans, ICMA-RC will provide reports of participants with payments delinquent by
30 to 89 days, 90 or more days but not yet deemed, and those whose loans have been deemed distributed. ICMA-RC is committed to
supporting employers who request assistance with their loan programs in order to reduce the number ofdelinquent loans and decrease
the occurrence of deemed distributions.
40MR24211489
Utr latest miam PwAst tat 4570/4011e)/4030) PLAN 5tats015 1 11
LOAN GUIDELINES AGREEMENT
XVI. fB
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.
XVII. SIGNATURES
'Ihe 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. Employer certifies that ail 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
H.,s K.
EMPLOYER
By:
Title:
Attest:
I
40082-1219.4"
toAv IrnEviiiuioo PtctAst tot 457(b/401(a)/403(b) Puo S/asoRS 1 12
Maximum Loan Amount Worksheet
The maximum amount a participant can borrow from his or her account is $50,000 or 50% of the account balance, whichever is less.
However, the amount must be reduced by a participant's highest outstanding loan balance over the past 12 months (which, obviously,
only impacts participants who have previously taken a loan from a 457(b), 401(a) qualified, or 403(b) plan). The minimum amount a
participant can borrow is $1,000.
EXAMPLE 1
Michael has never taken a loan from his account before and his 457(b) plan account balance at the close of business yesterday was
$84,000. To calculate the maximum loan amount he is eligible to receive, we need to determine if 50% of his account balance
($84,000 x 50% - $42,000) is greater than or less than $50,000. In this case, 50% of his account balance is less than $50,000,
so the maximum loan amount Michael is eligible to receive is $42,000 (the lesser of the two amounts).
EXAMPLE 2
Kathy has never taken a loan from her account before and her 401(0403(b) plan account balance at the close of business yesterday
was $240,000. In this case, 50% of Kathy's balance ($240,000 x 50% - $120,000) is greater than $50,000, so the maximum loan
amount Kathy is eligible to receive is $50,000 (the lesser of the two amounts).
EXAMPLE 3
Pam took a $15,000 loan from her account eight months ago (in the previous calendar year) and her 457(b) plan account balance
at the close of business yesterday was $130,000. In this case, 50% of Pam's balance ($130,000 x 50% - $65,000) is greater than
$50,000, but that amount must also be reduced by her highest outstanding loan balance over the past 12 months, so the maximum
loan amount Pam is eligible to receive is $35,000. ($50,000 - $15,000 - $35.000)
Exmirple
(us V WMbert hart
Workslheel Tompkile Faow* 3
1) Enter 50% of the participants total plan account balance. 1) $ 1) $65,000
2) Enter the answer to #1 or $50,000, whichever is less. 2) $ 2) $50,000
3) Enter the participant's highest outstanding loan balance over the past 12 months 3) -$ 3) $15,000
(from all of your plans combined), if applicable.
4) Subtract #3 from #2 and you have the maximum amount the participant is 4) $ 4) $35,000
eligible to receive as a new loan. {maximum lawn amount)
40012-1218.489
LOAM IYlttrltlrATIN Psttsct toa 4571b/40IN/403(b) No S►oas+es 1 13
457(b) PLAN LOAN ADMINISTRATION
icry RC AGREEMENT
This Agreement is not required if you have 1) only one 457(b) 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(b) plan document
under which ICMA-RC and one or more other prowider(s) must operate. Please refer to the Multiple Plans/Providers section of the
Loan Guidelines Agreement Instructions for more details.
This Agreement shall serve as an Addendum to the Loan Guidelines established by the Employer identified below and as an Addendum to
the Administrative Services Agreement (ASA) made by and between the ICMA Retirement Corporation (ICMA-RC) and the Employer.
The Employer currently sponsors a section 457(b) 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 [CMA-RC-administered account for the life of the loan.
AGREED as of the day of
Name of Employer:
State:
Employer Plan Number. 30
Authorized Official (Print Name):
Signature of Authorized Official:
Mail or fa: copies of all completed documents to ICMA RC.
I" to: OR
Workflow Management Team
202-682-6439
,20
Mail to:
ICMA-RC
ATTN: Workflow Management Team
P.O. Box 96220
Washington, DC 20090-6220
40012-1218489
LOAN IULI tNIATION PwAa ref 457(b/40lls1/4031b) PLAN Srmsois 1 15