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HomeMy WebLinkAbout3456 RESOLUTION NO.3 4 5 6 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AUBURN, WASHINGTON, AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE AND PUBLISH A REWRITTEN DEFERRED COMPENSATION PLAN FOR THE CITY OF AUBURN THAT COMPLIES WITH THE NEW PROVISIONS OF THE FEDERAL ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT (EGTRRA) OF 2001. WHEREAS, the Auburn City Council, at its regular meeting of June 15, 1981, adopted Ordinance 3644 which adopted a deferred compensation plan for the City of Auburn; and WHEREAS, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 has provided a number of enhancements to Section 457 of the Internal Revenue Code; and WHEREAS, these enhancements are beneficial to the City of Auburn; and WHEREAS, the Auburn City Council, at its regular meeting of November 19, 2001 adopted Ordinance 5609 which stated the City's intention to adopt a number of the provisions of EGTRRA and to rewrite the Deferred Compensation Plan prior to the federally mandated deadline of December 31,2002; and WHEREAS, the new Deferred Compensation Plan has been rewritten to include these provision, with clarifying language; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF AUBURN, KING COUNTY, WASHINGTON, HEREBY RESOLVES AS FOLLOWS: Section 1. The Mayor and City Clerk of the City of Auburn are hereby authorized to execute and publish the new Deferred Compensation Plan. A copy of Resolution No. 3456 April 8, 2002 Page 1 of3 said Plan is attached hereto, designated as Exhibit "An and by this reference incorporated here as if set forth in full. Section 2. The Mayor is hereby authorized to implement such administrative procedures as may be necessary to carry out the directives of this legislation. \. _.~ DATED and SIGNED this -ff- day of April, 2002. Resolution No. 3456 April 8, 2002 Page 2 of3 CITY OF AUBURN -:.::;.....~ ./ ~~.. .' . "7 . .., ~. . ....-/ ,"" '-: .~__.:...::;J . ~ -------....-----....--... PETER B. LEWIS MAYOR ATTEST: ~~~ Dani~e Daskam, City Clerk Daniel B. Heid City Attorney Resolution No. 3456 March 27, 2002 Page 3 of3 EXHIBIT A CITY OF AUBURN DEFERRED COMPENSATION PLAN Introduction The Employer adopted a Deferred Compensation Plan on June 22,1981 to attract and retain employees. The Plan has been amended from time to time. In order to further the purposes of the Plan and to comply with certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRAn) and other recent changes in law, the Employer hereby adopts the following amended and restated Plan, effective January 1, 2002, except as otherwise provided herein. This amended and restated Plan is intended as good faith compliance with the requirements of EGTRRA and is to be construed where applicable in accordance with EGTRRA and guidance issued thereunder. Article 1 - Definitions 1.01 APPROVED INSTITUTION: Any insurance company, bank, or other financial institution approved by the Plan Administrator to provide annuity contracts, trust accounts, or custodial accounts to the Participants under the Plan. The custodian of any custodial account created pursuant to the Plan must be a bank, as described in Section 408(n) of the Code, or a person who meets the nonbank trustee requirements of paragraphs (2)- (6) of section 1.408-2(e) of the Income Tax Regulations relating to the use of non-bank trustees. An insurance company issuing any annuity contracts must be qualified to do business in the state where the contract was issued. 1.02 BENEFICIARY. Any person or entity designated by the Participant to receive benefits payable after the death of the Participant. Any such designation shall be in writing delivered to the Plan Administrator before the death of the Participant, and shall revoke all prior designations. If the Participant has not designated a Beneficiary, or if no designated Beneficiary survives the Participant, then the Beneficiary is the Participant's estate. A Beneficiary is deemed not to have survived the Participant if he or she dies within 30 days after the Participant. A beneficiary designation may be joint or contingent or both. Unless otherwise stated, joint Beneficiaries are entitled to equal shares. A contingent Beneficiary is entitled to a benefit only if there is no surviving primary Beneficiary. A benefit election made by a Participant may be binding on any such Beneficiary subject to the right of a Beneficiary to defer payments to the extent permitted under Section 5.06 of the Plan. 1.03 CODE: The Internal Revenue Code of 1986, as amended, or any future United States internal revenue law, including all regulations promulgated thereto. 1.04 COMMITTEE: Compensation Committee hereinafter referred to as "Committee,n established by Ordinance No. 3644 of the City of Auburn, Washington. The Committee shall consist of an administrative unit consisting of three persons appointed from time to time by the Employer which shall have the duties defined in this Plan. L:\Compensation \2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc 1.05 COMPENSATION: The total annual remuneration for employment payable by the Employer that would be included in the federal gross income of the Participant. 1.06 DEFERRAL AGREEMENT: A written agreement between the Employer and a Participant under which a designated amount of Compensation not yet earned will be deferred in accordance with the provisions of the Plan. 1.07 ELIGIBLE INDIVIDUAL: A regular full-time employee of the Employer, a regular part- time employee of the Employer, or an individual performing services for the Employer either by appointment or election. Eligible individual shall not include any temporary employee (as defined by the Employer), any contract employee (as defined by the Employer), or any independent contractor not mentioned in the previous sentence (as that term is defined by the Employer, regardless of whether such classification is controlling for federal employment-tax purposes or under any applicable state law). 1.08 EMPLOYER: City of Auburn, Washington 1.09 INCLUDIBLE COMPENSATION: That amount of Compensation includible in the Participant's federal gross income, determined without regard to any community property laws. Includible Compensation does not include deferrals under this Plan or any other amounts excludable from the Participant's gross income under other provisions of the Code. 1.10 INVESTMENT PRODUCT: Any product offered through an Approved Institution and authorized by the Plan Administrator for investment of a Deferred Compensation Account, provided that such product conforms to the requirements prescribed by law. 1.11 NORMAL RETIREMENT AGE: The Normal Retirement Age is age 70~ unless another age is determined as follows: (a) At any time or times prior to severance from employment with the Employer and prior to any use of the Catch-up Limitation provision of Section 3.03 of the Plan, the Participant may elect for his or her Normal Retirement Age to be any age which is (i) not earlier than the earliest age at which the Participant has the right to retire and receive unreduced retirement benefits from the Employer's basic pension plan, and (ii) not later than age 70~. Any such election shall be made by the Participant in writing delivered to the Plan Administrator. (b) If a Participant continues in the service of the Employer after age 70~ and has not used the Catch-up Limitation provision of Section 3.03 of the Plan, then his or her Normal Retirement Age is his or her actual date of severance from employment with the Employer or any earlier age which the Participant may elect prior to any use of the Catch-up Limitation. Any such election shall be made by the Participant in writing delivered to the Plan Administrator. (c) Once a Participant has to any extent utilized the Catch-up Limitation of Section 3.03 of the Plan, such Participant's Normal Retirement Age shall be determined solely by reference to that age used for purposes of Section 3.03 of the Plan, and may not thereafter by changed. L:\Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc 1.12 PARTICIPANT: Any Eligible Individual or former Eligible Individual who is or has been enrolled in the Plan under Article II of the Plan and who retains the right to benefits under the Plan. 1.13 PLAN: This Deferred Compensation Plan, as set forth in this document, as the same is now or may hereafter be amended or restated. 1.14 PLAN ADMINISTRATOR: The Committee. 1.15 PLAN YEAR: The calendar year. Article 11- Participation in the Plan 2.01 ENROLLMENT IN THE PLAN: Any Eligible Individual may become a Participant on the enrollment date following execution of a Deferral Agreement. For purposes of this Plan, the enrollment date is the first day of each month of the Plan Year. Compensation will be deferred after a Deferral Agreement is executed by the Participant and approved by the Plan Administrator, but in no event shall such deferral start before the beginning of the next calendar month after execution of the Deferral Agreement. Pursuant to a Deferral Agreement, each Participant's deferral shall be deducted from his or her paycheck in approximately equal increments throughout the year. The deferral shall not be included as gross income on a Participant's federal income tax withholding statement (W-2 Form). 2.02 MODIFICATION OF DEFERRAL AGREEMENT: A Participant may change the amount deferred with respect to Compensation not yet earned by entering into a new Deferral Agreement. Any such change will be effective the next calendar month provided that the information is received two weeks prior and that such new Deferral Agreement is executed by the Participant and approved by the Plan Administrator. 2.03 REVOCATION OF DEFERRAL AGREEMENT: A Participant may discontinue deferrals with respect to Compensation not yet earned by revoking the existing Deferral Agreement. The Participant must notify the Plan Administrator of such revocation in writing. Any such revocation is effective and the Participant's full Compensation will be restored in the month following the month in which the Plan Administrator receives such written notice. 2.04 RENEWED PARTICIPATION: A Participant who has ceased to be an active Participant on account of a revocation of his or her Deferral Agreement or a severance from employment with the Employer may again become an active Participant in the Plan under Section 2.01 of the Plan, effective as of the next enrollment date, at any time he or she is an Eligible Individual. Article III - Deferrals Limits 3.01 MINIMUM DEFERRAL: The minimum amount which may be deferred under any Deferral Agreement is $25.00 per month. 3.02 MAXIMUM ANNUAL DEFERRAL: Except as provided in Sections 3.03 and 3.05 of the Plan, the maximum amount which may be deferred under the Plan for any taxable year of the Participant (other than rollover amounts) is the lesser of: L:\Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc (a) the applicable dollar amount; or (b) 100% of the Includible Compensation of the Participant for the year. The "applicable dollar amountn for purposes of this Section 3.02 of the Plan shall mean the amount determined in accordance with the following table: For taxable years beginning in calendar year: The applicable dollar amount: 2002 $11,000 $12,000 $13,000 $14,000 $15,000 2003 2004 2005 2006 or thereafter In the case of taxable years beginning after December 31,2006, the $15,000 applicable dollar amount shall be adjusted by the Secretary of the Treasury in accordance with Code Section 457(e)(15). 3.03 CATCH-UP LIMITATION: A Participant may trigger the Catch-up Limitation described in this Section 3.03 of the Plan by electing a Normal Retirement Age pursuant to Section 1.11 of this Plan. The maximum amount which may be deferred under the Plan for each of the last three taxable years of the Participant ending prior to but not including the year the Participant attains Normal Retirement Age is the lesser of: (a) twice the "applicable dollar amountn (as defined in Code Section 457(b)(2)(A)); or (b) the sum of the Normal Limitation set forth in Section 3.02 of the Plan (determined without regard to this Section 3.03 of the Plan) plus the Prior Underutilized Limitation described in Section 3.04 of the Plan. A participant may elect to utilize the Catch-up Limitation with respect to only one Normal Retirement Age in this Plan or any other similar plan notwithstanding the fact that the Participant may have utilized the Catch-up Limitation in less than all of the three eligible years. Thus, if a Participant uses the Catch-up Limitation and then postpones Normal Retirement Age or returns to work after retiring, the limitation shall not be available again before a subsequent retirement. 3.04 PRIOR UNDERUTILlZED LIMITATION: The Prior Underutilized Limitation is so much of the Normal Limitation which has been underutilized in all prior taxable years since January 1, 1979, provided that: (a) during any portion of that taxable year, the Participant was eligible to participate in the Plan or any similar plan of the same Employer or of another state or local government employer in the same state; and L: \Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc (b) during that taxable year, the Plan or similar plan was subject to Code Section 457. 3.05 CATCH-UP CONTRIBUTIONS FOR EMPLOYEES AGE 50 AND OVER. All Eligible Individuals under this Plan who have attained age 50 before the close of the Plan Year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Section 414(v) of the Code. Such catch-up contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Code Section 457. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements set forth in Code Section 414(v)(3)(B), as applicable, by reason of the making of such catch-up contributions. The additional elective deferrals which may be deferred under the Plan pursuant to this Section 3.05 of the Plan for any taxable year of the Participant is the lesser of: (a) the applicable dollar amount; or (b) the excess (if any) of (i) the participant's compensation for the year, over (ii) any other elective deferrals of the participant for such year which are made without regard to Section 414(v) of the Code. The "applicable dollar amount" for purposes of this Section 3.0q of the Plan shall mean the amount determined in accordance with the following table: For taxable years beginning in: The applicable dollar amount: 2002 $1,000 2003 $2,000 2004 $3,000 2005 $4,000 2006 or thereafter $5,000 In the case of taxable years beginning after December 31,2006, the $5,000 applicable dollar amount shall be adjusted by the Secretary of the Treasury in accordance with Code Section 414(v)(2)(C). Notwithstanding the foregoing, this Section 3.05 of the Plan shall not apply for any year , in which the Catch-up Limitation described in Section 3.03 of the Plan applies. 3.06 LIMITATION: The maximum amount of compensation of anyone individual which may be deferred under this Plan during any taxable year shall not exceed the amount in effect under Code Section 457(b)(2)(A) (as modified by any adjustment provided under Code Section 457(b )(3)). 3.07 COMPENSATION AT PRESENT VALUE. For the purpose of applying the limits of this Article III of the Plan, Compensation deferred under this Plan shall be taken into account L: \Compensation \2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc at its present value in the year allocated to the Participant or in such later year in which it becomes vested. 3.08 ADJUSTMENT OF DEFERRAL AGREEMENTS. The Plan Administrator may adjust any Deferral Agreement to disallow any deferral of Compensation under the Plan in excess of the limitations stated above. However, neither the Employer nor the Plan Administrator shall be held liable to a Participant if the Plan Administrator fails to disallow an excess deferral elected under any Deferral Agreement. Article IV - Deferred Compensation Accounts 4.01 ACCOUNTS ESTABLISHED. The Employer shall establish a Deferred Compensation Account for each Participant. All amounts of Compensation deferred pursuant to the Plan, all property and rights purchased with such amounts, and all income attributable to such amounts, property, or rights, such as the Deferred Compensation Account, shall be held in one or more annuity contracts, trusts, or custodial accounts with an Approved Institution meeting the requirements of Code Section 457(g) and held for the exclusive benefit of the Participants and Beneficiaries. The assets of any Deferred Compensation Account may not be used for or diverted to any purposes other than the provision of benefits under the Plan. For this purpose, the term "annuity contract" does not include a life, health or accident, property, casualty, or liability insurance contract. 4.02 ELECTIVE DEFERRALS. The Employer shall deposit the amount deferred under a Deferral Agreement to the Deferred Compensation Account of the Participant within a period that is not longer than is reasonable for the proper administration of the accounts of Participants. To comply with this requirement, all amounts of Compensation deferred under the Plan shall be transferred to a contract described in Section 401 (f) of the Code not later than 15 business days after the end of the month in which the Compensation would otherwise have been paid to the employee. 4.04 INCOME AND LOSS ON ACCOUNTS. The Deferred Compensation Account of each Participant shall be adjusted for the net income, gains, and losses realized by such Account. 4.05 INVESTMENT OF ACCOUNTS. Pursuant to procedures established by the Plan Administrator, each Participant may from time to time designate the Investment Product in which his or her Deferred Compensation Account will be invested. The Employer and Plan Administrator shall not be responsible for the investment or performance results of any Investment Product. The Plan Administrator may from time to time change the Investment Product(s) available under the Plan. The Participants shall have no right to require the Administrator to select or retain any Investment Product. If the Administrator eliminates an Investment Product, the Plan Administrator may require all amounts invested in that option to be reinvested in another Investment Product available under the Plan. If at any time a Participant fails to designate the Investment Product(s) in which his or her Deferred Compensation Account is to be invested or re-invested, then the Plan Administrator may make such designation. Article V - Benefits 5.01 AMOUNT OF BENEFITS. The benefits payable under the Plan to a Participant or his or her Beneficiary shall equal the balance in the Participant's Deferred Compensation L: \Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc Account. After benefits commence, the Participant's Deferred Compensation Account shall continue to be adjusted for the net income, gains, or losses realized by such Account. 5.02 RESTRICTIONS ON DISTRIBUTIONS. No benefits or other amounts will be payable under this Plan to a Participant or his or her Beneficiary earlier than: (a) the calendar year in which the Participant attains age 70~; (b) the Participant's severance from employment with the Employer; or (c) an Unforeseeable Emergency of the Participant as provided in Article VI of the Plan. 5.03 FORM OF BENEFITS. Unless otherwise elected under this provision, benefits under the Plan shall be paid in the form of a lump sum. If the Deferred Compensation Account of a Participant is greater than $5,000, then, subject to the requirements of Article IV of the Plan, the Participant or Beneficiary may elect to have benefits paid in any alternative form of payment available to the Participant from the Approved Institution holding the Deferred Compensation Account at any time before the benefit becomes payable. To the extent permitted by the Approved Institution, the Participant may also elect to receive benefits in the form of an in-kind distribution of the assets of the Deferred Compensation Account. Any such elections must be made at least thirty (30) days prior to the date payments are to begin. 5.04 COMMENCEMENT OF BENEFITS. Benefits under the Plan shall normally be payable sixty (60) days after the close of the Plan Year in which the Participant has a severance from employment with the Employer; provided, however, the Participant may elect, sixty (60) calendar days prior to such normal or any deferred commencement date, to defer the beginning of such payments, or any portion of such payments, to a later fixed and determinable date provided that it is no later than sixty (60) days after the end of the Plan Year in which the Participant will attain Normal Retirement Age; provided further, that a Participant is also entitled to the additional deferral election described in Section 5.09 of this Plan. 5.05 MINIMUM DISTRIBUTIONS DURING LIFE. The Required Beginning Date for a Participant is April 1 of the calendar year following the later of (i) the calendar year in which the Participant attains age 70~, or (ii) the calendar year in which the Participant retires. No later than the Required Beginning Date: (a) the entire Deferred Compensation Account of a Participant must be paid in full; or (b) distributions from the Deferred Compensation Account of a Participant must begin, in accordance with Treasury Regulations under Code Section 401 (a)(9), over the life of such Participant or over the lives of such Participant and a designated Beneficiary (or over a period not extending beyond the life expectancy of such Participant or the life expectancy of such Participant and a designated Beneficiary). All distributions made hereunder shall be made in accordance with the requirements of Code Section 401 (a)(9) and the Treasury regulations thereunder. L\Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc 5.06 MINIMUM DISTRIBUTIONS AFTER DEATH. If a Participant dies after the distribution of the Participant's interest has begun in accordance with Section 5.05(b) of the Plan, but before the Participant's entire interest has been distributed to him or her, the remaining portion of the Deferred Compensation Account of the Participant must continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death. All payments made after the death of the Participant must continue to meet the incidental death benefit requirements of Code Section 401 (a)(9)(G) and Section 1.401 (a)(9)-2 of the Proposed Income Tax Regulations. If the Participant dies before distribution of his or her interest begins, distribution of the Participant's entire interest shall be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death except to the extent that an election is made to receive distributions in accordance with (a) or (b) below: (a) if any portion of the Participant's interest is payable to a designated Beneficiary, distributions may be made over the life or over a period certain not greater than the life expectancy of the designated Beneficiary commencing on or before December 31 of the calendar year immediately following the calendar year in which the Participant died; (b) if the designated Beneficiary is the Participant's surviving spouse, the date distributions are required to begin in accordance with (a) above shall not be earlier than the later of (1) December 31 of the calendar year immediately following the calendar year in which the Participant died, and (2) December 31 of the calendar year in which the Participant would have attained age 70-1/2. 5.07 LIFE EXPECTANCY CALCULATIONS. For the purpose of Sections 5.05 and 5.06 of the Plan, life expectancies are computed using the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. The life expectancies of the Participant and a spouse Beneficiary shall be recalculated annually unless periodic payments for a fixed period begin irrevocably (subject to acceleration) by the date payments are required to begin. The life expectancy of any other Beneficiary may not be recalculated. 5.08 CASH-OUT OF SMALL ACCOUNTS. The Deferred Compensation Account of a Participant shall be distributed to the Participant in a lump sum payment (at the request of the Participant) within sixty (60) days after any Plan Year, provided that all of the following conditions are met: (a) the total value of the Deferred Compensation Account does not exceed $5,000 (or the dollar limit under Section 411 (a)(11) of the Code); (b) the Participant has not deferred any amount of Compensation under the Plan during the two-year period ending on the date of distribution; and (c) there has been no prior in-service distribution of the total amount payable to the Participant under the Plan. 5.09 ADDITIONAL DEFERRAL ELECTION. If a Participant has elected, in accordance with the Plan, to defer the commencement of distributions beyond the first permissible payout date, then the Participant may make an additional election to further defer the commencement of distributions, provided that the election is filed before distributions L: \Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc actually begin and the later commencement date meets the required distribution commencement date provisions of Sections 401 (a)(9) and 457(d)(2) of the Code. A Participant may not make more than one such additional deferral election after the first permissible payout date. For purposes of the this Section, the nfirst permissible payout daten is the earliest date on which the Plan permits payments to begin after separation from service, disregarding payments to a Participant who has an unforeseeable emergency or attains age 70 1/2, or under the in-service distribution provisions of the Plan. This Section shall apply notwithstanding that a Participant's prior election form regarding the commencement of distributions indicated that such election was irrevocable. Article VI - Withdrawals for Unforeseeable Emergencies 6.01 WITHDRAWALS FOR UNFORESEEABLE EMERGENCY. The Participant may withdraw an amount from his or her Deferred Compensation Account to the extent that the Plan Administrator determines that such amount is reasonably necessary to satisfy an unforeseeable emergency of the Participant. The emergency need must be one that cannot reasonably be relieved through reimbursement or compensation by insurance or otherwise, liquidation of the assets of the Participant or those of the Participant's spouse or minor children (to the extent that such a liquidation would not itself cause severe financial hardship), other distributions or loans from any employer plan, cessation of elective or voluntary contributions to any employer plan, or borrowing from banks, credit unions, or other commercial sources, or any combination of the foregoing. 6.02 UNFORESEEABLE EMERGENCY DEFINED. For purposes of this Article VI of the Plan, the term "unforeseeable emergencyn means a severe financial hardship caused by a sudden and unexpected illness or accident incurred by the Participant or the Participant's spouse or dependent (as defined in Code Section 152(a)), loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising from events beyond the Participant's control. This does not include foreseeable expenditures normally budgetable, such as the purchase of a home or automobile or school expenses, nor does it include a divorce or separation. 6.03 EFFECT ON BENEFITS. A withdrawal for an unforeseeable emergency may be made before or after benefits commence under Article V of the Plan, however, the terms of an optional form of payment may limit the availability of such a withdrawal. In no event shall the amount of a withdrawal for unforeseeable emergency exceed the balance in the Deferred Compensation Account at the time of withdrawal, and any remaining benefits payable from the Deferred Compensation Account will be appropriately reduced to reflect the withdrawal. Article VII-Intentionally Deleted. Article VIII - Plan to Plan Transfers 8.01 ROLLOVER CONTRIBUTIONS TO THIS PLAN. The Plan will accept participant rollover contributions and/or direct rollovers of distributions made after December 31, 2001, from the following: (a) a qualified plan described in Section 401 (a) or 403(a) of the Code, including after-tax employee contributions; (b) an annuity contract described in Section 403(b) of the Code, excluding L: \Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc after-tax employee contributions; and (c) an eligible plan under Section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. The Plan will also accept a participant rollover contribution of the portion of a distribution from an individual retirement account or annuity described in Section 408(a) or 408(b) of the Code that is eligible to be rolled over and would otherwise be includible in gross income. Any such transfer shall be in cash or in such form as the Plan Administrator may determine acceptable. Any amounts transferred to the Plan shall be held and administered under the terms of this Plan. 8.02 TRUST TO TRUST TRANSFERS. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. If any portion of the balance to the credit of an employee in the Plan is paid to the employee in an eligible rollover distribution, the employee transfers any portion of the property such employee receives in such distribution to an eligible retirement plan, and in the case of a distribution of property other than money, the amount so transferred consists of the property distributed, then such distribution (to the extent transferred) shall not be includible in gross income for the taxable year in which paid. 8.03 DEFINITIONS. (a) Eligible Rollover Distribution. An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401 (a)(9) of the Code; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); and any amount that is distributed on account of hardship. A portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in Section 401 (a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible. (b) Eligible Retirement Plan. An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, a qualified trust described in Section 401 (a) of the Code, an annuity contract described in Section 403(b) of the Code, or an eligible plan under Section 457(b) of the L: \Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan, that accepts the distributee's eligible rollover distribution. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the Alternate Payee under a Qualified Domestic Relation Order, as defined in Section 414(p) of the Code. (c) Distributee. A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (d) Direct Rollover. A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. 8.04 TRUSTEE TO TRUSTEE TRANSFERS TO PURCHASE PERMISSIVE SERVICE CREDIT. No amount shall be includible in gross income by reason of a direct trustee- to-trustee transfer to a defined benefit governmental plan (as defined in Code Section 414(d)) if such transfer is (1) for the purchase of permissive service credit (as defined in Code Section 415(n)(3)(A)) under such plan, or (2) a repayment to which Code Section 415 does not apply by reason of subsection (k)(3) thereof. Article IX - Administration 9.01 DUTIES OF THE PLAN ADMINISTRATOR. The Plan Administrator shall represent the Employer in all matters concerning the administration of this Plan. The Plan Administrator shall have full power and authority: (a) to adopt rules and regulations for the administration of the Plan, provided they are not inconsistent with the provisions of the Plan, Code Section 457 or any Treasury regulations promulgated thereunder or any other applicable law: (b) to interpret, alter, amend, or revoke any rules and regulations so adopted; (c) to enter into contracts on behalf of the Employer with respect to this Plan; (d) to enter into Deferral Agreements on behalf of the Employer; (e) to make discretionary decisions under this Plan; (f) to demand satisfactory proof of the occurrence of any event that is a condition precedent to the payment of any benefit under the Plan; (g) to perform any and all administrative duties under this Plan; and (h) to make any determinations under the Plan in the sole discretion of the Plan Administrator. L: \Compensation \2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc Except as expressly provided herein, every action taken by the Plan Administrator shall be final and binding on all parties, and shall be presumed to be a fair and reasonable exercise of the authority vested in or the duties imposed upon the Plan Administrator. The Plan Administrator shall be deemed to have exercised reasonable care, diligence, and prudence and to have acted impartially as to all persons interested, unless the contrary be proven by affirmative evidence. The Plan Administrator shall not be liable for amounts payable under the Plan. 9.02 CONFLICTS OF INTEREST. The Plan Administrator, or any individual acting on behalf of the Plan Administrator, may also be a Participant in the Plan, but such individual shall not be entitled to participate in discretionary decisions relating to such individual's own participation in the Plan. 9.03 ADMINISTRATIVE COSTS. The internal costs related to any Investment Product shall be charged to those Deferred Compensation Accounts which invest in it. Other administrative costs of the Plan may be paid by the Employer, or if not, shall be charged to the Deferred Compensation Accounts on a pro rata basis. 9.04 CLAIM PROCEDURES. Claims for benefits under the Plan shall be filed with the Plan Administrator in writing on such forms as the Plan Administrator may designate. The Plan Administrator shall furnish the claimant with written notice of the disposition of his or her claim within ninety (90) days. If special circumstances require and timely notice is given by the Plan Administrator to the claimant, the period for response may be extended for an additional ninety (90) days. If the claim is denied, such notice shall set forth the reasons for the denial, cite pertinent provisions of the Plan, describe the claim review procedures, and, where appropriate, provide and explanation of how the claim may be perfected. 9.05 CLAIM REVIEW PROCEDURES. If a claim has been denied in whole or in part under Section 9.04 of the Plan, the claimant or his or her authorized representative may request that the Plan Administrator give further consideration to such claim by filing a written request for review within sixty (60) days of receipt of the notice of denial. Such request shall include a written statement of the reasons why the claimant believes the denial to have been in error, and shall include any and all evidence in support of the claim. The Plan Administrator shall notify the claimant of the final decision on his or her claim in writing within sixty (60) days of the receipt of the request for review. If special circumstances require and timely notice is given by the Plan Administrator to the claimant, the period for a final decision may be extended for an additional sixty (60) days. The notice shall set forth the reasons for the final decision and cite pertinent provisions of the Plan. Article X - Assignment of Benefits 10.01 ASSIGNMENTS PROHIBITED. No Participant or Beneficiary shall have any right to commute, sell, assign, pledge, transfer, or otherwise conveyor encumber the right to benefits under this Plan, which benefits are expressly declared to be unassignable and non-transferable, and any attempt to do so shall be void. The benefits under this Plan shall not be subject to attachment, garnishment, or execution for the payment of any debts, judgments, alimony, or separate maintenance owed by the Participant or Beneficiary, or be transferable by operation of law in the event of bankruptcy or insolvency, to the fullest extent permitted by law. L: \Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc 10.02 QUALIFIED DOMESTIC RELATIONS ORDERS. (a) Generally. The benefits of a Participant may be transferred to an Alternate Payee under a domestic relations order meeting the requirements of Code Section 414(p). (b) Plan Procedures. Notwithstanding any other Plan provision, the following procedures shall apply when any domestic relations order is received by the Plan with respect to a Participant. The Plan Administrator shall promptly notify the Participant and (a) each person named in the order as entitled to payment of Plan benefits; and (b) any other person entitled to any portion of the Participant's Plan benefits (persons referred to in (a) and (b) are hereafter Alternate Payees) of the receipt of such order and of the Plan Administrator's procedures for determining the qualified status of the order. The Plan Administrator shall permit each Alternate Payee to designate a representative for receipt of copies of notices. Immediately upon receipt of a domestic relations order, the Plan Administrator shall separately account for the amounts which would have been payable to the Alternate Payee during such period if the order had been determined to be a Qualified Domestic Relations Order. The Plan Administrator shall determine, within a reasonable time after receipt of the domestic relations order, whether the order is a Qualified Domestic Relations Order. The Plan Administrator shall then notify the Participant and each Alternate Payee of its decision. A Qualified Domestic Relations Order is any judgment, decree or Order (including approval of a property settlement agreement) that: (i) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of the Participant; (ii) is made pursuant to a state domestic relations law (including a community property law); and (iii) creates or recognizes the existence of an Alternate Payee's right to receive all or a portion of a the benefits payable with respect to a participant under the Plan. The Plan Administrator's decision shall be final unless the Participant or an Alternate Payee gives written notice of appeal within 60 days after receipt of the decision. If within 18 months after the date on which the first payment would be required to be made under the order, an order is finally determined to be a Qualified Domestic Relations Order, the segregated amounts including any interest thereon shall be paid to the persons entitled thereto, and thereafter the Alternate Payee shall receive payments pursuant to the terms of the order. Amounts L:\Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc subject to the order which are not in pay status shall be transferred to a separate account in the name of the Alternate Payee and thereafter held for such payee's benefit pursuant to the terms of the order. If within 18 months after the date in which the first payment would be required to be made under the order, the order is determined not to be a Qualified Domestic Relations Order, or if the issue has not been finally determined, the Plan Administrator shall instruct the Approved Institution and/or issuer of the Investment Product to pay the segregated amounts (including any interest thereon) to the person who would have otherwise been entitled thereto if there had been no order. Any determination that an order is qualified after the close of the 18-month period shall be applied prospectively only. The Plan Administrator's procedures shall generally conform to this Plan's claims procedures. (c) Timing of Benefit Payment. Notwithstanding any provisions of this Plan to the contrary, an Alternate Payee pursuant to a Qualified Domestic Relations Order shall be entitled to elect to receive a distribution from the Plan following the date such order is determined by the Plan Administrator to be a Qualified Domestic Relations Order and as specified in such Order (to the extent not otherwise limited by the Investment Product). Provided, however, that for purposes of such a distribution, the amount distributed shall be valued as of the valuation date immediately preceding the date the withdrawal is processed, with payment(s) commencing as soon as reasonably possible after such valuation date. Payments made pursuant to this paragraph shall not be treated as a violation of the requirements of Section 457(d) of the Code. (d) Spouse or Former Spouse Treated as Distributee. Pursuant to Code Section 414(p)( 12), an Alternate Payee who is the spouse or former spouse of the participant (and not the Participant) shall be treated as the distributee of any distribution or payment made to such Alternate Payee by the Plan pursuant to a Qualified Domestic Relations Order. Article XI - Plan Assets All Deferred Compensation Accounts under the Plan, and all property and rights which may be purchased with such Accounts, and all income attributable to such Accounts, shall remain (until made available to the Participant or Beneficiary) solely the property and rights of the Plan and shall not be subject to the claim of general creditors of the Employer. Article XII - Amendment or Termination of Plan 12.01 AMENDMENT OR TERMINATION. The Employer may amend or terminate the Plan at any time; provided, however, no termination or amendment shall affect the rights of a Participant or Beneficiary to the balance in his or her Deferred Compensation Account. 12.02 EFFECT OF TERMINATION. Upon any termination of the Plan, the Participants in the Plan will be deemed to have withdrawn from the Plan as of the date of such termination and each Deferral Agreement shall be canceled. The full Compensation of all Participants will be thereupon restored on a non-deferred basis. The Plan Administrator L: \Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc shall not distribute Plan benefits at the time of such termination; but shall retain all Deferred Compensation Accounts until benefits are payable under the terms of Article V or Article VI of the Plan. Article XIII - Relationship to other Plans It is intended that, pursuant to Section 457 of the Code, Compensation deferred under the Plan will not be considered current Compensation for purposes of Federal income taxation. Such amounts will, however, be included as Compensation to the extent required under the Federal Insurance Contributions Act (FICA). Payments under this Plan will supplement retirement and death benefits under the Employer's group insurance and retirement plans, if any. Article XIV -Interpretation 14.01 CONSISTENCY WITH SECTION 457. This Plan is intended to be an eligible deferred compensation plan within the meaning of Section 457(b) of the Code, and shall be interpreted so as to be consistent with such Code Section. 14.02 NOT EMPLOYMENT CONTRACT. Nothing contained in this Plan shall be deemed to constitute an employment contract or agreement for services between the Participant and the Employer nor shall it be deemed to give a Participant any right to be retained in the employ of, or under contract to, the Employer. Nothing herein shall be construed to modify the terms of any employment contract or agreement for services between a Participant and the Employer other than to modify the time for payment of Compensation deferred under this Plan. 14.03 INVESTMENTS NOT GUARANTEED. The Employer, the Plan Administrator, and their agents, employees, or representatives, do not make any endorsement, guarantee, or any other representation, and shall not be liable to the Plan or to any Participant, Beneficiary, or any other person, with respect to the financial soundness, investment performance, fitness, or suitability of any Investment Product offered under the Plan. A Participant should consult with professional tax advisors to determine the tax consequences of his or her participation in this Plan. Furthermore, the Employer, the Plan Administrator, and their agents, employees, or representatives, do not represent or guarantee successful investment of deferrals, and shall not be required to repay any loss which may result from such investment or lack of investment. 14.04 NUMBER AND GENDER. Words used herein in the singular shall include the plural and the plural the singular where applicable, and one gender or the neuter shall include the other gender or the neuter where appropriate. 14.05 HEADINGS. The headings of articles, sections, or other subdivisions hereof are included solely for convenience of reference, and if there is any conflict between such headings and the text of the Plan, the text shall control. 14.06 STATE LAW. The Plan shall be construed in accordance with applicable federal law and, to the extent otherwise applicable, the laws of Washington. L: \Compensation\2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc IN WITNESS WHEREOF, the Employer has caused this Plan to be executed by its duly authorized officer(s) on the 15th day of April ,2002. Witness: CitYOf~__ ..........~ ~..-" ~./)/). f\.j{/f\ II _ -c~ Attest: ~{u/ltUJ( ~) By: c..--::::::.- ---::...----:::> Title: City Clerk Title: Mayor L: \Compensation \2002DefComp\457 Def Comp\2002DefComPlan \FinalDefCompPlan0402(Res3456).doc ~