For Board Meeting of February 23, 2017
Agenda Item No. F.2.a
MEMO TO:
BOARD OF DIRECTORS
FROM:
PAULA DIXON, DIRECTOR OF ADMINISTRATION
THRU:
ALLAN POLLOCK, GENERAL MANAGER
SUBJECT:
AMENDMENT TO NON BARGAINING RETIREMENT PLAN
Issue
Shall the Board adopt Resolution #2017-01 amending the non-bargaining Defined Benefit
Plan changing the pre-retirement survivor benefit from 50% to 100%?
Background and Findings
The current defined benefit plan provides that on the death of a married employee
before retirement, it will pay a 50% survivor annuity benefit to the surviving spouse. That is
the minimum required by federal pension law. It is what most private sector pension plans
provide and what OPSRP (for PERS members first employed after August 2003) now
provides. For example, if the employee has earned the right to a pension of $1,000/month
for life but then dies before retirement, the plan will pay $500/month to the surviving
spouse for the spouse’s lifetime. The other $500/month is forfeited back to the plan.
As part of the labor agreement adopted this year with respect to the bargaining-unit
defined benefit plan, the pre-retirement survivor benefit when an employee dies before
retirement was increased from 50% to 100%. This proposed amendment (Attachment A)
would make the same change to the non-bargaining plan.
Financial Impact
There is a small pension cost to this amendment. In funding the plan, the pension actuaries
take into account the probability that some employees will die before retirement and that
the plan will receive back 50% of the funds otherwise set aside for that employee. So there
is a savings to the plan figured into the funding calculations. Therefore to provide a
surviving spouse 100% of the deceased employee’s benefit, rather than just 50%, results in a
new cost to the plan. The pension actuaries have estimated this additional cost for this plan
to be $3,500 (from $509,242 to $512,754) for the year ending June 30, 2017.
Recommendation
Staff recommends adoption of Resolution #2017-01.
Proposed Motion
I move the Board adopt Resolution #2017-01 amending the non-bargaining Defined
Benefit Plan changing the pre-retirement survivor benefit from 50% to 100%.
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RESOLUTION #2017-01
SALEM AREA MASS TRANSIT DISTRICT
NON-BARGAINING UNIT RETIREMENT PLAN
WHEREAS, by Resolution #01-19, the District established the Salem Area Mass
Transit District Non-Bargaining Unit Retirement Plan ("the Plan"), which is a form of
floor offset defined benefit retirement plan, for its full-time career service nonbargaining unit employees, effective January 1, 2002;
WHEREAS, the Plan was most recently amended and restated pursuant to
Resolution #2015-08 to comply with the current requirements of the Internal Revenue
Code and the Internal Revenue Service as set forth in IRS Notice 2014-77, so as to
retain its status as a "qualified" plan.
WHEREAS, the Plan presently provides that upon the death of a participant
before retirement, the pre-retirement survivor benefit payable to a surviving spouse
or surviving registered domestic partner is 50% of the participant's accrued benefit at
the time of death. In bargaining, with regard to the bargaining unit plan, the District
agreed that the pre-retirement survivor benefit for a bargaining unit participant who
dies before retirement would be increased from 50% to 100% of the participant's
accrued benefit.
WHEREAS, the District believes that the same increase in the pre-retirement
survivor benefit should be provided for surviving spouses and surviving registered
domestic partners of participants in the non-bargaining unit plan who die before
retirement.
NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE SALEM
AREA MASS TRANSIT DISTRICT:
THAT Resolution #2017-01 shall be adopted to direct that the Plan shall be
amended to increase the pre-retirement survivor benefit for surviving spouses and
surviving registered domestic partners of participants in the Plan who die before
retirement from 50% of the participant's accrued benefit to 100% of the participant's
accrued benefit.
THAT the General Manager shall be authorized and directed to execute an
appropriate Amendment to the Plan to implement this Resolution, to be effective
upon signing of the Amendment.
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RESOLUTION #2017-01
SALEM AREA MASS TRANSIT DISTRICT
NON-BARGAINING UNIT RETIREMENT PLAN
ADOPTED BY THE BOARD OF DIRECTORS OF THE SALEM AREA MASS TRANSIT
DISTRICT this 23rd day of February, 2017.
ATTEST:
President Robert Krebs
SAMTD Board of Directors
John Hammill, Secretary
SAMTD Board of Directors
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For Board Meeting of February 23, 2017
Agenda Item No. F.2.a
THE SALEM AREA MASS TRANSIT DISTRICT DEFINED BENEFIT PLAN
FOR NON-BARGAINING UNIT EMPLOYEES
PLAN AMENDMENT
THE SALEM AREA MASS TRANSIT DISTRICT DEFINED BENEFIT PLAN FOR NONBARGAINING UNIT EMPLOYEES (the “Plan”), was originally adopted effective January
1, 2002 by THE SALEM AREA MASS TRANSIT DISTRICT (the “Employer”).
The Plan was most recently restated on January 26, 2016 in compliance of
Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, the
Moving Ahead for Progress in the 21st Century Act, the American Taxpayer Relief
Act of 2012, the Highway and Transportation Funding Act of 2014, the Cooperative
and Small Employer Charity Pension Flexibility Act, and the IRS regulations and
guidance referenced in IRS Notice 2014-77. The Plan as restated was effective
January 1, 2010, except as otherwise provided.
Having reserved the right to do so, the Employer now wishes to amend the Plan to
update the Employee Death Benefit section. This amendment shall be effective July
1, 2016 with respect to deaths occurring on or after that date.
1. Therefore, Section 8.5(a) “Employee Death Benefit” is amended to read as
follows:
“(a). The survivor Benefit shall be a monthly benefit for the life of the surviving
spouse, commencing on the first day of the second month following the date of the
Participant’s death and continuing through and including the first day of the month
of the surviving spouse’s death. The amount of the monthly survivor benefit shall
be determined as if the Participant terminated on his or her date of death and
commenced payment of a 100% Survivor Annuity as described under Section 8.4(b)
on the first day of the second month following the date of the Participant’s death,
reduced for the 100% Survivor Annuity benefit form in accordance with Exhibit A,
Part 1. If on the date of death the Participant was under age 60 and with less than
the thirty (30) years of Vesting Credits, then the survivor benefit shall be further
reduced in accordance with Section 8.3 to the Participant’s actual age on the date of
death but not below age 55, and if the Participant was under age 55 on the date of
PLAN AMENDMENT - 1
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For Board Meeting of February 23, 2017
Agenda Item No. F.2.a
death then the survivor benefit shall be further actuarially reduced for
commencement prior to age 55 in accordance with Section 1.2.
2. In all other respects, the Plan shall remain the same.
This action is being taken pursuant to the authority granted to the General
Manager by the Board of Directors of the District in Resolution #2017-01.
Dated this ________ day of _____________________, 2017.
SALEM AREA MASS TRANSIT DISTRICT
By ______________________________
Allan Pollock, General Manager
EMPLOYER
ACCEPTED:
PIONEER TRUST BANK, N.A.
By _________________________________
Its Trust Officer
TRUSTEE
PLAN AMENDMENT - 1
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