School Board Executive Summary
403b Plan Amendments
May 27, 2010
Background
This amendment allows us to provide a grandfather clause to retired
employees who wish to draw loans from their 403b funds. This is only a
change for those retirees who were inadvertently impacted by the change
in 403b regulations and the District’s new 403b plan.
Purpose
The purpose of this amendment is to provide a grandfather clause to
preserve the ability of a select group of retirees.
Recommendation
I recommend that the Board approve this amendment.
Presenter(s)/Contacts(s)
Nik Lightfoot, Ed. D, J.D.
Overview
Recent changes in 403b regulations forced the District to make a new plan.
We have learned from a select group of retirees that the changes as
originally proposed are creating a hardship for their financial planning.
Therefore, the plan is being amended to include a grandfather clause that
preserves abilities that used to be available.
Primary Issues to Consider
The acceptance of the amendment.
Supporting Documents
403b Plan Document Amendments
Excellence. Every School. Every Student. Every
AMENDMENT TO
HOPKINS PUBLIC SCHOOLS 403(b) RETIREMENT SAVINGS PLAN
BY THIS AGREEMENT, the Hopkins Public Schools 403(b) Retirement Savings Plan
(herein referred to as the “Plan”) is hereby amended as follows:
ARTICLE I
NAME OF EMPLOYER AND PLAN
1.1
Effective date. This Article shall be effective June 1, 2010.
1.2
Loans. The Plan is amended by replacing Section 5.12 with the following:
5.12
LOANS TO PARTICIPANTS
(a)
Except as otherwise provided in paragraph (d) below, effective January 1,
2009, no additional loans shall be made or renewed under the Plan.
(b)
Any loan previously made under the Plan shall remain subject to all
requirements of the applicable Funding Vehicle from which the loan was
made.
(c)
Notwithstanding anything in this Plan to the contrary, if a Participant or
Beneficiary defaults on a loan previously made under this Plan, then the
loan default will be a distributable event to the extent permitted by the
Code and Regulations.
(d)
Notwithstanding the foregoing, the Administrator or its designee may,
upon the application of any Participant who retired from the Employer
prior to January 1, 2004 (or of a Beneficiary of such a Participant),
approve and authorize Plan loans to such Participants and Beneficiaries
from a Funding Vehicle.
Such loans shall be made under the
circumstances, and upon the terms and conditions, specified in the
applicable Funding Vehicle and/or in the loan program of the issuer of the
Funding Vehicle. Provided, however, that: (1) loans shall bear a
reasonable rate of interest; (2) loans shall be adequately secured; and (3)
loans shall provide for periodic repayment over a reasonable period of
time.
1
(e)
Unless limited further by the applicable Funding Vehicle, loans made
pursuant to paragraph (d) of this Section (when added to the outstanding
balance of all other loans made by the Plan to the Participant) shall be
subject to the following limits:
(1)
The amount of the loan shall be limited to the lesser of:
(i)
$50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the
Participant during the one year period ending on the day
before the date on which such loan is made, over the
outstanding balance of loans from the Plan to the
Participant on the date on which such loan was made, or
(ii)
one half (1/2) of the present value of the non forfeitable
accrued benefit of the Participant under the Plan.
Note: This limitation is not based on a Funding Vehicle by
Funding Vehicle basis. The limitation is a “Plan” limitation. All
Funding Vehicles are considered together.
(2)
Loans shall provide for level amortization with payments to be
made not less frequently than quarterly over a period not to exceed
five (5) years. However, loans used to acquire any dwelling unit
which, within a reasonable time, is to be used (determined at the
time the loan is made) as a "principal residence" of the Participant
shall provide for periodic repayment over a reasonable period of
time that may exceed five (5) years. For this purpose, a "principal
residence" has the same meaning as a "principal residence" under
Code Section 1034. Loan repayments may be suspended under this
Plan as permitted under Code Section 414(u)(4).
(3)
Any loans granted or renewed shall be made pursuant to a
Participant loan program. Such loan program shall be established
in writing and must include, but need not be limited to, the
following:
(i)
the identity of the person or persons authorized to
administer the Participant loan program;
(ii)
a procedure for applying for loans;
(iii)
the basis on which loans will be approved or denied;
(iv)
limitations, if any, on the types and amounts of loans
offered;
2
(v)
the procedure under the program for determining a
reasonable rate of interest;
(vi)
the types of collateral which may secure a Participant loan;
and
(vii)
the events constituting default and the steps that will be
taken to preserve Plan assets.
Such Participant loan program is hereby incorporated by reference
and made a part of the Plan. Furthermore, such Participant loan
program may be modified or amended in writing from time to time
without the necessity of amending this Section.
(f)
Notwithstanding anything in this Plan to the contrary, if a Participant or
Beneficiary defaults on a loan made pursuant to this Section, then the loan
default will be a distributable event to the extent permitted by the Code
and Regulations.
IN WITNESS WHEREOF, this Amendment has been executed this ________ day of
______________, 2010.
HOPKINS PUBLIC SCHOOLS
By
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AMENDMENT TO
HOPKINS PUBLIC SCHOOLS SPECIAL PAY 403(b) RETIREMENT SAVINGS PLAN
BY THIS AGREEMENT, the Hopkins Public Schools Special Pay 403(b) Retirement
Savings Plan (herein referred to as the “Plan”) is hereby amended as follows:
ARTICLE I
NAME OF EMPLOYER AND PLAN
1.1
Effective date. This Article shall be effective June 1, 2010.
1.2
Loans. The Plan is amended by replacing Section 5.9 with the following:
5.9
LOANS TO PARTICIPANTS
(a)
Except as otherwise provided in paragraph (d) below, effective January 1,
2009, no additional loans shall be made or renewed under the Plan.
(b)
Any loan previously made under the Plan shall remain subject to all
requirements of the applicable Funding Vehicle from which the loan was
made.
(c)
Notwithstanding anything in this Plan to the contrary, if a Participant or
Beneficiary defaults on a loan previously made under this Plan, then the
loan default will be a distributable event to the extent permitted by the
Code and Regulations.
(d)
Notwithstanding the foregoing, the Administrator or its designee may,
upon the application of any Participant who retired from the Employer
prior to January 1, 2004 (or of a Beneficiary of such a Participant),
approve and authorize Plan loans to such Participants and Beneficiaries
from a Funding Vehicle.
Such loans shall be made under the
circumstances, and upon the terms and conditions, specified in the
applicable Funding Vehicle and/or in the loan program of the issuer of the
Funding Vehicle. Provided, however, that: (1) loans shall bear a
reasonable rate of interest; (2) loans shall be adequately secured; and (3)
loans shall provide for periodic repayment over a reasonable period of
time.
1
(e)
Unless limited further by the applicable Funding Vehicle, loans made
pursuant to paragraph (d) of this Section (when added to the outstanding
balance of all other loans made by the Plan to the Participant) shall be
subject to the following limits:
(1)
The amount of the loan shall be limited to the lesser of:
(i)
$50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the
Participant during the one year period ending on the day
before the date on which such loan is made, over the
outstanding balance of loans from the Plan to the
Participant on the date on which such loan was made, or
(ii)
one half (1/2) of the present value of the non forfeitable
accrued benefit of the Participant under the Plan.
Note: This limitation is not based on a Funding Vehicle by
Funding Vehicle basis. The limitation is a “Plan” limitation. All
Funding Vehicles are considered together.
(2)
Loans shall provide for level amortization with payments to be
made not less frequently than quarterly over a period not to exceed
five (5) years. However, loans used to acquire any dwelling unit
which, within a reasonable time, is to be used (determined at the
time the loan is made) as a "principal residence" of the Participant
shall provide for periodic repayment over a reasonable period of
time that may exceed five (5) years. For this purpose, a "principal
residence" has the same meaning as a "principal residence" under
Code Section 1034. Loan repayments may be suspended under this
Plan as permitted under Code Section 414(u)(4).
(3)
Any loans granted or renewed shall be made pursuant to a
Participant loan program. Such loan program shall be established
in writing and must include, but need not be limited to, the
following:
(i)
the identity of the person or persons authorized to
administer the Participant loan program;
(ii)
a procedure for applying for loans;
(iii)
the basis on which loans will be approved or denied;
(iv)
limitations, if any, on the types and amounts of loans
offered;
2
(v)
the procedure under the program for determining a
reasonable rate of interest;
(vi)
the types of collateral which may secure a Participant loan;
and
(vii)
the events constituting default and the steps that will be
taken to preserve Plan assets.
Such Participant loan program is hereby incorporated by reference
and made a part of the Plan. Furthermore, such Participant loan
program may be modified or amended in writing from time to time
without the necessity of amending this Section.
(f)
Notwithstanding anything in this Plan to the contrary, if a Participant or
Beneficiary defaults on a loan made pursuant to this Section, then the loan
default will be a distributable event to the extent permitted by the Code
and Regulations.
IN WITNESS WHEREOF, this Amendment has been executed this ________ day of
______________, 2010.
HOPKINS PUBLIC SCHOOLS
By
3