HomeMy WebLinkAbout2002-12-02 City Council (6)City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: HUMAN RESOURCES
4
DATE:
SUBJECT:
DECEMBER 2, 2002 CMR: 454:02
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING AND RESTATING THE CITY’S DEFERRED
COMPENSATION PLAN FOR PART-TIME, TEMPORARY, AND
SEASONAL (PTS) EMPLOYEES, (THEREBY REPLACING
CURRENT PTS PLAN ADMINISTRATOR, ICMA, WITH NEW
PLAN ADMINISTRATOR, PUBLIC AGENCY RETIREMENT
SYSTEM, AND ~INCORPORATING EGTRRA TAX LAW
CHANGES), AND APPROVING AND AUTHORIZING
EXECUTION OF A TRUST AGREEMENT FOR THE PLAN;
RESOLUTION DESIGNATING CITY MANAGER AND DIRECTOR
OF ADMINISTRATIVE SERVICES AS ADMINISTRATORS OF
SAID PLAN
RECOMMENDATION
This report recommends the Council take the following actions which are required to
amend the PTS (Hourly Employee) Deferred Compensation Plan to reflect changes made
to section 457 of. the Internal Revenue Code (IRC) by the Economic Growth and Tax
Relief Reconciliation Act of 2001 and to change the PTS Deferred Compensation Plan
Administrator from ICMA to Public Agency Retirement System (PARS).
Adopt the attached resolution amending and restating the City of Palo Alto’s
deferred compensation plan for part-time/temporary/seasonal (also known as
hourly) employees, and approving and authorizing execution of a trust agreement
for the plan.
Adopt the attached resolution designating the City Manager and the Director of
Administrative Services as administrators of the plan for the City.
o Authorize the City Manager to execute the attached service agreement with Phase
II Systems as Trust Administrator of the Plan in the amount of $14,504, for a term
of one year.
CMR 454:02 Pg. 1 of 4
BACKGROUND
All regular City of Palo Alto employees working at least 1,000 hours per fiscal year are
covered under the California Public Employees’ Retirement System (PERS). Hourly
employees working less than 1,000 hours are currently covered by the City of Palo Alto’s
PTS Plan, a deferred compensation plan, in accordance with Internal Revenue Code,
7½% of the hourly employee’s salary is required to be contributed to the PTS plan to
provide for these employees in retirement. The deferred compensation plan has served
the hourly employees and the City well, saving the City approximately $125,000
annually. The City’s PTS plan has been administered by ICMA since 1994, in
accordance with ICMA’s .standard plan document and trust agreement. The City Manager
and the Director of Administrative Services currently serve as trustees for this plan.
In 2001, the Federal Government passed the Economic Growth and Tax Relief and
Reconciliation Act (EGTRRA), new legislation which provided valuable additional
benefits to participants. One significant new provision available under the law gives
participants who separate from service the option of rolling account balances into another
deferred compensation or retirement account, rather than receiving automatic distribution
of balances under $5000. If the City continued to use ICMA as its PTS plan
administrator, the additional administrative burden associated with implementing this
new option would result in an unacceptable increase in City employee workloads, as
ICMA has advised the City that it is unable or unwilling to provide this additional
service.
Because of the relatively small dollar balances in the plan, most providers are reluctant to
perform these new administrative services. The City found one Plan Administrator that
would provide the necessary new time consuming and costly administrative services, the
Public Agency Retirement System (PARS). PARS is one of the largest providers of
alternative to Social Security plans. In California, PARS provides administrative services
for 135 plans, including 63 public agencies. PARS is served by Phase II Systems, the
Trust Administrator and Union Bank, the Trustee.
DISCUSSION
Currently the PTS Plan requires that all distributions under $5,000 in value be
automatically distributed to plan participants upon their.separation of service. The new
EGTRRA legislation requires that participants be given the choice to roll their account
balances into an Individual Retirement Account (IRA) or another tax-deferred retirement
plan that accepts rollovers. By contrast with ICMA, PARS will perform the additional
administrative services necessary to implement this new provision.
ICMA currently is and will remain one of the City’s two deferred compensation plan
administrators for regular employees. It is anticipated that regular employees may realize
increased investment return due to the City’s transfer of its PTS administration from
ICMA to PARS, by virtue of the reduced ICMA administration fees which would be
CMR 454:02 Pg. 2 of 4
applicable to regular employee deferred compensation accounts following the transfer.
The total cost for the City’s full-time deferred compensation plan will be reduced from
0.24% of plan assets to 0%, thus increasing the full-time employees’ investment return.
Advantages to Hourly Employees
Hourly Employees will benefit from the increased flexibility that implementing the
EGTRRA provisions provides. Distributions will no longer be automatically sent to
employees with balances under $5,000, instead employees can choose to take the
distribution in cash or elect a rollover to an IRA or another tax-deferred retirement plan
that accepts rollovers. In all plans in the PARS Program, distributions are paid on
average 22 days after PARS receives correctly completed distribution forms compared to
45-60 days for ICMA.
RESOURCE IMPACT
ICMA currently has the following fee schedule:
Plan administration fee of 0.90% of plan assets; and
o A maximum annual participant fee of $18.00 ($4.50 per quarter).
PARS currently has a plan administration fee based on the following sliding scale:
Plan Assets from:
$1 to $500,000
$500,001 to $2,500,000
$2,500,001 to $5,000,000
$5,000,001 to $10,000,000
$10,000,001 and above
Annual Rate:
2.00%
1.50%
1.25%
1.00%
0.75%
distribution fee of $12.00 per terminating employee
trustee fee of 0.12% of plan contributions
Based on the City’s current plan assets of approximately $800,000, it is anticipated that
appointing PARS as administrator for the PTS Plan could reduce the City of Palo Alto’s
overall costs. Based on these two fee schedules, the following is a comparison of
projected costs of the next three years:
Fiscal Year ICMA
2002-2003 ......~ .....$!6,813
2003-2004 $18,308
2004-2005 $19,691
Total $54,812
PARS
$14,504
$16,889
$19,086
$50,479
Reduction in Cost
$2,309
$1,419
$605
$4,333
POLICY IMPLICATIONS
This report does not represent any change to existing policies
CMR 454:02 Pg. 3 of 4
ENVIRONMENTAL REVIEW
This is not a project under the California Environmental Quality Act (CEQA)
ATTACHMENTS
Attachment A:
Attachment B’
Resolution amending and restating City’s PTS deferred
compensation plan, and approving and authorizing execution of trust
agreement for the plan
Resolution appointing City Manager and Director of Administrative
Services as Administrators of the plan for the City
PREPARED BY:
DEPARTMENT HEAD:
Leonard Zucker, Employee Benefits Manager
LESLIE LOOMIS
Director of Human Resources
CITY MANAGER APPROVAL:
EM ~Y HARRISON
Assistant City Manager
CMR 454:02 Pg. 4 of 4
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING AND RESTATING THE CITY OF PALO ALTO’S
DEFERRED COMPENSATION PLAN AND TRUST (RETIREMENT
PLAN) FOR PART-TIME/TEMPORARY/SEASONAL EMPLOYEES;
AND APPROVING AND AUTHORIZING EXECUTION OF A TRUST
AGREEMENT FOR THE PLAN
WHEREAS, pursuant to Resolution No. 7319, adopted June 13,
1994, the City Council of the City of Palo Alto adopted a deferred
compensation plan for the City’s part-time, temporary and seasonal
(PTS) employees, as the retirement plan for hourly employees not
eligible for membership in the Public Employees’ Retirement System,
in accordance with the Internal Revenue Code Section 457 and other
applicable law; and
WHEREAS, pursuant to Resolution No. 7639, adopted
December 16, 1996, the City Council approved an amendment to the
plan establishing a trust as required by changes to the Internal
Revenue Code; and
WHEREAS, ICMA Retirement Corporation (ICMA) has
administered this deferred compensation plan and trust pursuant to
Section 457 of the Internal Revenue Code since those dates; and
WHEREAS, the City desires to amend the plan and trust in
conformance with the Economic Growth and Tax Relief Reconciliation
Act (EGTRRA) and the final and temporary Treasury regulations under
Section 401(a) (9) of the Internal Revenue Code, as published in the
Federal Register on April 17, 2002, 74 FR 18987; and
WHEREAS, the City is eligible to be a member of the Public
Agency Retirement System (PARS) Trust Program, which has made
available a 457 Deferred Compensation Al~ternative to Social
Security Plan that meets the requirements of applicable laws; and,
WHEREAS, the City has determined that it is in the City’s
and its employees’ best interest to amend and restate the existing
PTS deferred compensation plan administered by ICMA into the City
of Palo Alto PTS 457 Deferred Compensation Plan (the "Amended and
Restated PTS Plan", attached as Exhibit A), to change third party
administrator of its PTS plan and trust from ICMA to PARS/Phase II,
and to appoint Phase II Systems as third party Trust Administrator
and Union Bank of California as Trustee of the trust, effective
January i, 2003; and
021121 cl 8120291
WHEREAS, the Amended and Restated PTS plan shall supersede
the provisions of the City’s existing PTS deferred compensation
plan to the extent the existing plan is inconsistent with the
provisions of this Amended and Restated PTS Plan.
NOW, THEREFORE, the Council of the City of Palo Alto does
RESOLVE as follows:
SECTION i. The Council hereby amends and restates the
existing PTS deferred compensation plan administered by ICMA into
the City of Palo Alto PTS 457 Deferred Compensation Plan, and
adopts the amended and restated City of Palo Alto PTS 457 Deferred
Compensation Plan, and the Trust Document, which designates Union
Bank of California as plan Trustee, copies of which are attached
hereto as Exhibit A and incorporated herein by reference°
SECTION 2. The Council hereby terminates the City’s
agreement with ICMA for third party administrative services in
connection with the City’s deferred compensation plan for PTS
employees;
SECTION 3. The Council hereby appoints Phase II Systems as
the third party Trust Administrator and Union Bank of California as
Trustee for the Amended and Restated PTS Plan and Trust;
SECTION 4. The Council approves that certain agreement,
attached hereto as Exhibit B, by and between the City and Phase II
Systems, which services PARS as trust administrator, for third
party administration of the Amended and Restated PTS Plan and
Trust, and authorizes the City Manager to execute the agreement for
and on behalf of the City.
//
//
//
//
//
//
//
021121 cl 8120291 2
SECTION 5. The Council finds that this is not a project
under the California Environmental Quality Act.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:APPROVED:
City Clerk
APPROVED AS TO FORM:
Mayor
City Manager
Senior Asst. City Attorney Director of Administrative
Services
Director of Human Resources
021121 cl 8120291 3
PARS BENEFIT TRUST
FBO
THE CITY OF PALO ALTO
SECTION 457 FICA ALTERNATIVE RETIREMENT PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2003
TRUST DOCUMENT
02 ! 125 cl 812/PARS 457 Trust-FINAL
EXHiBiT ~A~’
ARTICLE
I
II
IV
V
VI
VII
VIII
IX
X
TABLE OF CONTENTS
Trust Fund
Investments
Trustee’s Powers
Trustee’s Duties
Restrictions on Transfer
Resignation, Removal and Succession
Amendment
Liabilities
Duration and Termination
Miscellaneous
PAGE
3
5
6
10
11
12
12
13
15
16
021125 cl 812/PARS 457 Trust-FINAL 2
PARS Benefit Trust FBO The City of Palo Alto
Section 457 FICA Alternative Retirement Plan Effective January 1, 2003
This Trust Agreement (the "Trust Agreement") is made by and among The City of Palo Alto (the
"Agency") as the sponsor of the PARS Benefit Trust FBO The City of Palo Alto Section 457 FICA
Alternative Retirement Plan Effective January 1, 2003 (the "Plan"), and Union Bank of California,
N.A., a national banking association as Trustee ("Union Bank of California" or the "Trustee").
PURPOSE
The Agency has established the PARS Benefit Trust FBO The City of Palo Alto Section 457 FICA
Alternative Retirement Plan Effective January 1, 2003 for the benefit of eligible employees.
The Agency has established this Trust for the exclusive purpose of providing Plan benefits to its
employees ("Participants") and their beneficiaries ("Beneficiaries") and defraying reasonable
expenses of the Plan and Trust. The Agency has reserved the right to amend this Trust from time
to time.
The Plan provides that, from time to time, cash and other assets may be provided or forwarded to
the Trustee by the Agency to be held and administered in trust for the uses and purposes of the Plan,
solely for the purpose of providing such benefits. Subject to specific conditions set forth in this
Trust Agreement, the Trustee agrees that it will receive cash and other property of the Plan
acceptable to the Trustee, constituting Plan contributions from the Agency or transfers for the benefit
of the Plan, and shall hold and invest such cash andother property (the "Assets") for the. uses and
purposes and upon the terms and conditions stated in this Trust Agreement (the "Trust"). The
Agency intends that the Plan shall qualify under Section 457(b) of the Internal Revenue Code of
1986, as amended (the "Code"), and that the Trust hereby created shall be treated as a trust exempt
from tax under Section 501 of the Code, and shall not be subject to any claims of the Agency’s
creditors.
ARTICLE I
TRUST FUND
1.1 Si~nin~ Authority. The Agency’s City Council, Board of Directors or other duly
authorized governing body shall certify in writing to the Trustee the names and specimen signatures
of the person or persons appointed by the Agency as the administrator for purposes of this Trust (the
"Administrator") and all those who are authorized to act on behalf of, the Administrator, and those
names and specimen signatures shall be updated as necessary by such governing board or other duly
authorized officer of the Agency.
1o2 _Acceptance of Assets. All contributions or transfers shall be received by the Trustee in
cash or in any other property acceptable to the Trustee. The Trust shall consist of the contributions
and transfers of Assets received by the Trustee, together with the income and earnings from such
Assets, and any increments accruing to them. The Trustee shall manage and administer the Trust
without distinction between principal and income. The Trustee shall have no other duty to compute
any amount to be transferred or paid to it by the Agency and it shall not be responsible for the
021125 cl 812/PARS 457 Trust-FINAL
collection of any contributions or transfers due to the Trust.
1.3 Establishment of Trust. The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of Agency and shall be used exclusively for the uses and
purposes of Participants and Beneficiaries as herein set forth. Participants and Beneficiaries shall
have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust.
1.4 On~oinl~ Contributions to Trust. Agency, in its sole discretion, may at any time~ or from
time to time, make additional deposits of cash or other property acceptable to the Trustee to augment
the principal to be held, administered and disposed of by Trustee as provided in this Trust
Agreement. Neither the Trustee nor any Participant shall have any right to compel such additional
deposits.
1.5 No Duty of Trustee to Enforce Collection. Notwithstanding anything herein to the
contrary, the Trustee shall have no authority or obligation to enforce the collection of any
contribution or transfer to the Trust.
1.6 Plan Administration. The Agency and not the Trustee shal! be responsible for
administering the Plan (including without limitation determining the fights of the Agency’s
employees to participate in the Plan, determining any Participant’s right to benefits under such Plan),
and issuing statements to Participants of their interest in the Trust and Plan.
1.7 Participant Accounts. The Agency shall maintain, or cause to be maintained, a separate
account for each Participant under the Plan (the "Account") in which it shall keep a record of the
share of such Participant under such Plan~ in the Trust. The Agency may appoint a third-party
administrator or record-keeper (the "Record-keeper") to maintain such Accounts. A Participant’s
Account under the Plan shall represent the portion of the Trust allocated to provide such Participant
benefits under such Plan. If the Trustee is directed by the Agency to segregate the Trust into separate
Accounts for each Participant, at the time it makes a contribution to the Trust, the Agency shall
certify to the Trustee the amount of such contribution being made in respect of each Participant
under the Plan.
1.8 Tax Reporting. The Agency and not the Trustee shall be responsible for all income tax
reporting and calculation and payment of any wage withholding or other tax requirements in
connection with the Trust and any contributions thereto, and any income earned thereby, and
payments or distributions therefrom, and Agency agrees to indemnify and defend Trustee against any
liability for any such taxes, interest or penalties resulting from or relating to the Trust, provided,
however, that UBOC as Trustee shall file such tax reports for the Trust as required by law and as
agreed to by the parties in writing from time to time.
021125 cl 812/PARS 457 Trust-FINAL
ARTICLE II
INVESTMENTS
2.1 Administrator Authority. Except as otherwise provided in this Article II, the
Administrator appointed by the Agency shall have all power over and responsibility for the
management, disposition, and investment of the Trust Assets, and the Trustee shall comply with
proper written directions of the Administrator concerning those Assets. The Administrator shall not
issue directions in violation of the terms of the Plan and Trust or prohibited by any applicable federal
or state laws or regulations governing the establishment and operation of trusts by governmental
entities for the purpose of providing retirement benefits for their employees or other individuals
providing services to such entities, including, but not limited to, laws governing the actions of plan
fiduciaries. Except to the extent required by applicable state or federal law or regulations, or
otherwise provided in this Trust Agreement, the Trustee shall have no duty or responsibility to
review, initiate action, or make recommendations regarding Trust Assets and shall follow investment
directions and retain Assets until directed in writing by the Administrator to dispose of them. The
Trustee shall not be liable for any investment decisions of the Administrator or any investment losses
in the Account attributable to investment decisions of the Administrator.
2.2 Trustee as Mana_gg~. The Administrator may also delegate all or a portion of its
investment authority to the Trustee for all or a portion of the Trust Assets. Upon written acceptance
of that delegation, the Trustee shall have full power and authority to invest and reinvest that portion
of the Trust so designated by the Administrator in investments of any kind. The Trustee shall be
responsible for proper diversification of the Assets only if all the Plan Assets are subject to its
management.
The Administrator shall have the responsibility for establishing and carrying out a funding
policy and method consistent with the objectives of the Plan, taking into consideration the Plan’s
short-term and long-term financial needs (hereinafter referred to as the "Permissible Investment
Guidelines"). The Trustee’s responsibility for investment and diversification of the Assets in the
portion of the Trust for which Trustee has investment discretion shall be subject to, and is limited
by, the funding policy and investment guidelines issued to it by the Administrator and any Statutes.
It is understood and acknowledged that the Administrator, rather than the Trustee, shall be
responsible for the funding policy, for overall diversification of Trust Assets (unless the Trustee has
investment responsibility for all Plan Assets), for benefit allocation~ distribution, and for overall
compliance of the Trust with statutory limitations on the amount of the Trust’s investment in any
assets.
021125 cl 8][2/PARS 457 Trust-FINAL
2.3 Insurance Contracts. The Administrator may direct the Trustee in writing to invest assets
of the Trust in group or individual insurance contracts of all kinds authorized under the Plan, Statutes
and Permissible Investment Guidelines provided such contracts are issued by an insurance company
or companies qualified to do business in more than one state, and the Administrator shall have the
sole responsibility and shall direct the Trustee with respect to such insurance contracts. The
administration of these insurance contracts shall be the sole responsibility of the Administrator, and
the Trustee shall follow the directions of the Administrator with respect to the administration of any
such contracts.
2.4 Independent Investment Manalzer. The Administrator may appoint one or more
investment managers to direct the Trustee in the investment of all or a specified portion of the Trust
Assets. Any investment manager shall be a qualified investment advisor under the Investment
Advisors Act of 1940. The Administrator may also remove any investment manager. The
Administrator shall promptly notify the Trustee in writing of the appointment or removal of any
investment manager.
The Administrator shall cause the investment manager to acknoWledge to the Trustee in writing that
the investment manager is a fiduciary with respect to the Plan and Trust. If the foregoing conditions
are met, the investment manager shall have the power to manage, acquire, retain, or dispose of any
Trust Assets subject to the investment manager’s management and direction. The Trustee shall not
be liable for the acts or omissions of such investment manager, or be under an obligation to review
the investments of, or to invest or otherwise manage any asset of the Trust that is subject to the
management and direction of such investment manager,
ARTICLE III
TRUSTEE’S POWERS
3.1 General Trustee’s Powers. Except as otherwise provided in Article ]~, the Trustee shall
have full power and authority with respect to property held in the Trust to do all such acts, take all
proceedings, and exercise all such fights and privileges, whether specifically referred to or not in this
document, as could be done, taken or exercised by the absolute owner, including, without limitation,
the following:
(a) To invest and reinvest the Trust orany part hereof in any one or more kind, type,
class, item or parcel of property, real, personal or mixed, tangible or intangible; or in any one or more
kind, type, class, item or issue of investment or security; or in any one or more kind, type, class or
item of obligation, secured or unsecured; or in any combination of them; and to retain the property
associated with such investment or reinvestment for the period of time that the Trustee deems
appropriate.
(b) To buy, sell, assign, transfer, acquire, loan, lease (for any purpose, including
mineral leases, and for terms within or extending beyond the life of this Trust), exchange and in any
other manner to acquire, manage, deal with and dispose of all or any part of the Trust property, for
cash or credit and upon any reasonable terms and conditions.
021125 cl 812/PARS 457 Trust-FINAL
(c) To make "deposits" with any bank or savings and loan institution, including any
such facility of the Trustee or an affiliate thereof provided that the deposit bears a reasonable rate
of interest;
(d) To retain all or any portion of the Trust in cash temporarily awaiting investment or
for the purpose of making distributions or other payments, without liability for interest thereon,
notwithstanding Trustee’s receipt of "float" from such uninvested cash;
(e) To place uninvested cash and cash awaiting distribution in one or more mutual
funds and/or commingled investment funds maint4tined by or made available by the Trustee, and to
receive compensation from the sponsor of such fund(s) for services rendered, separate and apart from
any trustee’s fees hereunder. Trustee or Trustee’s affiliate may also be compensated for providing
investment advisory and other services to any such mutual fund or commingled investment funds.
Agency acknowledges receipt of prospectuses for such funds;
(f) To borrow money for the purposes of the Trust from any source other than a party
in interest of the Plan, with or without giving security and to pay interest, to issue promissory notes
and to secure the repayment thereof by pledging all or any part of the Trust assets;
(g) To take all of the following actions as directed by a fiduciary or other person with
investment discretion over the Trust assets; to vote proxies of any stocks, bonds or other securities;
to give general or special proxies or powers of attorney with or without power of substitution; to
exercise any conversion privileges, subscription rights or other options, and to make any payments
incidental thereto; to consent to or otherwise participate in corporate reorganizations or other
changes affecting corporate securities and to delegate discretionary powers and to pay any
assessments or charges in connection therewith; and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities or other property held in the Trust;
(h) To make, execute, acknowledge and deliver any and all documents of transfer and
conveyance and any and all other instruments that may be necessary or appropriate to carry out the
powers herein granted;
(i) To pay, or cause to be paid, from the Trust any and all real or personal property
taxes, income taxes or other taxes or assessments of any or all kinds levied or assessed upon or with
respect to the trust or the Plan;
(j) To enter into, modify, renew and terminate annuity contracts of deposit
administration of immediate participation or other group or individual type with one or more
insurance compames and to pay or deposit all or any part of the Trust thereunder; to provide in any
such contract for the investment of all or any part of funds so deposited with the insurance company
in securities under separate accounts; to exercise and claim all rights and benefits granted to the
contract holder by any such contracts;
021125 cl 812/PARS 457 Trust-FINAL
(k) To exercise all the further fights, powers, options and privileges granted, provided
for, or vested in trustees generally under applicable federal or state laws, as amended from time to
time, it being intended that, except as herein otherwise provided, the powers conferred upon the
Trustee herein shall not be construed as being in limitation of any authority conferred by law, but
shall be construed as in addition thereto.
3.2 Additional Powers. Except as otherwise provided in Article lI, the Trustee in any and all
events is authorized and empowered:
(a) To invest funds in any type of interest-bearing account including without limitation,
time certificates of deposit or interest-bearing accounts issued by Union Bank of California, N.A.,
or any mutual fund or short term investment fund ("Fund"), whether sponsored or advised by Union
Bank of California or any affiliate thereof; Union Bank of California, N.A. or its affiliate may be
compensated for providing investment advice or other services to such Fund, in addition to any
Trustee’s fees received pursuant to this Trust Agreement; provided, that such compensation is
reasonable;
(b) To cause all or any part of the Trust to be held in the name of the Trustee (which
in such instance need not disclose its fiduciary capacity) or, as permitted by law, in the name of any
nominee, and to acquire for the Trust any investment in bearer form; but the books and records of
the Trust shall at all times show that all such investments are a part of the Trust and the Trustee shall
hold evidences of title to all such investments;
(c) To serve as sole custodian with respect to the Trust assets with the sole exception
of insurance policy or annuity contracts, the underlying assets of which shall be maintained by the
insurance company issuer;
(d) To employ such agents and counsel as may be reasonably necessary in managing
and protecting the Trust assets and to pay them reasonable compensation; to employ any broker-
dealer, including any broker-dealer affiliated with the TruStee, and pay to such broker-dealer its
standard commissions; to settle, compromise or abandon all claims and demands in favor of or
against the Trust; and to charge any premium on bonds purchased;
(e) In addition to the powers listed herein, to do all other acts necessary or desirable
for the proper administration of the Trust, as though the absolute owner thereof and to exercise and
perform any and all of the other powers and duties specified in this Trust Agreement;
(f) To abandon, compromise, contest, arbitrate or settle claims or demands; to
prosecute, compromise and defend lawsuits, but without obligation to do so, all at the risk and
expense of the Trust;
(g) To permit such inspections of documents at the principal office of the Trustee as
are required by law, subpoena or demand by United States agency and to disclose the Agency’s name
to issuers of securities in connection with shareholder communications unless directed otherwise in
writing;
021125 cl 812/PARS 457 Trust-FINAL
(h) To comply with all requirements imposed by applicable .state Statutes or other
applicable provisions of state or federal law;
(i) To seek written instructions from the Agency, Administrator or other fiduciary or,
to the extent Participants are permitted to direct the investment of all or any portion of their Accounts
under the Plan, from a Participant, on any matter and await written instructions from such person
without incurring any liability. If at any time the Agency, the Administrator, a fiduciary or
Participant should fail to give directions to the Trustee, the Trustee may but is not required to act in
the manner that in its discretion seems advisable under the circumstances for carrying out the
purposes of this Trust. Such actions shall be conclusive on the Administrator and the Agency and
the Participant if written notice of the proposed action is given to the Administrator five (5) days
prior to the action being taken, and the Trustee receives no response;
(j)As directed by the Administrator:
(i)To cause the benefits provided under the Plan to be paid directly to
the persons entitled thereto under the Plan, and in the amounts and in the manner specified, or to
disburse such sums to the Agency, who shall be responsible to distribute sums due; and make
appropriate tax reports to Participants, Beneficiaries and taxing authorities, and to charge such
payments against the Trust with respect to which such benefits are payable;
(ii) To compensate such executive, consultant, actuarial, accounting, investment,
appraisal, administrative, clerical, secretarial, custodial, depository and legal, personnel and other
employees or assistants as are engaged by the Administrator in connection with the administration
of the Plan and to pay from the Trust the necessary expenses of such, personnel, employees and
assistants, to the extent not paid by the Agency and directed by the Administrator;
(iii) To impose a reasonable charge to cover the cost of furnishing to Participants
or Beneficiaries upon their written request documents as may be legally required by applicable state
or federal law or regulations;
(iv) To act upon proper directions of the Agency, the Administrator or any other
fiduciary or Participant including directions in writing, or oral instructions which Trustee in its
discretion may follow prior to receipt of written instructions, instruction given by photostatic
teletransmission using facsimile signature, or those instructions which are digitally recorded on the
Trusteels oral recording or VRU communications system. If oral or digital instructions are given,
to act upon those in Trustee’s discretion prior to receipt of written instructions. Trustee’s recording
or lack of recording of any such oral or digital instructions, taken in Trustee’s ordinary course of
business shall constitute conclusive proof of Trustee’s receipt or non-receipt of the oral or digital or
VRU instructions;
021125 cl 812/PARS 457 Trust-FINAL
In exercising the power and authority under this subparagraph (iv), the Trustee will perform
telephonic verification to the Administrator, or other authorized representative properly designated
by the Administrator or the Agency, or such other security procedure selected by the Administrator
prior to wire transfer of funds as the Trustee may require. The Administrator, the Agency, and the
Plan assume all risk with respect to delays or transfers if the Trustee is unable to reach the
Administrator or other authorized representative properly designated by the Administrator, or in the
event of delay as a result of attempts to comply with any other security procedure selected by the
Administrator in connection with wire transfers or otherwise;
(v)To pay from the Trust the expenses reasonably incurred in the
administration of the Trust as provided in the Plan, to the extent such expenses are not paid by the
Agency pursuant to Section 10.2;
(vi) To maintain insurance for such purposes, in such amounts and with such
companies as the Administrator shall elect, including insurance to cover liability or losses occurring
by reason of the acts or omissions of fiduciaries (but only if such insurance permits recourse by the
insurer against a fiduciary in the case of a breach of a fiduciary obligation by such fiduciary).
ARTICLE IV
TRUSTEE’S DUTIES
4.1 Powers Subiect to Duties. The Trustee shall exercise any of the foregoing powers from
time to time as required by any applicable federal or state law.
4.2 Records. The Trustee shall maintain or cause to be maintained suitable records, data and
informatioh relating to its functions hereunder. The Trustee shall keep accurate and detailed
accounts of all investments, receipts, disbursements and other actions hereunder. Its books and
records relating to the Trust shall be open to inspection and audit at all reasonable times by the
Agency, the Administrator or their duly authorized representatives.
4.3 Accounts. Within ninety days after the close of each Plan Year and within ninety days
after the resignation or removal of the Trustee as provided in Article VI hereof, the Trustee shall
render to the Agency a written account showing in reasonable summary the investments, receipts,
disbursements and other transactions engaged in by the Trustee during the preceding Plan Year or
accounting period with respect to the Trust. Such written accounts shall set forth the assets and
liabilities of the Trust. The Agency or Administrator shall have ninety days after the Trustee’s
mailing of each such written account within which to file with the Trustee written objections. Upon
the expiration of each such period, the Trustee shall be forever released and discharged from all
liability and accountability to the Agency, the Administrator and Participants with respect to the
propriety of its acts and transactions shown in such account except with respect to any such acts or
transactions as to which the Agency files written objections within such ninety-day period with the
Trustee.
021125 cl 812/PARS 457 Trust-FINAL ]- 0
4.4 ~. The Trustee shall file such descriptions and reports and shall furnish such
information and make such other publications, disclosures, registrations and other filings as are
required of the Trustee by the Code or any other, applicable law or regulation.
4.5 Follow Administrator and Investment Manager Direction. The Trustee shall have the
power and duty to comply promptly with all proper directions of the Administrator, the Agency, and
any duly appointed investment manager. Except as to investment directions received from the
Administrator or investment manager, the Trustee shall not act on any directions or requests received
from Participants.
ARTICLE V
RESTRICTIONS ON TRANSFER
5.1 Persons to Receive Payment.
(a) As directed by the Administrator, the Trustee shall, except as otherwise provided
in subsection (b), pay all amounts distributable hereunder only to the person or persons designated
under the Plan or deposit to the Participant’s or Beneficiary’s checking or savings account and not
to any other person or corporation, and only to the extent of assets held in the Trust. The
Administrator’s instructions to the Trustee regarding whether or not to make distributions, and the
amount of such distributions, shall be conclusive on all Participants and Beneficiaries.
(b) In the event any controversy shall arise as to the person or persons to whom any
distribution or payment is to be made by the Trustee, or as to any other matter arising in the
administration of the Plan or Trust, the Trustee may, (i) retain the amount in controversy pending
resolution of the controversy or the Trustee, (ii) file an action seeking declaratory relief, (iii)
interplead the Trust Assets in issue, and (iv) name the Agency and/or any or all persons making
conflicting demands as necessary paiTt, ies.
(c) The Trustee shall not be liable for the payment of any interest or income on any
amount withheld or interpleaded under subsection (b).
(d) The expenses incurred by the Trustee for taking any action under subsection (b)
shall be charged by the Trustee to the Trust unless paid by the Agency.
5.2 ~nment and Alienation Prohibited. In accordance with Section 457 of the Code,
Trust Assets shall not be subject to any claims of Agency or other creditors. Additionally, no benefit
or interest available hereunder shall be subject in any manner to assignment or alienation, whether
voluntarily or involuntarily, or to legal process except as permitted in the Internal Revenue Code,
applicable state or federal taw, or as provided in the Plan.
021125 cl 812/PARS 457 Trust-FINAL
ARTICLE VI
RESIGNATION, REMOVAL AND SUCCESSION
6.1 Resignation or Removal of Trustee. The Trustee may resign at any time upon ninety
days’ prior written notice to the Agency (which notice may be waived by the Agency). Agency may
remove the Trustee upon ninety days’ prior written notice to the Trustee (which notice may be
waived by the Trustee).
6.2 ~ation of Successor. Upon notice of the Trustee’s resignation or removal, Agency
shall promptly designate a Successor Trustee who will accept transfer of the assets of the Trust. If
no Successor Trustee is designated within thirty days of notice of Trustee’s resignation or removal,
the Administrator shall designate a Successor Trustee.
6.3 Court Appointment of Successor. If neither the Agency nor the Administrator designates
a Successor Trustee within thirty days after the Trustee gives notice of resignation or receives notice
of removal, the Trustee may, at the expense of the Trust, apply to a court of competent jurisdiction
to appoint a Successor Trustee. Until a Successor Trustee is appointed, and all Trust assets are
delivered to the Successor Trustee, the Trustee shall be entitled to be compensated for its services
according to its published fee schedule then in effect for acting as Trustee in accordance with the
Plan and Trust.
6.4 Successor’s Powers. A Successor Trustee shall have the same powers and duties as those
conferred upon the original Trustee hereunder. A resigning Trustee shall transfer the Trust Assets
and shall deliver the books, accounts and records of the Trust to the Successor Trustee as soon as
practicable. The resigning Trustee is authorized, howeve{, to reserve such amount from the Assets
of the Trust as may be necessary for the payment of its fees and expenses incurred prior to its
resignation, and the Trust Assets shall remain liable to reimburse the resigning Trustee for any costs,
expenses or attorneys’ fees or losses incurred, whether before or after resignation, due solely to
Trustee’s holding title to and administration of the Trust Assets.
6.5 Successor’s Duties. A Successor Trustee shall have no duty to audit or otherwise inquire
into the acts and transactions of its predecessor.
ARTICLE VII
AMENDMENT
7A Power to Amend. The Agency shall have the right at any time, and from time to time, to
modify or amend this Trust Agreement in whole or in part, effective upon thirty days’ prior written
notice to the Trustee, provided, however, that the Trustee’s dutieg and responsibilities shall not be
amended without the Trustee’s express written consent.
7.2 Limitation on Amendment. No amendment shall be made, at any time, under which any
part of the Trust may be diverted to purposes other than for the exclusive benefit of Participants and
their Beneficiaries,
021125 cl 812/PARS 457 Trust-FINAL ]. 2
7.3 Conformity with Law. Notwithstanding anything herein to the contrary, this Trust
Agreement may be amended prospectively or retroactively at any time by the Agency if deemed
necessary to conform to the provisions and requirements of the Internal Revenue Code or regulations
promulgated pursuant thereto in order to maintain the tax-exempt status hereof thereunder, or to
conform to the provisions and requirements of any law, regulation, order or ruling affecting the
character or purpose of the Plan or Trust. No such Amendment shall be effective to add or change
the Trustee’s powers or duties absent Trustee’s written consent.
ARTICLE VIII
LIABILITIES
8.1 Declaration of Intent. Nothing in this Article purports to relieve a fiduciary from liability
for any responsibility, obligation or duty under any applicable Statutes. However, to the full extent
permitted by law, it is the intent of this Article to relieve each fiduciary from all liability for any acts
or omissions of any other fiduciary or any other person and to declare the absence of liabilities of all
persons referred to in this Article to the extent not imposed by law or by provisions of this Trust
Agreement. Each of the following Sections, in declaring such limitations, is set forth without
limiting the generality of this Section but in each case shall be subject to the provisions, limitations
and policies set forth in this Section.
8.2 General Limitations of Liability.
(a) No fiduciary shall be liable with respect to a breach of fiduciary duty under any
applicable Statutes if such breach was committed before he or she became a fiduciary or after he or
she ceased to be a fiduciary.
(b) No fiduciary shall be liable for any act or omission of any other person to whom
fiduciary responsibilities (other than Trustee responsibilities) are allocated by the Plan, the Trust
Agreement or by a fiduciary.
8.3 Liability of the Trustee.
(a) The Trustee shall have no powers, duties or responsibilities with regard to the
administration of the Plan or to determine the rights or benefits of any person having or claiming an
interest under the Plan or in the Trust or under this Trust Agreement or to examine or control any
disposition of the Trust or part thereof which is directed by the Administrator.
(b) The Trustee shall have no liability for the adequacy of contributions for the
purposes of the Plan or for enforcement of the payment thereof.
(c) The Trustee shall have no liability for the acts or omissions of the Agency or the
Administrator.
(d) The T,rustee shall have no liability for following proper directions of a fiduciary,
the Agency, the Administrator or a Participant when such directions are made in accordance with
021125 cl 812/PARS 457 Trust-FINAL
this Trust Agreement.
(e) During such period or periods of time, if any person other .than the Trustee,
including but not limited to a Participant, is directing the investment and management of Trust
Assets, the Trustee shall have no obligation to determine the existence of any conversion,
redemption, exchange, subscription or other right relating to any securities purchased on the
directions of such person if notice of any such right was given prior to the purchase of such
securities. If such notice is given after the purchase of such securities, the Trustee shall notify the
Administrator, which shall transmit the notice to the directing party. The Trustee shall have no
obligation to exercise any such right unless it is informed of the existence of the right and is
instructed to exercise such fight, in writing, by a fiduciary or a Participant through the Administrator
within a reasonable time prior to the expiration of such right.
(f) During such period or periods of time, if the Trustee is directed to purchase
securities issued by any foreign government or agency thereof, or by any corporation domiciled
outside of the United States, it shall be the responsibility of the directing party to advise the Trustee
in writing with respect to any laws or regulations of any foreign countries or any United States
territories or possessions which shall apply, in any manner whatsoever, to Such securities, including,
but not limited to, receipt of dividends or interest by the Trustee for such securities.
(g) If the Plan and Trust cease to be subject to Sections 457 and 501 of the Code, the
Agency shall immediately notify Trustee. Agency shall indemnify the Trustee for any federal or state
income taxes, and any federal estate and state estate or inheritance taxes which the Trustee is
required to pay as a result of a distribution made at the direction of the Administrator, in which event
the Agency shall be subrogated to the fight of the Trustee to proceed against such Participant,
Beneficiary, the executor of the estate of a deceased Participant or any other person for
reimbursement of the amount paid and any taxes due.
8.4 Indemnification of Trustee.
(a) The Trustee shall not be liable for, and the Plan Administrator agrees to indemnify
and hold the Trustee harmless from and against any claims, demands, loss or liability imposed on
the Trustee, including reasonable attorneys’ fees and costs incurred by the Trustee, caused by and
related to (i) any acts taken in accordance with any directions (or any failure to act in the absence of
such directions) from the Plan Administrator, or any other party to whom Plan Administrator has
given authority to direct the Trustee, which the Trustee reasonably believes to have been given by
any of them; (ii) the negligence or willful misconduct of the Plan Administrator, or any other person
designated to act on Plan Administrator’s behalf; or (iii) the Plan Administrator’s execution of its
duties under this Trust Agreement, except in the event of the Trustee’s negligence or material breach
of this Agreement which directly causes the loss to the Trust.
(b) The Plan Administrator further agrees to indemnify the Trustee for and against any
claims, demands or liabilities imposed on the Trustee, including reasonable attorneys’ fees and costs
incurred by the Trustee, which exceed amounts payable or available from the Trust, arising as a
result of claims asserted by a third person or persons, not otherwise described in (a), and whether
such person or persons are related to the Trust, for action or failure to take action with respect to
Trust Assets, except in the event of the Trustee’s negligence.
02l 125 c| 812/PARS 457 Trust-FINAL
8.5 Indemnification of Member Plan Administrator. The Trustee agrees to indemnify the
Plan Administrator against, and hold the Plan Administrator harmless from, all liabilities and claims
(including reasonable attorney’s fees and costs incurred by the Plan Administrator) against the Plan
Administrator as a result of any breach of fiduciary responsibility by the Trustee which proximately
causes loss to the Trust, and where Trustee knowingly participates in such a breach, knowingly
undertakes to conceal such breach, has actual knowledge of such breach and fails to take reasonable
action to remedy such breach or through its gross negligence in performing its duties under this
Agreement, proximately causes loss to the Trust.
ARTICLE IX
DURATION AND TERMINATION
9.1 Termination. It is intended that this Trust shall be treated as being exempt from tax under
Section 501(a) of the Code and that the Plan referred to herein shall qualify under Section 457(b) of
the Code. However, notwithstanding any other provisions of the Trust, if the Internal Revenue
Service is requested to issue to the Agency a favorable written determination or ruling with respect
to the initial qualification of the Plan and exemption of the Trust from tax and such request is denied,
the Trustee shall, after receiving a written direction from the Administrator, pay to each Participant
that portion of the Trust applicable to said Participant’s voluntary contributions, if any, and provided
the Plan so states, pay to the Agency any part of the Trust attributable to Agency contributions then
remaining in the Trustee’s possession, less any.investment losses and Trustee’s fees and costs
incurred to date of distribution. As a condition to such repayment, Agency shall be solely
responsible for any tax reporting and withholding required, and the Agency agrees to indemnify,
defend, and hold the Trustee harmless from all claims, actions, demands, or liabilities arising in
connection with such repayment, and provided further that such repayment will occur within one
year after the date the request for qualified status is denied.
9.2 Exclusive Benefit. This Trust may be terminated at any time by the Agency, and upon
such termination, the Trust Assets shall be distributed by the Trustee as and when directed by the
Administrator in accordance with the provisions of this Trust Agreement and the Plan document.
Notwithstanding anything to the contrary, the Trustee shall not charge any termination fee or other
fee in connection with the termination of the Trust. From the date of termination of the Plan and
until the final distribution of the Trust, the Trustee shall continue to have all the powers provided
under this Trust that are necessary or desirable for the orderly liquidation and distribution of the
Trust. In no instance upon any termination, or discontinuance and subsequent distribution shall the
Trust or any part of it be used for, or diverted to, purposes other than for the exclusive benefit of
Participants, their Beneficiaries, and defraying the administrative expenses of the Plan and Trust
until all Plan liabilities have been satisfied, except in the instance of the failure of the Trust initially
to qualify for tax-exempt status as set forth in Section 9.1 and in the event of a return of assets
mistakenly contributed as set forth in Section 9.3.
9.3 Return of Mistaken Contributions. Notwithstanding any other provision of this
Agreement, it is specifically provided that if a contribution or any portion thereof is made by the
Agency by virtue of a mistake of fact, the Trustee shall, upon written request of the Agency, return
such amounts as may be permitted by law to the Agency.
021125 cl 812/PARS 457 Trust-FINAL ~-5
9.4 Duration. This Trust shall continue in full force and effect for the maximum period of
time permitted by law and in any event until the expiration of twenty-one years after the death of the
last surviving person who was living at the time of execution hereof who at any time becomes a
Participant in the Plan, unless this Trust is sooner terminated in accordance with the Plan or the
terms of this Trust Agreement.
ARTICLE X
MISCELLANEOUS
10.1 ~. By written notice to the Trustee, the Administrator or the Agency may
authorize the Trustee to act on matters in the ordinary course of the business of the Trust or on
specific matters upon the signature of its delegate.
10.2 Expenses and Taxes.
(a) The Agency, or at its optic;n, the Trust, shall pay the Trustee its expenses in
administering the Trust and reasonable compensation for its services as Trustee at a rate to be agreed
upon by the parties to this Agreement, based upon Trustee’s published fee schedule. However, the
Trustee reserves the right to alter this rate of compensation at any time by providing the Agency with
notice of such change at least thirty days prior to its effective date. Reasonable compensation shall
include compensation for any extraordinary services or computations required, such as determination
of valuation of assets when current market values are not published and interest on funds to cover
overdrafts, The Trustee may withdraw from the Trust its compensation and reasonable expenses
it has incurred, including counsel, appraisal, or accounting fees, unless they are paid by the Agency.
(b) Reasonable counsel fees, reasonable costs, expenses, and charges of the Trustee
incurred or made in the performance of its duties, including but not limited to expenses relating to
investment of the Trust such as broker’s commissions, stamp taxes, and similar items and all taxes
of any and all kinds that may be levied or assessed under existing or future laws upon or in respect
to the Trust or the income thereof shall be paid from the Trust Assets, unless paid by the Agency.
10.3 Third Parties.
(a) No p.erson dealing with the Trustee shall be required to follow the application of
purchase money paid or money loaned to the Trustee or inquire as to whether the Trustee has
complied with the requirements hereof.
(b) In any judicial or administrative proceedings, only the Agency and the Trustee shall
be necessary parties and no Participant or other person having or claiming any interest in the Trust
shall be entitled to any notice or service of process (except as required by law). Any judgment,
decision or award entered in any such proceeding or action shall be conclusive upon all interested
persons.
1(L4 Succe~o If any successor to an Agency continues the Plan adopted by the
Agency, such successor shall concurrently become a successor first party to this Trust Agreement
by giving written notice of its adoption of the Plan and this Trust Agreement to the Trustee by duly
021125 cl 812/PARS 457 Trust-FINAL "1 6
authorized persons; such successor Agency shall become a signatory to this Trust Agreement upon
its written notice to Trustee of the Successor’s adoption hereof.
10.5 Relation to Plan. All words and phrases used herein shall have the same meanings as in
the Plan, and this Trust Agreement and the Plan shall be read and construed together. Whenever the
Plan provides that the Trustee shall act as therein prescribed, the Trustee shall be and is hereby
authorized and empowered to do so for all purposes as fully as though specifically so provided herein
or so directed by the Administrator. The Trustee shall furnish the Agency with copies of the Trust
Agreement and all amendments thereto.
10.6 Use of Trust Funds. Except as provided in Section 9.2 and 9.3, under no circumstances
shall any part of the Trust be recoverable by the Agency from the Trustee or from any Participant or
former Participant, his or her Beneficiaries, or any other person or be used for or diverted to purposes
other than for the exclusive purposes of providing benefits to Participants and their Beneficiaries,
provided, however, that:
(a) An Agency’s excess contribution may be returned to such Agency in accordance
with the provisions of the Plan, and
(b) The portion, if any, of the Trust attributable to an Agency not required for the
satisfaction of all liabilities to Participants and their Beneficiaries shall, upon such Agency’s
termination of the Plan, revert to such Agency.
10.7 Location of Trust Fund Assets. Except as authorized by applicable state or federal laws
or regulations, the indicia of ownership of any assets of the Trust and Plan shall not be maintained
outside the jurisdiction of the District Courts of the United States.
10.8 Arbitration of Disputes, Any dispute under this Agreement shall be resolved by
submission of the issue to a member of the American Arbitration Association who is chosen by the
Agency and the Trustee. If the Agency and the Trustee cannot agree on such a choice, each shall
nominate a member of the American Arbitration Association, and the two nominees will then select
an arbitrator. Expenses of the arbitration shall be paid as decided by the arbitrator.
10.9 Partial Invalidit,g. If any provision of this Trust Agreement is held to be invalid or
unenforceable for any reason, this Agreement shall be construed and enforced as if such provisions
had not been included and such illegality or invalidity shall not affect the remaining portions of this
Trust Agreement, unless such invalidity prevents accomplishment of the objectives and purposes of
this Trust Agreement and the Plan. In the event of any such holding, the parties will immediately
amend this Trust Agreement as necessary to remedy any such defect.
10.10 Construction. This Trust Agreement shall be constructed, administered and enforced
according to the Internal Revenue Code and where state law is applicable, under applicable Statutes
and laws of the State of California applied fairly and equitably in accordance with the purposes of
the Plan.
021125 cl 812/PARS 457 Trust-FINAL
ADOPTION
Executed this ~ day of , ~
THE CITY OF PALO ALTO, Sponsor of: PARS Benefit Trust FBO The City of Palo Alto
Section 457 FICA Alternative Retirement Plan Effective January 1, 2003
By:
(Signature)
(typed or printed name)
(title)
UNION BANK OF CALIFORNIA, N.A.
TRUSTEE
Accepted this __. day of
By:.
(Signature)
(typed or printed name)
(title)
021125 cl 812/PARS 457 Trust-FINAL
AGREEMENT FOR ADMINISTRATIVE SERVICES
This agreement ("Agreement") is made this ~ day of ,2002, between Phase II
Systems ("Phase II Systems"), a corporation organized and existing under the laws of the
State of California, and the City of Palo Alto ("Agency").
WHEREAS, Agency has adopted the City of Palo Alto PARS Section 457 FICA Alternative
Retirement Plan (the "Plan") effective , and wishes to engage Phase II Systems
to provide administrative services under the Plan subject to the direction of the Agency
and/or the Plan Administrator as defined in the Plan;
NOW THEREFORE, the parties agree:
o
Services. Phase II Systems will provide the services pertaining to the Plan as described
in the exhibit attached hereto as "Exhibit 1A" ("Services") in a timely manner, subject to
the further provisions of this Agreement.
Fees for Services. Phase H Systems will be compensated for performance of the
Services as described in the exhibit attached hereto as "Exhibit 1B".
Payment Terms. Payment for the Services will be remitted directly from Plan assets
unless the Agency chooses to make payment directly to Phase II Systems. In the event
that the Agency chooses to make payment directly to Phase II Systems, it shall be the
responsibility of the Agency to remit payment directly to Phase II Systems based upon an
invoice prepared by Phase II Systems and delivered to the Agency. If payment is not
received from the Agency within sixty (60) days after such invoice is delivered to the
Agency, payment will be remitted directly from Plan assets, unless Phase II Systems has
previously received written communication disputing the subject invoice that is signed by
a duly authorized representative of the Agency.
Fees for Services Beyond Scope. Fees for services will be billed to the Agency at the
rates indicated in Phase 1:I Systems’ standard fee schedule in effect at the time such
services are provided and shall be payable as described in Section 3 of this Agreement.
Before any such services are performed, Phase II Systems will provide the Agency with
written notice of the subject services, terms, and an estimate of the fees therefore.
o Information Furnished to Phase II Systems. Phase II Systems will provide the
Services contingent upon the Agency’s providing Phase II Systems the information
specified in the exhibit attached hereto as "Exhibit 1C" ("Data"). It shall, be the
responsibility of the Agency to certify the accuracy, content and completeness of the Data
so that Phase II Systems may rely on such information without further audit. It shall
further be the responsibility of the Agency to deliver the Data to Phase II Systems in such
a manner that allows for a reasonable amount of time for the Services to be performed.
Unless specified in Exhibit 1A, Phase II Systems shall be under no duty to question Data
received from the Agency, to compute contributions made to the Plan, to determine or
inquire whether contributions are adequate to meet and discharge liabilities under the
Plan, or to determine or inquire whether contributions made to the Plan are in compliance
with the Plan or applicable law. In addition, Phase II Systems shall not be liable for non-
021125 cl 812/Admin Services Agmt - FINAL Page 1
EXHIBIT "B"
10.
11.
performance of Services if such non-performance is caused by or results from erroneous
and/or late delivery of Data from the Agency. In the event that the Agency fails to
provide Data in a complete, accurate and timely manner and pursuant to the
specifications in Exhibit 1C, Phase II Systems reserves the fight, notwithstanding the
further provisions of this Agreement, to terminate this Agreement upon no less than
ninety (90) days written notice to the Agency.
Suspension of Contributions, In the event contributions are suspended, either
temporarily or permanently, prior to the complete discharge of Phase II Systems’
obligations under this Agreement, Phase II Systems reserves the right to bill the Agency
for Services under this Agreement at the rates indicated in Phase II Systems’ standard fee
schedule in effect at the time such Services are provided, subject to the terms established
in Section 3 of this Agreement. Before any such Services are performed, Phase II
Systems will provide the Agency with written notice of the subject services, terms, and
an estimate of the fees therefore.
Records. Throughout the duration of this Agreement, and for a period of five (5) years
after termination of this Agreement, Phase II Systems shall provide duly authorized
representatives of Agency access to all records and material relating to calculation of
Phase II Systems’ fees under this Agreement. Such access shall include the right to
inspect, audit and reproduce such records and material and to verify reports furnished in
compliance with the provisions of this Agreement. All information so obtained shall be
accorded confidential treatment as provided under applicable law.
Confidentiality. Without the Agency’s consent, Phase II Systems shall not disclose any
information relating to the Plan except to duly authorized officials of the Agency, subject
to applicable law, and to parties retained by Phase II Systems to perform specific services
within this Agreement.
Independent Contractor. Phase II Systems is and at all times hereunder shall be an
independent contractor with respect to all services it provides to the Agency under this
Agreement. Phase II Systems shall pay all wages, salaries and other amounts due its
employees in connection with this Agreement and shall be responsible for all reports and
obligations respecting them, such as social security, income tax withholding,
unemployment compensation, workers’ compensation and similar matters.
Indemnification, Phase II Systems and Agency hereby indemnify each other and to
hold the other harmless, including their respective officers, directors, employees, agents
and attorneys, from any claim, loss, demand, liability, or expense, including reasonable
attorneys’ fees and costs, incurred by the other as a consequence of Phase II Systems’ or
Agency’s, as the case may be, acts, errors or omissions with respect to the performance of
their respective duties hereunder.
Compliance with Applicable Law. The Agency shall observe and comply with federal,
state and local laws in effect when this Agreement is executed, or which may come into
effect during the term of this Agreement, regarding the administration of the Plan. Phase
II Systems shall observe and comply with federal, state and local laws in effect when this
021125 cl 812/Admin Services Agmt- FINAL Page 2
12.
13.
14.
15.
16.
17.
18.
Agreement is executed, or which may come into effect during the term of this
Agreement, regarding Plan administrative services provided under this Agreement.
Applicable Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of California. In the event any party institutes legal
proceedings to enforce or interpret this Agreement, venue and jurisdiction shall be in any
state court of competent jurisdiction.
Force Majeure, When a party’s nonperformance hereunder was beyond the control and
not due to the fault of the party not performing, a party shall be excused from performing
its obligations under this Agreement during the time and to the extent that it is prevented
from performing by such cause, including but not limited to: any incidence of fire, flood,
acts of God, acts of terrorism or war, commandeering of material, products, plants or
facilities by the federal, state or local government, or a material act or omission by the
other party.
Ownership of Reports and Documents. The originals of all letters, documents, reports,
and data produced for the purposes of this Agreement shall be delivered to, and become
the property of the Agency. Copies may be made for Phase II Systems but shall not be
furnished to others without written authorization from Agency.
Designees. The Plan Administrator or its designee, shall have the authority to act for and
exercise any of the rights of the Agency as set forth in this Agreement, subsequent to and
in accordance with the written authority granted by the Governing Board of the Agency,
a copy of which writing shall be delivered to Phase II Systems. Any officer of Phase II
Systems, or his or her designees, shall have the authority to act for and exercise any of
the rights of Phase II Systems as set forth in this Agreement.
Notices. All notices hereunder and communications regarding the interpretation of the
terms of this Agreement, or changes thereto, shall be effected by delivery of the notices
in person or by depositing the notices in the U.S. mail, registered or certified mail, return
receipt requested, postage prepaid and addressed as follows:
(A) To Phase II Systems: Phase II Systems; 3961 MacArthur Boulevard, Ste. 200;
Newport Beach, CA 92660; Attention: President
(B) To Agency: City of Palo Alto; 250 Hamilton Avenue; Palo Alto, CA 94301;
Attention:
Notices shall be deemed given on the date received by the addressee.
Term of Agreement. This Agreement shall remain in effect until terminated by either
party. Either party may terminate this Agreement by providing the other party with
written notice of its intent to terminate this Agreement. The Agreement shall terminate
ninety (90) days after such notice is provided, unless the parties agree in writing to an
earlier termination date.
Amendment. This Agreement may not be amended orally, but only by a written
instrument executed by the parties hereto.
021125 cl 812/Admin Services Agmt - FINAL Page 3,
19.Entire Agreement. This Agreement, including exhibits, contains the entire
understanding of the parties with respect to the subject matter set forth in this Agreement.
In the event a conflict arises between the parties with respect to any term, condition or
provision of this Agreement, the remaining terms, conditions and provisions shall remain
in full force and legal effect. No waiver of any term or condition of this Agreement by
any party shall be construed by the other as a continuing waiver of such term or
condition.
20.Attorneys Fees. In the event any action is taken by a party hereto to enforce the terms of
this Agreement the prevailing party herein shall be entitled to receive its reasonable
attorney’s fees.
21.Counterparts. This Agreement may be executed in any number of counterparts, and in
that event, . each counterpart shall be deemed a complete original and be enforceable
without reference to any other counterpart.
22.Headings. Headings in this Agreement are for convenience only and shall not be used to
interpret or construe its provisions.
23.Effective Date. This Agreement shall be effective on the date first above written, and
also shall be the date the Agreement is executed.
AGENCY:
BY:DATE:
TITLE:
PHASE II SYSTEMS:
BY:
TITLE:
DATE:
021125 cl 812/Admin Services Agmt- FINAL Page 4
EXHIBIT 1A
SERVICES
Phase II Systems will provide the following services for the City of Palo Alto PARS
Section 457 FICA Alternative Retirement Plan:
1. Plan Installation Services:
(A)Meeting with appropriate Agency personnel to discuss Plan provisions,
implementation timelines, benefit communication strategies, data
reporting and contribution submission requirements;
Providing the necessary analysis and advisory services to finalize these
elements of the Plan;
(c)Providing for review by Agency legal counsel the documentation needed
to establish the Plan.
2. Plan Administration Services:
(A)Monitoring the receipt of Plan contributions made by the Agency to the
trustee of the Plan ("Trustee"), based upon information received from the
Agency and the Trustee;
(B)Performing periodic accounting of Plan assets, including the allocation of
employer and employee contributions, distributions, investment activity
and expenses (if applicable) to individual Plan participant ("Participant")
accounts, based upon information received from the Agency and/or
Trustee;
(c)Acting as ongoing liaison between the Participant and the Agency in
regard to distribution payments, which shall include use by the
Participants of toll-free telephone communication to Phase II Systems;
(D)Coordinating the processing of Participant distribution payments pursuant
to authorized written Agency certification of distribution eligibility,
authorized direction by the Agency, and the provisions of the Plan, and, to
the extent possible, based upon Agency-provided Data;
(E)Directing Trustee to liquidate Plan assets (if necessary) and make
Participant distribution payments, and producing required tax filings
regarding to said distribution payments;
(F)Notifying the Trustee of the amount of Plan assets available for further
investment and management, or, the amount of Plan assets necessary to be
liquidated in order to fund Participant distribution payments;
021125 cl 812/Admin Services Agmt- FINAL Page 5
(G)Coordinating actions with the Trustee as directed by the Plan
Administrator within the scope of this Agreement;
(H)Preparing and submitting periodic reports of non-contributing Participants
to the Agency;
(I)Preparing and submitting a monthly report of Plan activity to the Agency,
unless directed by the Agency otherwise;
(J) Preparing and submitting an annual report of Plan activity to the Agency.
3. Phase II Systems is not licensed to provide and does not offer tax, accounting, legal,
investment or actuarial advice. In providing the services specified above, Phase II
Systems will retain qualified professional service providers at its cost as it deems
necessary if the service lies outside its area of expertise.
021125 cl 812/Admin Services Agmt- FINAL Page 6
EXHIBIT 1B
FEES FOR SERVICES
Phase II Systems shall be entitled to receive fees, paid as described in Section 3 of this
Agreement, for performance of Services, as described in Exhibit 1A. Such fees shall be as set
out below:
(A) An annual asset fee based on the following schedule:
For Plan Assets from:Annual Rate:
$1 To $500,000 2.00%
$500,001 To.$2,500,000 1.50%
$2,500,001 To $5,000,000 1.25%
$5,000,001 To $10,000,000 1.00%
$10,000,001 And above 0.75%
(B)
Annual rates are prorated and paid monthly. The annual asset fee shall be calculated
by the following formula [Annual Rate divided by 12 (months of the year)
multiplied by the Plan asset balance at the end of the month]. Asset based fees are
subject to a $300.00 monthly minimum.
A distribution fee equal to $12.00 per terminated Participant ("Distribution Fee"),
which shall be deducted solely from the terminating Participant’s account.
(C)A fee equal to the out of pocket costs charged to Phase II Systems by an outside
contractor for formatting contribution data on to a suitable magnetic media, charged
only if the contribution data received by Phase II Systems from the Agency or
ICMA-RC is not on readable magnetic media ("Data Processing Fee").
Fees for services beyond the scope of this Agreement will be charged at Phase II Systems
hourly rate at the time services are performed. Before any such services are performed, Phase
II Systems will provide the Agency with written notice of the subject services, terms, and an
estimate of the fees therefore.
Phase II Systems hourly fee schedule as of January 1, 2003:
Senior Vice President= $225.00 Analyst=S115.00
Vice President= $180.00 Clerical=S65.00
Manager=$155.00
021125 cl 812/Admin Services Agmt- FlNAL Page 7
EXHIBIT 1C
DATA REOUIREMENTS
Pha~e II Systems will provide the Services under this Agreement contingent upon receiving
the following information:
1.Transfer Data - readable magnetic media containing the following items related to the
ICMA-RC closing participant and plan data:
(A) Agency name
(B) Employee’s legal name
(C) Employee’s social security number
(D) Employee’s entry date
(E) Employee’s account status (active or eligible for distribution)
(F) Employee’s date of last pay period ending
(G) Employee’ s Employee account value
(H) Employee’s Employer account value
(I) Employee’s address (only for those eligible for distribution)
(J) Plan’s total account value
2. Contribution Data - readable magnetic media containing the following items of employee
information related to the covered payroll period:
(A) Agency name
(B) Employee’s legal name
(C) Employee’s social security number
(D) Payroll date
(E) Employer contribution amount
(F) Employee contribution amount
3. Distribution Data - written Plan Administrator’s (or authorized Designee’s) direction to
commence distribution processing, which contains the following items of Participant
information:
(A) Agency name
(B) Participant’s
(C) Participant’s
(D) Participant’s
(E) Participant’s
(F) Participant’s
legal name
social security number
address
phone number
birthdate
021125 cl 812/Admin Services Agmt - FINAL Page 8
(G) Participant’s condition of eligibility
(H) Participant’s effective date of eligibility
(I)Signed certification of distribution eligibility from the Plan Administrator, or
authorized Designee
4.Executed Legal Documents:
(A) Certified Board Resolution
(B) Adoption Agreement
(C) Plan Document
(D) Trustee Investment Forms
5. Other information requested by Phase II Systems
The Agency understands that Phase II Systems is not the original administrator of the
Plan. It is understood and agreed that Phase II Systems is not liable for any acts or
omissions of any prior administrator of the-Plan, including but not limited to the
previous administrator of the Plan, ICMA-RC, unless such acts or omissions are
directly or indirectly caused by or exacerbated by the negligence or misconduct of
Phase II Systems
Initials Initials
021125 cl 812/Admin Services Agmt - FINAL Page 9
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO
APPOINTING CITY MANAGER AND DIRECTOR OF
ADMINISTRATIVE SERVICES AS CITY ADMINISTRATORS OF
THE DEFERRED COMPENSATION PLAN AND TRUST
(RETIREMENT PLAN) FOR PART-TIME/TEMPORARY~SEASONAL
EMPLOYEES
WHEREAS, pursuant to Resolution No. 7319, adopted June 13,
1994, the City Council of the City of Palo Alto adopted a deferred
compensation plan for the City’s part-time, temporary and seasonal
(PTS) employees, as the retirement plan for hourly employees not
eligible for membership in the Public Employees’ Retirement System,
in accordance with the Internal Revenue Code Section 457 and other
applicable law; and
WHEREAS, PUrsuant to Resolution No. 7639, adopted
December 16, 1996, the City Council approved an amendment to the
plan establishing a trust as required by changes to the Internal
Revenue Code; and
WHEREAS, the City Council has by resolution amended and
restated the existing PTS deferred compensation plan administered
by ICMA into the amended and restated City of Palo Alto PTS 457
Deferred Compensation Plan, and adopted the amended and restated
City of Paio Alto PTS 457 Deferred Compensation Plan ("PTS Plan")
and Trust Document, effective January i, 2003; and
WHEREAS, the City Council has by resolution changed third-
party administrator of the PTS Plan and Trust from ICMA to
PARS/Phase II, and appointed Phase II Systems as third-party Trust
Administrator and Union Bank of California as Trustee of the Trust,
effective January i, 2003; and
WHEREAS, under the Trust Agreement for the PTS Plan, which
provides for the holding and inyesting of PTS Plan assets by the
Plan Trustee, the City administrator directs the Plan Trustee with
respect to the investment of assets under the PTS Plan; and
WHEREAS, it is in the City’s and its employees’ best
interest to appoint the City Manager and the Director of
Administrative Services as co-administrators of the City of Palo
Al~o PTS 457 Deferred Compensation Plan and Trust for the City, in
order to ensure that ultimate authority for PTS Plan administration
and PTS Plan investments remains with the City; and
WHEREAS, the current City Manager and the Director of
Administrative Services have agreed to serve as co-administrators
021125 cl 8120292
of the PTS Plan for the City, with the understanding that they may
jointly designate the City’s Benefits Manager to sign documents
pertaining to the Plan and to take those actions necessary to keep
the Plan in compliance with law.
NOW, THEREFORE, the Council of the City of Palo Alto does
RESOLVE as follows:
SECTION i. The Council hereby designates the City Manager
and the Director of Administrative Services as co-administrators
for the PTS Plan and Trust for the City, as described herein.
SECTION 2. The City Manager and Director of Administrative
Services have signified their acceptance of the designation made in
Section 1 by signing Exhibit "A", attached hereto and incorporated
herein by reference.
SECTION 3. The Council finds that this is not a project
under the California Environmental Quality Act.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:APPROVED:
City Clerk
APPROVED AS TO FORM:
Mayor
City Manager
Senior Asst. City Attorney Director of Administrative
Services
Director of Human Resources
021125 cl 8120292
EXHIBIT "A"
to
RESOLUTION NO.
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO ALTO
APPOINTING CITY MANAGER AND DIRECTOR OF
ADMINISTRATIVE SERVICES AS CITY ADMINISTRATORS OF
THE DEFERRED COMPENSATION PLAN AND TRUST
(RETIREMENT PLAN) FOR PART-TIME/TEMPORARY/SEASONAL
EMPLOYEES
WHEREAS, pursuant to Resolution No. 7319, adopted June 13,
1994, the City Council of the City of Palo Alto adopted a deferred
compensation plan for the City’s part-time, temporary and seasonal
(PTS) employees, as the retirement plan for hourly employees not
eligible for membership in the Public Employees’ Retirement System,
in accordance with the Internal Revenue Code Section 457 and other
applicable law; and
WHEREAS, pursuant to Resolution No. 7639, adopted
December 16, 1996, the City Council approved an amendment to. the
plan establishing a trust as required by changes to the Internal
Revenue Code; and
WHEREAS, the City Council has by resolution amended and
restated the existing PTS deferred compensation plan administered
by ICMA into the amended and restated City of Palo Alto PTS 457
Deferred Compensation Plan, and adopted the amended and restated
City of Palo Alto PTS 457 Deferred Compensation Plan ("PTS Plan")
and Trust Document, effective January i, 2003; and
WHEREAS, the City Council has by resolution changed third-
party administrator of the PTS Plan and Trust from ICMA to
PARS/Phase II, and appointed Phase II Systems as third-party Trust
Administrator and Union Bank of California as Trustee of the Trust,
effective January i, 2003; and
WHEREAS, under the Trust Agreement for the PTS Plan, which
provides for the holding and investing of PTS Plan assets by the
Plan Trustee, the City administrator directs the Plan Trustee with
respect to the investment of assets under the PTS Plan; and
WHEREAS, it is in the City’s and its employees’ best
interest to appoint the City Manager and the Director of
Administrative Services as co-administrators of the City of Palo
Alto PTS 457 Deferred Compensation Plan and Trust for the City, in
order to ensure that ultimate authority for PTS Plan Administration
and PTS Plan investments remains with the City; and
WHEREAS, the current City Manager and the Director of
Administrative Services have agreed to serve as co-administrators
1
021125 cl 8120293
of the PTS Plan and Trust for the City, with the understanding that
they may jointly designate the City’s Benefits Manager to sign
documents pertaining to the Plan -and to take those actions
necessary to keep the Plan in compliance with law; and
WHEREAS, the undersigned agree to serve in that capacity.
NOW, THEREFORE, the undersigned, City Manager Frank Benest,
and Director of Administrative Services Carl Yeats, hereby agree to
serve as co-administrators for the City of the PTS Plan and Trust,
as described in the resolution appointing them.
Frank Benest, City Manager Carl Yeats, Director of
Administrative Services
Date: December __, 2002 Date: December __, 2002
021125 cl 8120293