COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Employee and Public Services

DATE:

September 23, 2004

BOARD MEETING DATE:

October 19, 2004

TO:

Honorable Board of Supervisors

FROM:

Mary Welch, EPS Director

Paul Hackleman, Benefits Manager

SUBJECT:

County’s Deferred Compensation Plan Document

RECOMMENDATION:

Approve a resolution amending the County’s Deferred Compensation Plan Document to comply with new federal regulations and authorizing the EPS Director to implement future changes to the County’s Deferred Compensation Plan Document and Investment Policy upon External Administrators, internal Deferred Compensation Committee and County Counsel review and approval.

BACKGROUND:

The 1996 Small Business Job Protection Act required that public sector employers establish by January 1, 1999 a formal Plan Document placing deferred compensation assets in a trust for the sole benefit of plan participants and their beneficiaries. The Board approved a formal Plan Document on December 15, 1988. In December, 2001, the Board approved revisions to the plan document as required by the 2001 Economic Growth and Tax Relief Reconciliation Act and adopted an Investment Policy which specified how plan funds would be monitored and evaluated. In November, 2003, the Board amended the Investment Policy in order to address regulatory and statutory changes as specified by the 2003 Sarbanes-Oxley Act.

DISCUSSION:

The key changes to the Plan Document mandated by new regulations are:

• Modification to the definition of “Custodian”,

• Inclusion of registered domestic partners as eligible beneficiaries,

• Changes to the effective date of an employee’s initial eligibility to assure that a Participant Agreement has been completed by the first of the month in which contributions are made,

• New administrative protocols for returning excess contributions to participants in a timely manner,

• Modifications to beneficiary distribution options upon the death of the participant, and

• Adding loss of primary residence and unforeseen, uncovered medical expenses as appropriate criteria for eligible hardship withdrawals.

Both the Plan Document and Investment Policy require regular amendments because of ongoing legislative or regulatory requirements. These frequent changes are reviewed and approved by: 1) legal and compliance staff of the County’s two Deferred Compensation Administrators, 2) the Labor-Management Deferred Compensation Committee and 3) County Counsel. Because legislative and regulatory changes require frequent document amendments, the Deferred Compensation Committee recommends that future changes to either the Plan Document or the Investment Policy, based on mandated requirements, be authorized by the Deferred Compensation Committee Chair (EPS Director) after the review and approval process noted above. The Committee recommends that any proposed amendments for reasons other than legislative or regulatory mandates continue to be brought before the Board for review and approval.

VISION ALIGNMENT:

The revision of the Plan Document represents Vision Statement #20 which focuses on careful consideration of future impact and #21 incorporating the County’s vision and goals into delivery of services.

FISCAL IMPACT:

Because contributions to deferred compensation are voluntarily paid by employees, there is no County cost associated with these recommendations.