DATE: August 12, 2015
TO: Board of Mayor and Aldermen
FROM: Eric Stuckey, City Administrator
SUBJECT:
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Consideration of Resolution 2015-68, To Be Entitled: “A Resolution of the Board of Mayor and Aldermen for Amendment Number 2 to the City of Franklin Employees’ Pension Plan” (09/08/15 WS)
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Purpose
The purpose of this memorandum is to provide information to the Franklin Board of Mayor and Aldermen (BOMA) concerning Resolution 2015-68, which amends the Pension Plan to allow recognition of Qualified Domestic Relations Orders.
Background
On March 10, 2015, the Board of Mayor and Aldermen approved Amendment Number 1 to the City of Franklin Employees’ Pension Plan, which made clarifications to the Pension Plan that were requested by the Internal Revenue Service upon their last review of the City Plan. Included in that Amendment was the deletion of all references to Qualified Domestic Relations Orders (QDRO’s). Deleting those references brought the Plan into conformance with State law, which barred recognition of QDRO’s.
In May of this year, the State Legislature approved House Bill 249 and Senate Bill 153 which requires local government pension plans to recognize QDRO’s. This action by the State, which became effective July 1, 2015, results in the requirement of an amendment to the City Employees’ Pension Plan in order for the Plan to be brought back into compliance with current law. Amendment Number 2 has been prepared by the legal advisor to our Pension Plan to achieve compliance.
Financial Impact
There will be a financial impact to the City, with additional recordkeeping and legal costs to maintain and implement the new State requirement. The amount of impact cannot be determined at this time, as it will fluctuate depending on the number of individuals involved in Qualified Domestic Relations Orders and the length of time that the Orders are in effect. It is estimated that the costs will be of some significance, but is unavoidable given the new State law. The reason that QDRO’s were strictly prohibited prior to this legislation was because of the potential costs that local government pension funds would incur.
Recommendation
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Staff recommends approval of the Resolution.