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HomeMy WebLinkAboutCC Resolution 10343 (Deferred Comp Plan)RESOLUTION NO. 10343 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL AMENDING THE DEFERRED COMPENSATION PLAN, EFFECTIVE DECEMBER 21, 1998. WHEREAS, the City of San Rafael (Employer) has employees currently participating in a 457 deferred compensation plan administered by FundSelect Advisers Inc. (FundSelect) and ICMA Retirement Corporation (ICMA), and WHEREAS, the Employer has employees rendering valuable services; and WHEREAS, the Employer has established two deferred compensation plans for such employees that serves the interest of the Employer by enabling it to provide reasonable retirement security for its employees, by providing increased flexibility in its personnel management system and by assisting in the attraction and retention of competent personnel; and WHEREAS, FundSelect and ICMA are able to administer the deferred compensation plan for Employer in accordance with the terms of their respective agreements. WHEREAS, amendments to the Internal Revenue Code have been enacted that require changes to the structure of and allow enhancements of the benefits of the deferred compensation plan; NOW, THEREFORE, BE IT RESOLVED, 1. The Employer hereby amends and restates the deferred compensation 457 plan (the "Plan") and adopts the Plan referred to as Appendix "A". 2. The assets of the Plan shall be held in a Trust/Custodial Fund, with the Employer or its designated officer appointed as and serving as Trustee/Custodian, for the exclusive benefit of the Plan participants and their beneficiaries, and the assets shall not be diverted for any other purpose. The Employer's beneficial ownership of Plan assets held in FundSelect and ICMA shall be held for the further exclusive benefit of the Plan participants and the beneficiaries. 3. The Plan will not permit loans. 4. The Employer hereby agrees to serve as Trustee under the Plan. 5. The City Manager, or his/her designee, is hereby authorized to execute all necessary agreements with FundSelect and ICMA incidental to the administration of the Plan and shall do all things necessary and proper to implement this Resolution. This Amended and Restated Plan and Trust/Custodial Document adopted by Employer hereby supersedes and replaces any prior plan applicable to FundSelect and ICMA. I, JEANNE M. LEONCINI, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the City Council of said City held on Monday, the 21St day of December 1998, by the following vote to wit: AYES: COUNCILMEMBERS: Heller, Miller, Phillips and Mayor Boro NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: Cohen Jeanne M. Leon�iCity,lerk DEFERRED COMPENSATION PLAN (Amended and Restated Plan and Trust/Custodial Document) Section 1. Name: The name of this Plan and Trust/Custodial Document is the City of San Rafael, State of California, Deferred Compensation Plan, hereinafter referred to as the "Plan". This Plan is the continuation in restated form of the City of San Rafael Deferred Compensation Plan previously established by the City of San Rafael City Council. Section 2. Purpose: The primary purpose of the Plan is to attract and retain personnel by permitting them to enter into agreements with the Employer that will provide for deferral of payment of a portion of their current Compensation until death, disability, retirement, termination of employment or other events as provided herein, in accordance with applicable provisions of State law and Section 457 and other applicable Sections of the Internal Revenue Code. Except as otherwise stated herein, this amended and restated Plan shall become effective December 21, 1998. This Plan and Investment and Trust/Custodial Fund is intended to be exempt from taxation under Section 501(a) of the Internal Revenue Code (Code) and intended to comply with Section 457(g) of such Code. The Trustees/Custodian shall be empowered to submit or designate appropriate agents to submit this Plan and Investment and Trust/Custodial Fund to the Internal Revenue Service for a determination of the eligibility of the Plan under Section 457, and the exempt status of the Investment and Trust/Custodial Fund under Section 501(a), if the Trustees/Custodian conclude that such a determination is desirable. Section 3. Definitions: For the purposes of this Plan when used and capitalized herein the following words and phrases shall have the meanings set forth below. 3.1 "Account" means the bookkeeping account maintained for each Participant reflecting the cumulative amount of the Participant's Deferred Compensation, including any income, gains, losses or increases or decreases in market value attributable to the Employer's investment of the Participant's Deferred Compensation and further reflecting any distributions to the Participant or the Participant's Beneficiary and any fees or expenses charged against such Participant's Deferred Compensation. 3.2 "Accounting Date" means each business day that the New York Stock Exchange is open for trading, as provided in Section 6.6 for valuing the trust's assets. 3.3 "Administrator" means the service provider or providers with whom the Employer contracts either investment, recordkeeping or other management services for the Plan. The Employer may remove any person as Administrator upon 60 day's advance notice in writing to such person, in which case the Employer shall name another person or persons to act a Administrator. The Administrator may resign upon 60 day's advance notice in writing to the Employer, in which case the Employer shall name another person or persons to act as Administrator. 3.4 "Beneficiary" means the person or persons a Participant designates to receive his/her interest under the Plan after the Participant's death, (provided that a married Participant may designate someone other than his/her spouse as his/her Beneficiary only with his/her spouse's consent). The designation may be made, and may be revoked and changed, only by a written instrument (in form 2 acceptable to the Employer) signed by the Participant, consented to by the Participant's spouse, if necessary, and filed with the Employer prior to the Participant's death, or if no designated Beneficiary survives the Participant, his/her Beneficiary shall be his/her spouse if he/she is married, or, if not, his/her estate. 3.5 "Code" means the Internal Revenue Code of 1986, as amended. 3.6 "Compensation" means the total of all amounts of salary or wages which would be paid by the Employer to or for the benefit of an Employee (if he/she were not a Participant in the Plan) for services performed during the period that the Employee is a Participant, including any amounts of Deferred Compensation that may be credited to the Participant's Account. Compensation shall be taken into account at its present value and its amount shall be determined without regard to any community property laws. 3.7 "Trustee/Custodian" means a bank, trust company, financial institution, or other legally authorized entity appointed by the Employer to have custody of assets in the Investment and Trust/Custodial Fund. 3.8 "Deferred Compensation" means the amount of Compensation which the Participant defers pursuant to his/her Participation Agreement in accordance with the provisions of this Plan. 3.9 "Disability" means the inability of a Participant to engage in his/her usual occupation by reason of a medically determinable physical or mental impairment as determined by the Employer on the basis of advice from a physician or physicians. 3 3.10 "Election Period" means the fifty-nine (59) day period after separation from service with the Employer during which a Participant may elect to defer commencement of benefit payments under the Plan. 3.11 "Employee" means any officer, employee or elected official of the Employer, provided, however, that all extra -help or temporary employees and/or any contract employee whose contract does not provide for participation in the Plan shall not be "employees". 3.12 "Employer" means the City of San Rafael. 3.13 "Employer Contribution" means the contribution made by the Employer pursuant to Subsection 5.2 of the Plan. 3.14 "Employment Period" means a period from January 1 through December 31 of the same year, except that the first Employment Period of an Employee hired on any date other than January 1 shall be the period beginning with the date of employment and ending on December 31 of the same year. 3.15 "Includible Compensation" means Compensation which (taking into account the provisions of the Code, including Section 403(b) and Section 457) is currently includible in gross income for federal income tax purposes. Such term does not include any amount excludable from gross income under this Plan or any other plan described in Section 457(b) of the Code or any other amount excludable from gross income for federal income tax purposes. Includible Compensation shall be determined without regard to any community property laws. 3.16 "Investment and Trust/Custodial Fund" means a fund established by the Employer as a convenient method of setting aside a portion of its assets to meet its obligations under the Plan, as provided in Subsection 6.1. 4 3.17 Joinder Agreement: An agreement entered into between an Employee and the Employer, including any amendments or modification thereof. Such agreement shall fix the amount of Deferred Compensation, specify a preference among the investment alternatives designated by the Employer, designate the Employee's Beneficiary or Beneficiaries, and incorporate the terms, conditions and provisions of the Plan by reference. 3.18 "Normal Retirement Age" means the date a Participant attains age 70 Y2 or, at the election of the Participant, any earlier date that is no earlier than the earliest age at which the Participant has the right to retire under the Marin County Employee Retirement System and to receive immediate retirement benefits calculated without actuarial reduction, but in any event not later than the date or age at which the Participant separates from service with the Employer. If a Participant is employed by the Employer beyond age 70 Y2 , his/her Normal Retirement Age may be the age at which he separates from service with the Employer; provided that the distribution requirements of Subsection 7.5 are still satisfied with respect to the Participant, and provided further that a Participant who has utilized the catch-up deferral provisions of Subsection 5.3(b) may not thereafter change his/her Normal Retirement Age. 3.19 "Participant" means any Employee who fulfills the participation requirements under Section 4. 3.20 "Participation Agreement" means the agreement executed and filed by an Employee with the Employer pursuant to Section 4, under which the Employee elects to become a Participant in the Plan and to defer Compensation thereunder. 3.21 "Plan Year" means the calendar year. 5 3.22 "Retirement" means the first date upon which both of the following shall have occurred with respect to a Participant: Separation from Service and attainment of age 65. 3.23 "Separation From Service" means severance of the Participant's employment with the Employer which constitutes a "separation from service" within the meaning of Section 402(d)(4)(A)(iii) of the Code. In general, a Participant shall be deemed to have severed his employment with the Employer for purposes of this Plan when, in accordance with the established practices of the Employer, the employment relationship is considered to have actually terminated. 3.24 "Trust" means all compensation deferred under the Plan, plus any income and gains thereon, less any losses, expenses and distributions to Participants and Beneficiaries. Section 4. Participation in the Plan: 4.1 Participation: Each Employee may elect to become a Participant in the Plan and defer payment of Compensation not yet earned by executing a written Participation Agreement and filing it with the Employer at any time during active employment with the Employer. Compensation shall be deferred for any calendar month only if a Participation Agreement providing for such deferral has been entered into and is effective before the beginning of such month. 4.2 Modification of Deferral: A Participation Agreement shall remain in effect until it is terminated or modified. A Participant may modify an existing Participation Agreement to effect subsequent deferrals in accordance with rules established by the Employer. Such modification must be filed by the Participant with the Employer prior to the beginning of the month for which the modification is to be effective. 4.3 Termination of Deferral: A Participant may terminate further deferral of Compensation under the Plan effective at the beginning of any month by filing with the Employer an executed notice of termination of his/her Participation Agreement prior to the effective date of termination. Once further deferral of Compensation is terminated, a Participant may rejoin the Plan in accordance with rules established by the Employer. No previously deferred amounts shall be payable to an Employee upon terminating further deferral of Compensation under the Plan unless otherwise due pursuant to Section 7 hereof. 4.4 Selection of Investment Options: The Participation Agreement shall also provide for the selection, pursuant to Subsection 6.5, of one (1) or more investment options in the Investment and Trust/Custodial Fund to which the Participant's Deferred Compensation shall be allocated; provided that any amounts so allocated equal or exceed a minimum of ten dollars ($10.00) per pay period. The Employer shall invest the Participant's deferrals in accordance with such selection. Section 5. Amount of Deferrals and Deferral of Compensation 5.1 Deferral of Compensation: During each Employment Period in which an Employee is a Participant in the Plan, the Employer shall defer payment of such part of the Participant's Compensation as is specified by the Participant in the Participation Agreement which the Participant has executed and filed with the Employer. 5.2 Employer Contribution: During each Employment Period in which an Employee is a Participant in the Plan, the Employer may make an Employer Contribution to the Participant's Account equal to the percentage of the Participant's Compensation specified by resolution or labor contract approved by the Employer. 5.3 Limitation: The amount of Compensation which may be deferred by a Participant and the amount of Employer Contributions, if any, made to a Participant's Account are subject to the following limitations: a) Annual Limitation: Except as provided in Paragraph (b) below, the maximum amount that a Participant may defer during an Employment Period, when added to the amount of any Employer Contribution for such Participant during the Employment Period, shall not exceed the lesser of (1) eight thousand dollars ($8,000), as may be adjusted for cost -of -living by the Secretary of the Treasury or (2) 33 1/3% of the Participant's Includible Compensation. The minimum amount that a Participant may defer is ten dollars ($1 0.00) per pay period. b) Catch -Up Deferrals: For one or more of a Participant's last three Employment Periods ending before the Participant attains Normal Retirement Age, the maximum amount a Participant may defer during the Employment Period, when added to the amount of any Employer Contribution for such Participant during the Employment Period established in Paragraph (a) above, plus so much of such maximum amounts determined under such Paragraph (a) for Employment Periods beginning after December 31, 1978, but before the current Employment Period in which the Participant was eligible to participate in the Plan (or in another eligible deferred compensation plan under Section 457(b) of the Code) less the amount of compensation actually deferred under such Paragraph (a) for such prior Employment Periods shall not exceed fifteen thousand dollars ($15,000) per each of such three Employment Periods. 8 The provisions of this Paragraph (b) shall not apply more than once to each Participant. c) Aggregation of Plans: In applying Paragraphs (a) and (b) above, the amount that may be deferred by a Participant under the Plan for any employment Period shall be reduced by: (i) the amount deferred by the Participant for such Employment Period under any other eligible deferred compensation plan under Section 457(b) of the Code, (ii) any Employment Period under Section 403(b) of the Code, (iii) any amount excluded from the Participant's gross income for such Employment Period under Section 402(a)(8) or Section 402(h)(B) of the Code, and (iv) any amount with respect to which a deduction is allowable for such Employment Period by reason of a contribution on behalf of the Participant to an organization described in Section 501(C)(1 8) of the Code. The Participant shall inform the Employer of his/her participation in any of the above listed plans and is solely responsible for any violation of this Paragraph (c) above. Section 6 Investment and Trust/Custodial Fund Provisions: 6.1 Investment of Deferred Compensation: A trust is hereby created to hold all the assets of the Plan for the exclusive benefit of Participants and Beneficiaries, except that expenses and taxes may be paid from the Trust as provided in Section 6.3. The Trustee shall be the Employer or such other person which agrees to act in that capacity hereunder. 0 6.2 Investment Powers: The Trustee or the Plan Administrator acting as agent for the trustee, shall have the power listed in this Section 6.2 with respect to investment of Trust assets, except to the extent that the investment of Trust assets is directed by Participants, pursuant to Section 6.5. Trustee shall have the power: a) To invest and reinvest the Trust without distinction between principal and income in any form of tangible or intangible property, real personal, or mixed, and wherever situated, including, but not by way of limitation, common or preferred stocks, shares of regulated investment companies and other mutual funds, bonds, loans, notes, debentures, mortgages, certificates of deposit, interest, or participation, equipment trust certificates, commercial paper including but not limited to participation in pooled commercial paper accounts, contracts with insurance companies including but not limited to insurance, individual or group annuity, deposit administration, and guaranteed interest contracts, deposits at reasonable rates of interest at banking institutions including but not limited to savings accounts and certificates of deposit, and other forms of securities or investments of any kind, class, or character whatsoever and representing interests in any form of enterprise, wherever it may be located, organized or operated within or without the United States of America, whether such investments are income producing or not, without being limited in any respect by statute or court rule or decision of any jurisdiction now or hereafter in force purporting to limit or otherwise affect such investments. Assets of the Trust may be invested in securities or new ventures that involve a higher degree of risk than investments that have demonstrated their investment performance over an extended period of time. b) To invest and reinvest all or any part of the assets of the Trust in any common, collective or commingled trust fund that is maintained by a 10 bank or other institution and that is available to Employee plans described under Sections 457 or 401 of the Code, or any successor provisions thereto, and during the period of time that an investment through any such medium shall exist, to the extent of the participation of the Plan, the declaration of trust of such common, collective or commingled trust funds shall constitute a part of this Plan. c) To invest and reinvest all or any part of the assets of the Trust in any group annuity, deposit administration or guaranteed interest contract issued by an insurance company or other financial institution on a commingled or collective basis with the assets of any other 457 plan or trust qualified under Section 401(a) or any other plan described in Section 401(a)(24) of the Code, and such contract may be held or issued in the name of the Plan Administrator, or such custodian as the Plan Administrator may appoint, as agent and nominee for the Employer. During the period that an investment through any such contract shall exist, to the extent of participation of the Plan, the terms and conditions of such contract shall constitute a part of the Plan. d) To hold cash awaiting investment and to keep such portion of the Trust in cash or cash balances, without liability for interest, in such amounts as may from time to time be deemed to be reasonable and necessary to meet obligations under the Plan or otherwise to be in the best interests of the Plan. e) To vote or to refrain from voting any stocks, bonds or other securities held in the Trust, to exercise any other right appurtenant to any securities or other property held in the Trust, to give general or special proxies or powers of attorney with or without power of substitution with respect to such securities and other property, to exercise any conversion privileges, subscription rights, or other options or privileges with respect to 11 such securities and other property and make any payments incidental thereto, and generally to exercise, personally or by general or limited power of attorney, any of the powers of an owner with respect to stocks, bonds securities, or other property held in the Trust at any time. f) To oppose or to consent to and participate in any organization, reorganization, consolidation, merger, combination, readjustment of finances, or similar arrangement with respect to any corporation, company, or association, any of the securities of which are held in the Trust, to do any act with reference thereto, including the exercise of options, the making of agreements or subscriptions and the payment of expenses, assessments, or subscriptions that may be deemed necessary or advisable in connection therewith, and to accept, hold, and retain any securities or other property that may be so acquired. g) To hold, to authorize the holding of, and to register any investment to the Trust in the name of the Plan, the Employer, or any nominee or agent of any of the foregoing, including the Plan Administrator, or in bearer form, to deposit or arrange for the deposit of securities in a qualified central depository even though, when so deposited, such securities may be merged and held in bulk in the name of the nominee of such depository with other securities deposited therein. h) Upon such terms as may be deemed advisable by the Employer or the Plan Administrator, as the case may be, for the protection of the interest of the Plan or for the preservation of the value of an investment, to exercise and enforce by suit for legal or equitable remedies or by other action with the Employer's authorization, or to waive any right or claim on behalf of the Plan or any default in any obligation owing to the Plan, to renew, extend the time for payment of, agree to a reduction in the rate of interest on, or agree to any other modification or change in the terms of 12 any obligation owing to the Plan, to settle, comprise, adjust or submit to arbitration any claim or right in favor of or against the Plan, to exercise and enforce any and all rights of foreclosure, bid for property in foreclosure, and take a deed in lieu of foreclosure with or without paying consideration therefore, to commence or defend suits or other legal proceedings whenever any interest of the Plan requires it, and to represent the Plan in all suits or legal proceedings in any court of law or equity or before any body or tribunal. i) To employ suitable consultants, depositories, agents and legal counsel on behalf of the plan. j) To open and maintain any bank account or accounts in the name of the Plan, the Employer, or any nominee or agent of the foregoing, including the Plan Administrator, in any bank or banks. k) To do any and all other acts that may be deemed necessary to carry out any of the powers set forth herein and under applicable state and federal laws. 6.3 Taxes and Expenses: All taxes of any kinds whatsoever that may be levied or assessed under existing or future laws upon, or in respect to the Trust, or the income thereof, and all commissions or acquisitions or dispositions of securities and similar expenses of investment and reinvestment of the Trust, shall be paid from the Trust. Such reasonable compensation of the Plan Administrator, as may be agreed upon from time to time by the Employer and the Plan Administrator, and reimbursement for reasonable expenses incurred by the Plan Administrator in performance of its duties hereunder (including but not limited to fees for legal, accounting, investment and custodial services) shall also be paid from the Trust. 13 6.4 Payment of Benefits: The payment of benefits from the Trust in accordance with the terms of the Plan may be made by the Plan Administrator, or by any custodian or other person so authorized by the Employer to make such disbursement. The Plan Administrator, custodian or other person shall not be liable with respect to any distribution of Trust assets made at the direction of the Employer. 6.5 Investment Funds: In accordance with uniform and nondiscriminatory rules established by the Employer and the Plan Administrator, the Participant may direct his/her Accounts to be invested in one (1) or more investment funds available under the Plan; provided, however, that the Participant's investment directions shall not violate any investment restrictions established by the Employer. Neither the Employer, the Administrator, nor any other person shall be liable for any losses incurred by virtue of following such directions or with any reasonable administrative delay in implementing such direction. The Plan Administrator or the Employer shall adopt various investment options for the investment of deferred amounts by Participants or their Beneficiaries, and shall monitor and evaluate the appropriateness of continued offering by the Plan. The Trustees/Custodian or the Employer may determine which options are no longer appropriate for offering. In adopting or removing such options, the Trustees/Custodian or Employer, the Participants or their Beneficiaries shall be entitled to select from among the available options for investment of their deferred amounts. In the event options are removed from the active list, the Trustees/Custodian or Employer may require Participants to move balances to an alternative option offered by the Plan. If any Participants fail to act in response to the written notice, the Trustees/Custodian or Employer shall transfer monies out of the ineligible investment option to an alternative option chosen by the Trustees/Custodian or Employer. By exercising such right to select investment options or by failing to respond to notice to transfer from a removed option where the Trustees/Custodian or Employer move the monies on behalf of 14 such Participants, the Participants and their Beneficiaries agree that none of the Plan fiduciaries will be liable for any investment losses, or lost investment opportunity in situations where monies are moved by Trustees/Custodian or Employer, that are experienced by a Participant or Beneficiary in the investment options(s) they select or are selected from them if they fail to take appropriate action in regard to a no longer available fund. 6.6 Valuation of Accounts: As of each Accounting Date, the Plan assets held in each investment fund offered shall be valued at fair market and the investment income and gains or losses shall be determined. Such investment income and gains or losses shall be allocated proportionately among all Account balances on a fund -by -fund basis. The allocation shall be in the proportion that each such Account balance as of the immediately preceding Accounting Dates bears to the total of all such Accounting Date. For purposes of this Section, all Account balances include the Account balances of all Participants and Beneficiaries. 6.7 Crediting of Accounts: The Participant's Account shall reflect the amount and value of the investments or other property obtained by the Employer through the investment of the Participant's Deferred Compensation pursuant to Sections 6.5 and 6.6. It is anticipated that the Employer's investments with respect to a Participant will conform to the investment preference specified in the Participant's Joinder Agreement, but nothing here shall be construed to require the Employer to make any particular investment of a Participant's Deferred Compensation. Each Participant shall receive periodic reports, not less frequently than annually, showing the then current value of his/her Account. 6.8 Employer Liability: In no event shall the Employer's liability to pay benefits to a Participant under this Plan exceed the value of the amounts credited to the Participant's Account; neither the Employer nor the Administrator shall be liable for losses arising from depreciation or shrinkage in the value of any investments acquired under this Plan. 15 Section 7 Distribution of Benefits 7.1 Payments on Separation from Service: Subject to the provisions of Subsection 7.5, upon a Participants Separation from Service with the Employer for any reason (including disability), the entire amount credited to his/her Account (less any federal, state or local income tax required to be withheld therefrom) shall be paid to him in a single lump sum immediately after the expiration of the Election Period; provided, however, that during such Election Period a Participant (including a Participant who has utilized the catchup deferral provisions of Subsection 5.3(b) with an Account balance in excess of an amount specified by the Employer, which amount shall not exceed the amount specified in Section 457(e)(9)(A) of the Code, as the same may be adjusted from time -to - time, may irrevocably elect in writing (on a form acceptable to the Employer) a specific later date for first receiving payment under the Plan. In addition, a Participant may elect a different method of payment as provided in Subsection 7.2 by filing the appropriate form with the Employer no later than sixty (60) days prior to the Participant's elected payment date. The Account balance of a Participant with less than the amount specified by the Employer in his/her Account at the time of his/her separation from service shall be paid in a single lump sum to the Participant (less applicable taxes) as soon as practicable following his/her separation from service. A Participant who has elected a specific later date for the first receiving a payment under the Plan, as set forth above, may elect to further defer the date upon which such payment(s) will begin. Such election to further defer payment may be made only once, to a later date, as long as payments have not yet begun when such election is made. 16 7.2 Optional Forms of Benefit Payments: Subject to the provisions of Section 7.5, as an alternative to payment in a lump sum, a Participant whose Account balance exceeds the amount specified by the Employer under Subsection 7.1 above, may elect to receive payment under the Plan as follows: a) Equal monthly, quarterly, semi-annual or annual payments in an amount chosen by the Participant, continuing until his/her Account is exhausted. b) Approximately equal monthly, quarterly, semi-annual or annual payments, calculated to continue for a period certain chosen by the Participant. c) Annual Payments equal to the minimum distributions required under Section 401(a)(9) of the Code over the life expectancy of the Participant or over the life expectancies of the Participant and his Beneficiary. d) Payments equal to payments made by the issuer of a retirement annuity policy acquired by the Employer. e) A split distribution under which payments under options (a), (b) or (d) commence or are made at the same time, as elected by the Participant under Section 7.1, provided that all payments commence (or are made) by the latest benefit commencement date under Section 7.5 and that once a payment is made subsequent payments will be made in substantially non -increasing amounts. f) Any payment option elected by the Participant and agreed to by the Employer and Administrator, provided that such option must provide for 17 substantially nonincreasing payments for any period after the benefit commencement date under Section 7.1. 7.3 Emergency Withdrawals: Except as otherwise provided in Subsection 7.5 distributions to or on behalf of a Participant shall be made only in the event of his/her separation from service with the Employer, unless such Participant experiences an unforeseeable emergency. "Unforeseeable emergency" means a severe financial hardship to the Participant resulting from: a) A sudden and unexpected illness or accident of the Participant or a dependent of the Participant as defined in Section 152(a) of the Code, b) the Participant's loss of property due to casualty, or c) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. Examples of events which may cause an "unforeseeable emergency" are catastrophic illness, flood, fire, earthquake, death in the family or disabling injury. Withdrawals will not be permitted for expenditures normally budgetable, such as a down payment on a home, purchase of an automobile or educational expenses. Withdrawals will not be allowed to the extent that the hardship may be relieved: (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant's assets (to the extent such liquidation would not itself cause severe financial hardship), or (iii) by cessation or temporary suspension of deferrals under the Plan. is Withdrawals of amounts because of an unforeseeable emergency will be permitted only to the extent reasonable needed to satisfy the emergency. Former Employees who have not yet received distribution of their entire Account balances shall also be eligible for emergency withdrawals under the same conditions as active Participants. A Participant or former Employee who experiences such an unforeseeable emergency may apply to the Employer for a withdrawal which shall be permitted at the discretion of the Employer, only to the extent it complies with the requirements of this Subsection 7.3. Any amount approved hereunder for emergency withdrawal shall be paid to the Participant in a single lump sum (less any applicable withholding taxes). The withdrawal shall be effective at the later of the date specified in the Participant's application or the date approved by the Employer. 7.4 Payments on the Death of a Participant a) Death After Benefit Commencement: If the Participant dies after having begun to receive installment payments in accordance with Section 7.2, payment of the remainder of such scheduled payments shall be suspended for a period of sixty (60) days after the Participant's death. During each sixty (60) day suspension period, the Beneficiary of such Participant may elect, subject to the distribution requirements of Subsection 7.5, to receive the balance then credited to the Participant's Account in a single lump sum or in installments as specified under Section 7.2, provided that the Participant's Account will be distributed to the Beneficiary at least as rapidly as under the method of distribution being used prior to the Participant's death. If no such election is made by the Beneficiary by the end of the sixty (60) day suspension period, the remaining installment payments selected by the Participant (adjusted, if necessary, to comply with the distribution requirements of Subsection 7.5) shall be paid to the Beneficiary. 19 b) Death Prior to Benefit Commencement: Subject to the provisions of Section 7.5, if the Participant dies before distribution of his/her Account commences, his/her Beneficiary shall receive distribution of such Participant's Account as provided under Section 7.1, treating the Beneficiary as if he/she were the Participant; provided, however, that if the Beneficiary elects installment payments, the Participant's entire Account shall be distributed over a period not to exceed fifteen (15) years (or the life expectancy of the Participant's surviving spouse, if such spouse is the Participant's Beneficiary). 7.5 Provisions Required Pursuant to Code Section 401 (a)(9) a) Timing and Amount of Required Distributions 1) Notwithstanding any of the foregoing, distribution of a Participant's entire Account shall commence not later than April I following the calendar year in which he attains age 70 '/2, whether or not the Participant has separated from service with the Employer. Unless the form of distribution is a single lump sum payment, distributions shall be made over a period not exceeding the life expectancy of the Participant, or the joint life expectancy of the Participant and his/her Beneficiary. 2) If the Participant's entire Account is to be distributed in a form other than a single lump sum payment, then the amount to be distributed each year must be at least an amount equal to the quotient obtained by dividing the Participant's entire Account balance (determined as of the last valuation date of the preceding calendar year) by the life expectancy of the Participant or (if applicable) the joint life expectancy of the Participant and his/her 20 designated Beneficiary. Life expectancy and joint life expectancy shall be computed by the use of the return multiples contained in Section 1.72-9 of the Treasury Regulations. b) Distribution After Death 1) If the Participant dies after having begun to receive installment payments in accordance with Subsection 7.2, the remaining portion of such Participant's Account shall continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death. 2) If the Participant dies before distribution of his/her Account commences, the Participant's entire Account shall be distributed in one of the distribution options provided under Subsections 7.1 and 7.2 no later than December 31 of the calendar year which contains the fifth anniversary of the Participant's death except; (i) that if the beneficiary is not the Participant's spouse, and such non -spousal beneficiary elects to commence distribution by December 31, of the year following the year the Participant died, such non -spousal beneficiary may elect a periodic payment not exceeding fifteen (15) years, as set forth in Section 7.4(b) above, or (ii) that if the designated Beneficiary is the Participant's surviving spouse, such spouse may elect to receive distribution of the Participant's entire Account in substantially equal monthly, quarterly, semiannual or annual installment payments over the life expectancy of the surviving spouse. Such distributions are required to commence on or before the later of (i) December 31 of the calendar year immediately following the year in which the Participant would have attained age 70'/2. If the spouse dies before such payments begin, subsequent distributions shall be made as if the spouse had been 21 the Participant. For purposes of this subparagraph, payments will be calculated by use of the return multiples specified in Section 1.72-9 of the Treasury Regulations. c) Interpretation: The provisions of the Subsection 7.5 shall override any distribution options in the Plan that are inconsistent with this Subsection. All distributions under the Plan shall be made in accordance with Treasury Regulations issued under Section 401(a)(9) of the Code. The provisions of this Subsection shall be effective as of January 1, 1989. 7.6 Effect of Reemployment: If a Participant who separates from service again becomes an Employee, no distributions shall be made or continued to the Participant while he/she is so employed. Any amounts which the Participant was entitled to receive on his/her prior separation from service shall be held until the Participant or his/her Beneficiary is again entitled to a distribution under the terms of the Plan. 7.7 De Minimus Distributions: Notwithstanding any other provision of the Plan, if the Participant has not deferred any amount for a two (2) year period and the total amount of the Participant's Account under the Plan does not exceed five thousand dollars ($5,000), a Participant may elect to receive, or the Plan may elect to distribute without the Participant's consent, the entire value of the Participant's Account in a lump sum distribution. No subsequent distribution under this provisions of such Participant may be made, once such distribution occurs. Section 8 Nonassignability: The interest of a Participant in the contractual obligation of the Employer, establish by the Plan, shall not be assignable in whole or in part, directly or by operation of law or otherwise, in any manner. 22 Section 9 Miscellaneous: 9.1 No Effect on Employment: Neither the establishment of the Plan nor any modification thereof, nor the establishment of an Account, nor any agreement between the Employer and the Custodian, nor the payment of any benefits, shall be construed as giving to any Participant or other person any legal or equitable right against the Employer except as herein provided, and in no event shall the terms of employment of the Employee or Participant be modified or in any way affected hereby. 9.2 Construction: This Plan shall be construed, administered and enforced according to the Constitution and laws of the State of California. 9.3 Plan -to -Plan Transfers: Plan -to -plan transfers shall be permitted as follows: a) Transfers from Plan: To the extent and in the manner permitted under Section 457(e)(10) of the Code and the Treasury Regulations thereunder, the balance in the Account of Participant who is no longer an Employee and who subsequently becomes a participant in another eligible deferred compensation plan under Section 457(b) of the Code shall be transferred to his/her account in the plan of his/her new employer; provided that such plan provides for the receipt of such transferred amounts. If a Participant's Account has been transferred to such plan, the Participant shall not be entitled to receive any benefit under this Plan, notwithstanding anything in this Plan to the contrary. b) Transfers to Plan: If prior to becoming an Employee, an individual participated in another eligible deferred compensation plan under Section 457(b) of the Code, the Employer may in its discretion accept transfer of 23 any amount credited to the deferred compensation account of such Employee under that plan and, in the event of such transfer, shall establish for the Employee an Account under the Plan to which such amount shall be treated as an amount deferred under and subject to the terms of the Plan, except that no amount so transferred will be taken into account in applying the deferral limitations set forth in Subsection 5.1. Section 10 Amendment and Termination 10.1 Amendment and Termination: The Employer may at anytime and from time to time by action of its governing or appointing board as evidenced by an instrument in writing duly executed by the Employer modify, amend, suspend, or terminate the Plan in whole or in part (including retroactive amendments) or cease deferring Compensation pursuant to the Plan for some or all Participants. In the event of such an action, the Employer shall deliver to each affected Participant a notice of such modification, amendment or termination or a notice that it shall cease deferring Compensation; provided, however, that the Employer shall not have the right to reduce or affect the value of any Participant's Account or any rights accrued under the Plan prior to such modification, amendment, termination or cessation. 10.2 Interpretation: This Plan is intended to qualify as an eligible deferred compensation plan under Section 457 of the Code, and shall be interpreted and administered in a manner consistent with such qualification. The Employer reserved the right to amend the Plan to the extent that it may be necessary to conform the Plan to the requirements of Section 457 of the Code and any other applicable law, regulation or ruling, including amendments that are retroactive to the effective date of the Plan. In the event that the Plan is deemed by the Internal Revenue Service to be administered in a manner inconsistent with Section 457 of the Code, the Employer shall correct such administration within 24 the period provided in Section 457 of the Code. The Employer reserves the right to take such action and to such things as are required to make the Plan, as administered, consistent with Section 457 of the Code. Section 11 Plan Administration 11.1 Administration: The Plan shall be maintained by the Employer, which may recommend rules and regulations for the administration of the Plan consistent with the terms of the Plan. All rules and regulations recommended by the Employer shall be final and conclusive upon adoption by resolution of the City Council of the Employer. 11.2 Powers: The Employer shall have all powers to perform all duties necessary to exercise its functions including, but not limited to, the: a) Determination of Employee's eligibility, participation and benefits under the Plan; b) Establishment and maintenance of written records showing at any time the interest of a Participant in his/her book Account; c) Interpretation and construction of the provisions of the Plan; d) Direction of the Employer (or the Trustee/Custodian on behalf of the Employer) to make disbursement of benefits under the Plan; e) Appointment of such agents, advisors, counselors and delegates including an Administrator as may be necessary and appropriate for the administration and operation of this Plan and the delegation to such 25 agent, advisors, counselors and delegates of any of its discretionary and ministerial powers and duties in accordance with this Section; and f) Composition of any provision to Participants of all forms as described in this Plan. 11.3 Revocability of Administrative Action: Any action taken by the Employer with respect to the rights or benefits under the Plan of any person shall be revocable by the Employer as to payments or distributions not therefore made pursuant to such actions and appropriate adjustments may be made in future payments or distributions to a Participant or Beneficiary to offset any excess payment or underpayment theretofore made to such Participant or Beneficiary. Section 12 Gender and Number: The masculine pronoun, whenever used herein, shall include the feminine pronoun, and the singular shall include the plural, except where the context requires otherwise. 26