To: Board of Supervisors
From: Ann Elliott, Human Resources Director
Report Title: Create and Implement a new 401(a) Plan for Members of the Physicians’ and Dentists’ Organization of Contra Costa County (post-PEPRA hires)
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
1. ADOPT Resolution No. 2024/XXX approving the creation and implementation of a new 401(a) Plan for retirement savings for Members of the Physicians’ and Dentists’ Organization of Contra Costa County, effective December 1, 2024.
2. AUTHORIZE the County Administrator, or designee, to take all necessary actions to implement the 401(a) Plan with a new plan document that will be separate from the County’s 457(b) Deferred Compensation Plan.
FISCAL IMPACT:
The program is funded through plan participant fees. There is no fiscal impact beyond overhead administration support costs which are reimbursed annually through the plan.
BACKGROUND:
On October 8, 2024, a side letter amending the Memorandum of Understanding between the County and the Physicians’ and Dentists’ Organization of Contra Costa County (“PDOCC”) was approved, concerning the creation and implementation of an employee-funded 401(a) Plan for those PDOCC employees who became new (not reciprocal) members of CCCERA on or after January 1, 2013, also known as “post-PEPRA hires”.
The Plan is a defined-contribution plan within the meaning of Internal Revenue Service Code section 401(a). Its primary purpose is to provide Post-PEPRA PDOCC members with a source of retirement funds by deferring a portion of their base salary. The recordkeeper will administer the 401(a) Plan and is also the Plan Trustee.
All employees who are post-PEPRA hires employed in a classification represented by PDOCC will be automatically enrolled in the 401(a) Plan following establishment of the Plan or upon employment, whichever is later. Participation in the Plan is mandatory.
Each month, two percent (2%) of these employees’ base salary, not including differentials, additional pay, or special pays, will be deducted from their earned wages as a pre-tax 401(a) Plan contribution. Contributions for new employees will begin on the first pay date following ninety (90) days of employment or as soon as administratively feasible following determination of the new employee's status as a post-PEPRA hire.
Participating employees will be responsible for all costs and administrative fees associated with the 401(a) Plan.
CONSEQUENCE OF NEGATIVE ACTION:
If this is not approved, PDOCC employees will not have access to a 401(a) Plan, which serves as a retirement savings vehicle, through Contra Costa County.
THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY, CALIFORNIA
and for Special Districts, Agencies and Authorities Governed by the Board
body
IN THE MATTER OF the Board of Supervisors of the County of Contra Costa approving the establishment of the 401(a) plan.
WHEREAS, the County of Contra Costa (the “County”) entered into a Memorandum of Understanding between the County and the Physicians’ Dentists’ Organization of Contra Costa (“PDOCC”), which was effective on November 1, 2022, and will expire on October 31, 2025 (the “MOU”); and
WHEREAS, the County agreed in a Side Letter between the County and PDOCC dated October 8, 2024 (the “Side Letter”) to implement and maintain a tax-qualified defined contribution plan (the “Plan”) intended to meet the requirements of Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), to provide retirement funds for the benefit of PDOCC members, and their beneficiaries, who became new, members of the Contra Costa County Employees’ Retirement Association on or after January 1, 2013, without reciprocity (“Post-PEPRA Hires”).
NOW THEREFORE, BE IT RESOLVED, that the Board of Supervisors of the County of Contra Costa (the “Board”) hereby establishes the Plan in the form of the Great-West Trust Company LLC Non-Standardized Governmental 401(a) Pre-Approved Plan (Attachment A), pursuant to the specific provisions of the Adoption Agreement (Attachment B).
Designation of Pick-Up Contributions
WHEREAS, the Side Letter states that the terms of the Plan will provide that participation in the Plan is mandatory for all Post-PEPRA Hires employed in a classification represented by PDOCC and such Post-PEPRA Hires will be automatically enrolled in the Plan upon establishment of the Plan or upon their date of hire, whichever is later; and
WHEREAS, the Side Letter further states that the terms of the Plan will provide that Post-PEPRA Hires employed in a classification represented by PDOCC will make mandatory employee contributions of two percent (2%) of their base salary, not including differentials, additional pay, or special pay, to the Plan through a payroll deduction; and
WHEREAS, under section 414(h)(2) of the Code and related guidance from the Internal Revenue Service, such deductions from employees’ compensation qualify for pre-tax treatment only if the County takes formal action to designate the deductions, for tax purposes, as contributions “picked-up” by the County; and
WHEREAS, the Board, in accordance with Code section 414(h)(2), wishes to designate amounts deducted from employees’ compensation to fund benefits for Post-PEPRA Hires under the Plan as pick-up contributions; and
WHEREAS, the County will pick up all mandatory employee contributions made by the Post-PEPRA Hires, employed in a classification represented by PDOCC, to the Plan in accordance with section 414(h)(2) of the Code and all guidance issued thereunder.
NOW THEREFORE BE IT RESOLVED, the Board hereby approves the following:
1. This resolution applies to all contributions that are required to be made by any eligible employee of the County as a participant of the Plan in accordance with the MOU and Side Letter, on a regular payroll deduction basis and which are paid to the Plan and credited to employee accounts.
2. Although designated as employee contributions and deducted from employees’ compensation, these contributions shall, for tax purposes, be characterized as “picked up” by the County in accordance with Code section 414(h)(2), and shall be treated as paid by the County in lieu of contributions by the employee.
3. Post-PEPRA Hires in a classification represented by PDOCC shall not have the option of choosing, directly or indirectly, to receive the contributions instead of having the contributions paid by the County to the Plan.
4. The County shall pay to the Plan the contributions designated as employee contributions from the same source of funds as used in paying base salary.
5. Employee contributions that are picked up in accordance with this resolution shall result in tax deferral of the contributions to the extent provided under the Code, Treasury Regulations and other guidance issued thereunder.
6. This resolution establishes and adopts the County’s pick-up practices in accordance with Revenue Ruling 2006-43 for contributions made by Post-PEPRA Hires in a classification represented by PDOCC.
7. The County shall comply with all reporting, contribution, and other administrative requirements established by the Plan with respect to all Post-PEPRA Hires in a classification represented by PDOCC whose contributions are picked up in accordance with this resolution.
Appointment of Trustee and Plan Administrator
WHEREAS, Section 2.1 of the Plan authorizes the Board to appoint a Trustee under the Plan; and
WHEREAS, Section 2.2 of the Plan authorizes the Board to appoint an Administrator under the Plan and delegate administrative authority under the Plan.
NOW THEREFORE BE IT RESOLVED that the Board hereby appoints the County’s Deferred Compensation Recordkeeper as Trustee under the Plan; and
BE IT FURTHER RESOLVED that the Board hereby appoints the County Administrator as Administrator under the Plan; and
BE IT FURTHER RESOLVED that the Board delegates administrative authority under the Plan to the County’s Deferred Compensation Committee, who shall receive reports, notices, etc., from the recordkeeper and investment consultant; shall make recommendations to the County Administrator on necessary actions; and
BE IT FURTHER RESOLVED that the Board authorizes the County Administrator of the County, or his or her designee, to take all necessary actions to implement the Plan.