HomeMy WebLinkAboutAgenda - 05-18-1999 - 9eOrange County
Board of Commissioners
Action Agenda
Item No. t~- e
Action Agenda Item Abstract
Meeting Date: May 18, 1999
Subject: Employee Pay and Benefits -Follow Up Report on 401(k) Plan
Department: Personnel
Public Hearing: (Y/1~ No
Attachment(s):
1 - "Pay Proposal" from October 13, 1998
Employee Compensation Work Session
2 -Approved Minutes from October 13, 1998
Work Session
3 - 401(k) Plan Information Updated from
October 1998 Pay and Benefits Report
4 - State 401(k) Plan letter confirming options
5 - 401(k) Plan Options and Cost Estimates
Information Contact:
Elaine Holmes, Personnel Director
Telephone Numbers: - - ezt. 2550
Hillsborough 732-8181
Chapel Hill 968-4501
Durham 688-7331
Mebane 227-2031
Purpose: To consider the 401(k) plan follow up information received in the May 11,
1999 Boazd of Commissioners' work session and provide direction to staff
on the type of plan option the Board wishes to consider for 1999-00.
Background: On Apri121, 1999 the Board held a work session on employee compensation
for 1999-00. In that work session, the Boazd reviewed the planned pay and
benefits components for 1999-00 from its October 13, 1998 work session,
including the plan to implement a County 401(k) Plan contribution effective
July 1, 1999.
In the April 21 work session, the Board reaffirmed its desire to implement a
401(k) contribution but wished to revisit the:
^ Previous Boazd discussion related to the type of contribution and
contribution amount, and
^ 401(k) Plan information generally, including types of contribution
options available to the County.
At the May 11, 1999 Boazd work session, the Boazd received the updated,
comprehensive report on the State 401(k) plan and County contribution
options for 1999-00 that it had requested in the April 21 employee pay and
benefits work session. That information also is provided here as attachments
to this abstract.
Previous Discussion
In prepazation for the October 13, 1998 work session, the Boazd received a
comprehensive pay and benefits report. This included an extensive benefits
review and 401(k) Plan information. In support of the Board's discussion of
employee pay and benefits at the October 13 work session, then Boazd Chair
Mazgazet Brown presented a "Pay Proposal" (Attachment 1) for the Board's
consideration. This provided under "Additions to the Pay and Benefits
Plan:"
"To be established a 401-K plan effective July 1, 1999 - a county
match based on flat dollar amount of $15.00 per pay period"
In the October 13 work session the Board discussed the option of a County
match as compazed to anon-matching, across-the-boazd contribution. At the
conclusion of that work session, the Board adopted Commissioner Brown's
proposal including the $15 per pay period amount with the modification to
not make a decision about the in range increase amount until a decision was
made about the cost of living increase for 1999. Staff was not cleaz about
the end result of the Boazd's discussion of the matching vs. non-matching
401(k) contribution. The minutes for the October 13 work session
(Attachment 2) reflect anon-matching contribution.
In presenting the October 13 planned pay and benefits componerrts for the
Boazd's review and confirmation or clarification, staff presented the $15
across-the-boazd contribution 401(k) County contribution as the last
understanding of the October 13 discussion outcome for the Board's
confirmation or clarification.
Updated 401(k) Plan Information
Attachment 3 to this abstract is the updated 401(k) information from the
October 1998 Pay and Benefits Report. The updates include:
^ Current numbers of employees voluntarily participating in the 401(k)
plan, including salary level information, and
^ Current numbers of other local government employers participating in
the 401(k) and the types of plans that they have (matching as compazed
to non-matching, percentage of salary as compazed to flat dollaz
contribution).
As part of the updating process, staff met again with the State 401(k) Plan
representative and reviewed in detail the types of 401(k) contribution
options available to the County. This indicated no change from the options
previously identified in the report. Attachment 4 is a letter from the 401(k)
Plan representative confirming the options available.
Financial Impact: Attachment 5 shows the various 401(k) Plan options and updated cost
estimates for 1999-00. In the Apri121 work session, the Board said that it
wished to consider options within the estimated cost range of the $15 per
pay period across the boazd amount so the options shown reflect these
amounts. This amount of funds also will be available within the Manager's
Recommended Budget for 1999-00. At this time, the Board is not being
asked to make a decision on funding or to appropriate funds. These
decisions will be part of the final budget deliberations in June.
3
Recommendation(s): The Manager recommends the Board provide direction to staff on the type of
plan option it wishes to consider for 1999-00.
H:\e\99401 abs
May 12, 1999
ATTACI~IENT 1
PAY PROPOSAL
Desuspend the current payplan and adopt the 1997-98 plan for this year.
2. Starting July 1, 1999 - adopt a 2-year employee pay plan and benefits
package including the following:
± COLA/Market based pia _ see p,aQe 15 of the notebook
* Addressing the salary progression schedule - after the first year a 2.5%
or equivalent to 112 step increase will be given to all employees that rate
effective or higher on the WPPR (replaces 1.25 salary progression)
* Meritorious Service Awards :exceptional hi hest and superior 2-tier award
ro ram ,
Exceptional -employees would receive a meritorious award of $1500 in
a lump sum payment, not to be attached to base pay. Exceptional is those
employees who excel in 100% of their job duties.
* Superior -employees would receive a meritorious award of $750 in a
lump sum payment, not to be attached to base pay. Superior is those
employees who consistently exceed job expectations at least 95% of the
time.
Employees rated at this level will receive a certificate of recognition from the
Board of County Commissioners as recommended by the County Manager and
the County Manager may also recommend other recognition for these
employees
* Longevity -remains at the current level
* COLA -determined annually by the Board of Commissioners
ADDITIONS TO THE PAY AND BENEFIT PLAN
* to be established a 401-K plan, effective July 1, 1999 - a county match
based on flat dollar amount of $15.00 per pay period -see page 67, tab
"H"
* Personal leave days - 2 days to be used as determined by employees and
approved by the department head
* Equity/Retention Fund to be used to address re-establishing equitable
salary relationships among employees in a work unit and retention -adopt
as presented in the notebook -see .page 22 Tab "B"
1 APPROVED MAY 4, 1999 ATTACHMENT 2
2 MINUTES
3 ORANGE COUNTY BOARD OF COMMISSIONERS 5
4 WORK SESSION
5 OCTOBER 13, 1998
6
7 The Orange County Board of Commissioners met for a work session on October 13, 1998 at
8 7:30 p.m. in the meeting room at the Government Services Center, Hillsborough, North Carolina.
9
10 COUNTY COMMISSIONERS PRESENT: Chair Margaret W. Brown, and Commissioners Moses
11 Carey, Jr., William L. Crowther, Alice M. Gordon and Stephen H. Halkiotis.
12 COUNTY ATTORNEY PRESENT: Geoffrey Gledhill
13 COUNTY STAFF PRESENT: County Manager John M. Link, Jr., Assistant County Managers Rod
14 Visser and Albert Kittrell and Clerk to the Board Beverly A. Blythe (All other staff members will be identified
15 appropriately below)
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18 NOTE: ALL DOCUMENTS REFERRED TO IN THESE MINUTES ARE IN THE PERMANENT
19 AGENDA FILE IN THE CLERK'S OFFICE. ALL RECORDINGS OF THE MEETING
20 WILL BE KEPT FOR 5 YEARS.
21
22 ORANGE COUNTY EMPLOYEE COMPENSATION
23
24 John Link said that we are here to respond to questions from the County Commissioners
25 about employee compensation.
26
27 Chair Brown made reference to a proposal that she distributed with an outline of issues that
28 she feels are important. She explained her proposal in detail. She said she felt a central issue was
29 salary progression and her proposal was based on Option 1 -the COLA/market based pay option -
30 in the pay and benefits report prepared by the Personnel Director Elaine Holmes. A copy of her
31 proposal is attached to these minutes.
32
33 Chair Brown emphasized the importance of reinstating our present pay plan for the year
34 (1998-99) and to implement a plan effective July 1, 1999 for two years.
35
36 Commissioners Carey and Gordon noted that Commissioner Brown's proposed plan has the
37 same foundation as our current pay plan but increases the amounts.
38
39 Commissioner Gordon said that she was interested in attempting to match the award more
40 closely with achievement. She said that the effect of Option 1 is that about everyone gets the same
41 increase regardless of performance. Employees will get 2.5% added to their salary. In addition
42 they will receive a lump sum amount if they achieve a superior or exceptional rating. She noted that
43 Option 3 -Department Based pay in the material prepared by the Personnel Director - is the one
44 that gives more flexibility to match pay and achievement and she compared it with a similar salary
45 program at the University of North Carolina.
46
47 Chair Brown made reference to the equity/retention fund and said that allocation would be
48 determined by the Board of County Commissioners each year. It is suggested that this amount be
49 $25,000 for the first year.
50
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2
1 Elaine Holmes explained the pay and benefits cost worksheet which is hereby incorporated in
2 these minutes by reference. She answered various questions from the County Commissioners.
3 Commissioner Gordon asked about meritorious awards and how the funding was estimated.
4 Personnel Director Elaine Holmes explained that, for purposes of giving Commissioners' cost
5 figures to consider on the spreadsheet in the report, she figured the percentage of employees who
6 would fall into the superior range at 17-18% and the exceptional range at 7 percent or about 25%
7 percent of employees in total receiving a superior or exceptional award. She said that this keeps in
8 place the WPPR but provides a new way to look at the meritorious service awards.
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10 John Link explained his proposal in the recommended budget for 1998-99. Elaine Holmes
11 explained salary compression and the impact this has on recruitment and morale.
12
John Link said that they are trying to respond to the County Commissioners' concerns. Staff
looked at two major issues -one is how do we reward the top 5% of employees. It could be one
rating or two separate ratings as Chair Brown has indicated. The most important aspect is to be
able to move the majority of the employees up the salary scale as long as they are performing at
proficient levels. He feels that Chair Brown's proposal would address these two elements. The
meritorious award system would reward those who are exceptional or superior. He emphasized that
keeping their WPPR is still very important. With Chair Brown's plan, the compression issue would
be addressed with greater speed and he supports that. The plan also adds two new personal leave
days.
23 Commissioner Halkiotis said that overall he likes what has been presented by Chair Brown.
24 He feels that personnel pay plans can get very confusing. He likes this plan because it is simple
25 and people can be rewarded for longevity and also it provides a merit plan to reward high achievers.
26 He suggested that the Board pursue the COLA option including the market-based pay.
27
28 Commissioner Halkiotis suggested that new positions be brought forth in February or March.
29
30 Commissioner Carey asked about the 401 K proposal. He feels that the County should
31 contribute regardless if it is matching or not. This would benefit those on the lower end of the scale
32 who may not be able to contribute.
33
34 Commissioner Gordon said that in terms of additions, she feels it would be a good idea to do
35 a 401 K and suggested that an equity retention fund could address some of the salaries that are not
36 in line.
37
38 John Link said that he is developing a plan for those employees who need improvement in
39 certain areas. If the department addresses those situations and the employee improves, he will
40 not get involved. However, if things do not improve, Commissioner Gordon has suggested that he
41 get involved with those situations.
42
43 Chair Brown explained the two step plan. The first step would allow all employees to
44 progress on the salary scale unless they are rated "needs improvement" or "unsatisfactory". The
45 meritorious awards would reward those employees who excel and we would develop a recognition
46 program for them. John Link said that they would recognize them and talk about what they have
47 achieved. He will develop a recognition program for these employees.
48
49 Commissioner Carey said that he supports the proposed plan. He commended Chair Brown
50 for coming up with this plan. The information was very revealing. He feels we should at least do as
51 much for our employees as we do for the school systems
3
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2 A motion was made by Commissioner Carey, seconded by Commissioner Halkiotis to
3 approve the plan as submitted by Chair Brown with the 401 K contribution being nonmatching.
4
5 Commissioner Gordon said that she still has a concern that the proposed pay plan does not
6 do anything different. She would like to have some portion of the plan to be flexible so that pay and
7 performance are more closely matched, but she understands that this is not the option the Board is
8 ready to pursue She also suggested that the County Commissioners each year decide the amount
9 for COLA and the in-range percentage and asked that Commissioners defer making a decision on
10 the 2.5% amount for in-range salary progression until it is deciding on the COLA for 1999-00.
A friendly amendment was added by Commissioner Gordon and accepted by consensus that
the County Commissioners would decide the amounts for COLA and in-range increase percentage
at budget time.
The motion included reinstating the current pay plan for 1998-99 and appropriating $118,734
from fund balance to provide the needed additional funding.
VOTE: UNANIMOUS
CLOSED SESSION
A motion was made by Commissioner Halkiotis, seconded by Commissioner Crowther to
adjourn into Closed Session by authority of 143-318.11 to consult with an attorney in order to
preserve the attorney-client privilege between the attorney and the public body.
VOTE: UNANIMOUS
RECONVENE INTO OPEN SESSION
RESOLUTION - SPORTSPLEX
A motion was made by Commissioner Carey, seconded by Commissioner Halkiotis to adopt
the resolution as stated below:
NORTH CAROLINA
ORANGE COUNTY
RESOLUTION
WHEREAS, on October 1, 1991 the Orange County Recreation and Parks Advisory Council
recommended that Orange County enter into a joint venture with the Triangle Community Center for
construction of a public swimming pool in central Orange County which would fulfill one of the goals
outlined in Orange County's adopted Master Recreation and Parks Plan; and
WHEREAS, Orange County has made a commitment to its residents through its Master
Recreation and Parks Plan to providing swimming pool and other recreation programs available to
the citizens of Orange County at a reasonable cost and without discrimination among users; and
WHEREAS, on March 1, 1994 Orange County and the Orange County Community Activity
Corporation entered into aFacilities/ Services Agreement related to the construction and the
operation of a Community Activity Center which would include three swimming pools and other
facilities including an ice rink; and
WHEREAS, the Orange County Community Activity Corporation, anon-profit organization
authorized to own, operate and manage recreational activities in the County, agreed to construct
and finance the construction of a Community Activity Center through a "63-20" financing in which the
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1 corporation would issue its own corporate debt and in which Orange County would not be liable for
2 any payment of that debt; and
3 WHEREAS, Orange County determined in 1994 that it was in the interest of the County and
4 the people of Orange County that instead of building and operating its own pool, the County contract
5 with Orange County Community Activity Corporation to provide public swimming pools and
6 recreation services through the operation of the Community Activity Center pools for the benefit of
7 Orange County residents; and
8 WHEREAS, Orange County's commitment, as contained in the March 1, 1994
9 Facilities/Services Agreement, to Orange County Community Activity Corporation and to providing
10 swimming pool and other recreation programs to the residents of Orange County without
11 discrimination continues.
12 NOW, THEREFORE, BE IT RESOLVED that the Orange County Board of Commissioners
13 continues to support its goals and objectives:
14 1. in the operation of the Sportsplex facilities and continues its commitment, contained in
15 the March 1, 1994 Facilities/Services Agreement between it and the Orange County Community
16 Activity Corporation (OCCAC), to the facility and its operations providing swimming pool and other
17 recreation programs to the citizens of Orange County on a nondiscriminatory basis without
18 discrimination among users and in compliance with all equal employment/affirmative action
19 requirements imposed under national, state or local law in exchange for the commitment of OCCAC
20 or its successor to:
21 (a) retain or employ maintenance personnel who are trained and qualified to
22 operate and maintain equipment, chemicals and supplies; to perform scheduled maintenance and to
23 complete all periodic inspections associated with facilities such as the Community Activity Center
24 (the CAC);
25 (b) retain or employ a facility manager and aquatics and skating directors and
26 operators (1) meeting all specifications and qualifications required by national, state and local
27 regulatory bodies or organizations whose standards are recognized in the aquatic and skating
28 communities; and (2 experienced in operations of aquatic and skating centers of the size and scope
29 of the CAC and (3) experienced in planning and implementing aquatics and skating instructional
30 classes, innovative aquatic and skating programs and the schedule of activities proposed each year
31 by the County Recreation and Parks Department;
32 (c) make the facilities and programs of the CAC available to the public without
33 discrimination among users and in compliance with all equal employment/affirmative action
34 requirements imposed under national, state or local law;
35 (d) establish fees and charges for the use of the CAC competitive with similar
36 facilities located in the County, but with preferential fees and charges to residents of the County for
37 all pool and skating uses and activities;
38 (e) assist the County Recreation and Parks Department in providing special pool or
39 skating activities at the CAC for its program participants;
40 (f) establish a schedule of hours, uses and activities for the pool and skating that is
41 satisfactory to the County, with changes to such schedule to be made from time to time or in special
42 circumstances through agreement between the Corporation and the County Recreation and Parks
43 Department.
44 2. To continue to explore with OCCAC and Eaton Vance (the owner of the OCCAC
45 bonds used to finance the construction of the CAC) ways in which the success of the County's goals
46 and objectives with respect to the Sportsplex can be achieved.
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50 Upon motion of Commissioner Moses Carey. Jr., seconded by Commissioner Stephen H.
51 Halkiotis, the foregoing resolution was adopted this the 13th day of October , 1998.
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I, Beverly A. Blythe, Clerk to the Board of Commissioners for the County of Orange, North
Carolina, DO HEREBY CERTIFY that the foregoing is a true copy of so much of the proceedings of
said Board at a meeting held on October 13. 1998 as relates in any way to the adoption
of the foregoing and that said proceedings are recorded in Minute Book No. 27 of the minutes of
said Board.
WITNESS my hand and the seal of said County, this 15th day of October , 1998.
Clerk to the Board of Commissioners
VOTE: UNANIMOUS
ADJOURNMENT
With no further items to come before the County Commissioners, Chair Brown adjourned the
meeting. The next meeting of the County Commissioners will be held on October 20, 1998 at 7:30
p.m. at the Southern Human Services Center, Chapel Hill, North Carolina.
Beverly A. Blythe, Clerk
Margaret W. Brown, Chair
NOTE: The pay proposal, as presented by Chair Brown, is attached to these minutes.
10
ATTACHMENT 3
401(k) Plan Information
1. Background
The North Cazolina legislature created the Supplemental Income Plan of North Cazolina
[NC 401(k) Plan] in 1984 to offer employees atax-deferred investment program for their
retirement. The plan is established under Section 401(k) of the Federal Internal Revenue
Code.
2. Plan Governance
The Plan is sponsored by the State of North Carolina and is governed by the Department
of the State Treasurer and the Plan's Board of Trustees. The Boazd is composed of
members of the Boazds of Trustees for the State Retirement System and the Local
Government Employees Retirement System. The State Treasurer and the Boazd have
contracted with Branch Banking and Trust Company (BB&T) to administer the plan.
3. Plan Eligibility
The Plan is available to employees who aze members of the State Retirement System or
the Local Government Employees Retirement System.
4. How the Plan Works
^ An employee and/or employer makes a contribution to the plan through payroll
deduction. The contribution goes into the employee's individua1401(k) account that
is owned by the employee.
/ An employee's contributions are pre-tax; that is, they aze sheltered from Federal
and State income taxes and not subject to taxes until withdrawal.
/ An employer's contributions aze pre-tax and also are exempt from mandatory
deductions for Social Security and Local Government Employees Retirement
System.
^ The employee selects the investment options for the funds in his or her account from
a range of options that include bank investments or mutual funds.
^ Funds may be withdrawn:
/ At retirement in a variety of payout options to provide retirement income.
/ For certain financial hazdships.
/ Through a loan provision in which employees borrow from the account and pay
back to themselves for any reason such as for medical or college expenses.
11
/ At age 55 if separated from service or age 59 1/2 if still employed.
5. Benefits for the Employee
^ Retirement income and security
^ Tax savings
^ Full ownership, 100% vested immediately
^ Hardship withdrawal provisions
^ Loan provision
6. Employee Participation
^ One of the key purposes of an employer contribution is to encourage employee
participation in the supplemental retirement plans. This supports employees in
actively planning for retirement. The experience of the 401(k) plan has been that an
employer contribution has the effect of significantly increasing employee
participation.
^ As of Apri130, 1999, 159 Orange County general government employees participate
in the 401(k) plan by making an employee contribution. By salary grade, the
following numbers of employees make a voluntary contribution:
Salary Grade Category Number Employees
Grades 57-63 46
Grades 64-70 83
Grades 71 and over 30
For the 159 general government employees making a voluntary contribution, the
average salary grade is grade 65. The average salary is $28,000. (For County
employees as a whole, the average salary grade is 65 and the average salary is about
$32,000.)
^ As of Apri130, 1999, 137 employees participate in the 457 Plan (another type of
supplemental retirement plan with some different provisions as outlined in
Attachment 1). By salary grade the following numbers of employees make a
voluntary contribution.
Salary Grade Category Number Employees
Grades 57-63 35
Grades 64-70 73
Grades 71 and over 29
For these 137 employees, the average salary grade is 66 and the average salary is
about $39,000.
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7. Benefits to the County
^ An employer contribution to the 401(k) plan would support the County in recruitment
as it competes with other local government employers and private employers.
Attachment 2 shows azea local governments with supplement retirement
contributions.
There are about 140,000 active plan participants state-wide. About 2421ocal
government employers state-wide make an employer contribution to the plan for
general government employees, including 38 counties.
^ An employer contribution to the 401(k) has cost savings to the County over cash
payments. An employer contribution to a 401(k) plan is a declazed expenditure for
public purpose and therefore exempt from FICA and Retirement contributions.
^ An employer contribution to the 401(k) plan also would offer some disability
protection wherein employees can access money through the loan and hazdship
provisions. Currently the County does not offer an employer paid disability insurance
plan. Some local government employers in the azea offer short-term and/or long-term
disability coverage. Unlike making premium payments to purchase disability
insurance, money contributed to a 401(k) plan is there and available to the employee
for a variety of financial hardships.
^ An employer contribution to the 401(k) plan would significantly increase employee
morale. It is most appreciated by employees that their employer is helping to plan for
future retirement as well as meet immediate needs such as college tuition, medical
expenses, purchase of a primary residence, or the like.
^ An employer contribution to the 401(k) plan would offer additional incentive for
voluntary participation.
^ An employer contribution to the 401(k) plan would support the County's efforts in
retaining qualified employees as it competes with other local government employers
and private employers.
8. Types of Employer Contributions
There are three forms in which an employer contribution may be made to the 401(k) Plan.
These are listed and described below.
a. Across the Board Contribution Option
(1) An across the boazd contribution is one in which the County makes a employer
paid contribution to employees without regazd to whether or not the employee
makes a contribution. An across the boazd contribution may be a fixed percent of
salary or a flat dollar amount provided that each employee receives the same
contribution.
(2) Of the 2421ocal government employers who make a 401(k) contribution, 201 (83
percent) make an across the boazd contribution.
(3) With an across the boazd contribution, the effective date could be effective on a
retroactive or current basis.
b. Matching Option
(1) A matching option is one in which the County makes a contribution if the
employee makes a contribution. A matching contribution may be up to a
percentage of salary or a flat dollar amount provided that the employee elects to
participate by making a voluntary contribution.
(2) The 401(k) matching option is a new provision now available to all local
government employers effective January 1, 1998.
(3) Of the 242 employers, 43 (18 percent) provide for a matching option. Of the 38
counties, four provide a matching contribution.
(4) The minimum employee 401(k) Plan contribution is $10 a pay period for the 24
pay periods in which deductions aze made. This would be the minimum required
for any matching option.
(5) The match may be dollar for dollaz up to specified limit such as two percent of
salary or it may be that any employee contribution triggers the full employer
match such as if the employee contributes $10 a pay period then the employer
contributes two percent of salary.
(6) A matching option must be effective on a prospective basis and may not be
retroactive.
(7) The employee may not match by designating a percentage of his or her salary for
the contribution. The match must designate a specific dollar amount each pay
period. This means any increase in earnings such as overtime pay or other
requires the employee do a change form in order to maximize any match which is
based on a percentage of salary.
(8) Several examples of employer matches aze listed below:
Craven County matches voluntary employee contributions up to 2 percent of
salary.
Harnett County matches a 1 percent employee contribution with a 1 percent match
(employee has to contribute 1 percent to get the match).
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Scotland County matches 3.75 percent of salary if the employee contributes
anything.
c. Combination of Across the Board contribution and a Match
(1) The 401 (k) Plan advises the two options also may be combined. Each part of the
combination must apply to all employees and the amounts may not vary.
(2) An example would be if an employer made a $10 a pay period across the board
contribution and a match of up to one percent of salary. A combination may not
be in a form such as $20 or one percent of salary, whichever is higher.
(3) At present, five employers have a combination plan. One of these is a county.
Rutherford County has a two percent across the board contribution and a one
percent match.
9. Impacts (Pros/Cons) of Across the Board Contribution
a. Benefits more the lower salaried employee who may have more difficulty making a
matching contribution.
b. Is more competitive in the labor market since this is the most frequent practice in
local government.
c. Could be effective retroactive to July 1, 1999, based on a Board decision with budget
adoption on June 21, 1999.
d. Encourages employee 401(k) participation but not as strongly as a match.
10. Impacts (Pros/Cons) Matching Option
a. Strongly encourages employee participation in the 401(k) plan.
b. Higher salaried employees may be more able to take advantage of the match than
lower salaried employees.
c. Must be effective on a prospective basis. Based on a Board decision on June 21, 1999
with budget adoption, could be effective August 23, 1999 with the September 3
PaY~Y•
d. More difficult for employees to maximize the employer contribution (if the employer
contribution is a percentage of salary) because a change form must be completed by
the employee with every change in salary.
e. Is more complex to communicate and requires significantly more administrative time
than an across the boazd contribution.
11. Impacts (Pros/Cons) of Flat Dollar Amount Vs a Percentage of Salary
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a. A flat dollaz amount provides a relative greater percentage increase to a lower salaried
employee. The following chart shows the impact of a $10, $15 and $20 a pay period
contribution as a percentage of salary.*
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Amount Per Pay Period Yields
At a salary of $10
($240 yr) $15
($360 yr) $20
($480 yr)
$17,561 (pay plan
minimum) 1.37% 2.05% 2.73%
$25,000 .96% 1.44% 1.92%
$32,000 .75% 1.13% 1.50%
$50,000 .48% .72% .96%
*Based the matching option for 24 pay periods.
b. While a flat dollar amount serves the objective of addressing the lower salaried
employees, it does not serve as well the objective of competing with the other
employers in the mazket who offer a 401(k) Plan contribution as a percentage of
salary. Of the 201 employers who make an across the Boazd contribution, nine or
four percent make a flat dollaz amount contribution and 192 or 96 percent make a
percentage of salary contribution. One county makes a flat dollaz amount
contribution.
12. Waiting Periods
The County could make a 401(k) plan contribution or match effective with the hire date
or could impose a waiting of up to six months from the hire date.
13. Employers Making 401(k) Contributions or Matches
Attachment 3 is a list provided by the 401(k) Plan of governmental employers who make
401(k) Plan contributions.
14. Types of Options and Cost
The separate chart provided with the agenda abstract shows various 401(k) contribution
and matching options and the estimated County costs.
15. Benefits as a Percent of Salary
If the County adopted a one percent of salary 401(k) plan contribution for general
government employees, the County's benefits as a percent of salaries would change from
the current 25.8 percent to 26.6 percent.
K~health/401 info
May 6, 1999
16
Attachment 1
State 401(k) Plan and 457 Deferred Compensation Plan
Comparison Summary
Benefits 401(k) Plan 457 Deferred
Compensation
Contributions
Minimum Monthly
$20.00
$20.00
Maximum Annual
Withdrawal Terms
Penalties
Transfers
Investment Options
Number of Transfers
Allowed
Loans
20% of annual Boss salary
up to $10,000
- Termination
- Retirement
- Death
- Age 59 '/z (regazdless of
employment status)
- Sepazation from service after
Reaching age 55
- Disability
- Financial Hardships:
Medical Expenses
College Tuition
Eviction
Foreclosure
Purchase of primary residence
Some withdrawals prior to age
59'/~ may be subject to 10% IRS*
Penalty.
A 401(k) plan is transferable to
Another 401(k) plan, IRA or
Another qualified plan.
10 (includes 7 Mutual Funds & 3
Bank Investment Contracts -
BIC)
Unlimited transfers allowed
(5 yeaz BIC -Penalty of 3 months
of interest if moved before
maturity)
Yes - loans for any reason such as
college education, home
improvement or other. The
employee bon ows from his or her
account and pays him or herself
back with interest.
25% of annual taxable salary
up to $8,000
- Termination
- Retirement (regazdless of age)
- Death
-Unforeseeable emergencies
which cannot be budgeted
for as determined by the plan
(catastrophic events)
Withdrawals without a 10% IRS
penalty under above listed terms
regardless of age.
A 457 plan is transferable only to
other 457 plans.
49 (includes 48 Mutual Funds &
Fixed Account)
Mutual Funds
- Unlimited same day transfers
Allowed with no penalty
Fixed Accounts Only
- No more than twice per yeaz
- May not exceed 20% of
account value
-with no penalty
None
i
Benefits 401(k) Plan 457 Deferred
Compensation
Fees:
Administrative None None
Asset Fee 0.30% annually on all accounts 0.70 - 0.90% annually on Mutual
Fund options
Loan Fee $60.00 for each loan Not applicable
Catch Up Option Calendar yeaz catch up available. Calendaz year catch up available.
Also
An individual can contribute up to
$15,000 per yeaz for three yeazs
prior to retirement eligibility.
Universal Life and
Term Life Insurance No Yes (premiums aze paid with pre-
tax dollars)
Additional Information Related to Employer Contributions
FICA Not subject to FICA taxes Subject to FICA taxes
Retirement Not subject to retirement Not subject to retirement
Contributions
Markets Private Sector nationwide and Public Service nationwide
N.C. Governmental employees Govennmental employees only
only
Contributions Fixed contributions amounts: Contributions may be made to all
Contributions aze to be made to all employees on the same basis or
general employees exactly the on a tiered basis based on
same. longevity, job classification,
salary, etc.
Waiting Periods County may elect no waiting Any waiting period as the County
period or may impose up to a six decides.
month waiting period.
Amount of I May be a percentage or may be a I May be a percentage or may be a
Contributions flat dollaz amount flat dollaz amount
Matching Options I Yes, available.
and/or combinations
Yes, available.
17
18
Pros/Cons Summary - 401(k) Plan As Compared to 457*
1. Employer contributions to 401(k) plan aze not subject to Social Security. Thus
County cost for the 401(k) contribution is about 7.65 percent less.
2. Several 401(k) plan provisions are stronger:
^ A loan provision for any reason is available. This enables the employee to access
funds without withdrawal and does not require the employee demonstrate
hazdship. Such loans may be used for college education, home improvement or
any other reason. 'fhe employee borrows from himself or herself and pays the
money back to him or herself with interest. Among other things, this may provide
some disability protection.
^ Account fees paid by the employee aze lower.
^ There is greater portability.
3. Other local government employers with whom the County competes primarily offer
the 401(k) Plan.
4. The 457 Plan permits approved withdrawals without an IRS penalty. Some 401(k)
Plan withdrawals may involve an IRS penalty. [A 401(k) loan does not involve an
IRS penalty.] The terms to qualify for withdrawal aze significantly more stringent
under the 457 than the 401(k).
5. The 457 plan permits different employer contribution amounts to different employee
groups such as by service or salary. The 401(k) Plan does not.
6. The 457 plan offers more investment options.
* Differences primarily result from the different sections of the Internal Revenue Code
[401(k) or 457] under which the plans operate.
(K:\Benefits\Misc\401 &457.Doc)
May 4, 1999
19
Attachment 2
Area Local Government Employers
Supplemental Retirement Contributions
Employer Amount Match?
Alamance County 2% No
Carrboro 3% No
Chapel Hill 5% No
Chatham County 2% No
Durham City 5% No
Durham County 5%* No
Hillsborough 4.5% No
Orange Water and Sewer Authority Years Service Pav Period Amt**
0-4 0
4-9 $20
10-14 $30
15+ $40 No
Person County 3% No
Raleigh Up to 1.75% ** Yes
Wake County 5% No
Orange County - _
* To 401(k) or 457 plan
**To 457 plan
A-B Tech Comm Coll $25/mon
Aberdeen 5%
Ahoskie 5%
Alamance-Caswell Mental Health 3%
Alamance County 2%
Angier 5%
Anson County 2%
Apex(town) 4.5%
Archdale 5%
Ashe County 2%
Asheville 3%
Ashevile Reg. Airport 4%
Bald Head Island 5%
Beaufort (town) 1
Belhaven 2%
Belmont 5%
Benson 3.5°k
Bessemer City 2%
Bethel 2°h
Beulaville 5%
Biltmore Forest 3%
Black Mountain 3%
Blue Ridge Center 2%
Boiling Spring Lakes 5%
Boiling Springs 5%
Brunswick County 2°h
Buncombe County 5%
Bunc County Air Pollution 5%
Burke-Catawba Confinement 2~0
Burke County 2°k
Burke County Dept. Social Services 2%
Burke County Health Dept. 2%
Burlington 5%
Burlington Graham ABC 5%
Cabarrus County 5%
Cabarrus Health Alliance 5%
Cape Fear COG 1 %
Carrboro 3%
Carteret County 2%
Cary 5%
Caswell Beach 5%
Centralina COG 2.5%
Chapel Hill 5%
Chatham County 2%
Cherryville 5%
Clayton 2%
Cleveland County 5%
Coastal Regional Solid Waste Mgmt. 5%
Columbus (town) $10 x 52
Concord 2.5%
Concord ABC 2.5°r6
Conover 5%
Cornelius 5%
Craven County 2°h
Craven County Airport Auth. 2%
Creedmoor 4%
Cumberland County ABC 5%
Currituck County 4.52%
Dallas 2%
Davidson (town) 5%
Davie County 2°~
Fletcher 5%
Franklin County 3%
Fuquay-Varina 3%
Gamer 3%
Gaston (town) 2°k
Gibsonville 4%
Graham (city) 5%
Greensboro ABC 5%
Greenville $25 x 26
Greenville Housing Authority $25 x 26
Greenville Utilities $25 x 26
Grover 5%
Guilford College Vol. Fire Dept.. 5%
Guilford County 5%
Guilford Fire Dist 13 2%
Harnett County 1
Havelock 5%
Haw River 4.67°k
Henderson (city) 4%
Hertford (town) 2%
High Point ABC 5%
Hillsborough 4.5%
Holy Springs 2.5%
Hudson 1 %
Huntersviile 5°r6
Iredell County 5%
Jamestown 2%
Johnston County 5%
Johnston County ABC 5%
Johnston/Smith Library 5%
Jonesville 4.67%
Kenly 2%
Kill Devil Hills 3°k
King 5%
Kings Mountain 2%
Kinston 1.5°k
Knightdale 2°k
Laurinburg 5%
Lee County 3%
Lee-Harnett Mental Health 10%
Lenoir County 5%
Lexington 2%
Lillington 5%
Lincolnton Housing Auth 3°~
Long Beach 1.51 °~
Louisburg 5%
Louisburg ABC 5°~
Lowell 2.5%
Madison (town) 3%
Madison-Mayodan Recreation 5%
Manteo 5%
Marion 3.46%
Marshville 3.5%
Matthews 5%
Mayodan 5%
McAdenville 5%
McDowell County $10.35 x 24
Mecklenburg County ABC 6%
Metro Sewage Dist 1.5%
Mid-Carolina COG 2%
Middlesex 3.5%
NC Ctr for Applied Tech 1.5%
North Topsail Beach 3%
North Wilkesboro 2.50
Northwest Piedmont COG 1
Ocean Isle Beach 5%
Person County 3%
Pilot Mountain 5%
Pine Knoll Shores 5%
Pinecroft-Sedge Fire 2%
Pinehurst 5%
Pineville 5%
Pitt-Greenville Visit/Conv. $25 X 26
Pitt County 4.58%
Plymouth Housing Auth. 1
Raeford 5%
Reidsville 3%
Reidsville ABC 1
River Bend 5%
Robbins 2%
Robeson County 2%
Rockingham (city) 2.5%
Rocky Mount 4%
Rowan County 3%
Rutherford County 3%
Sampson County 2.53%
Sanford 3%
Sawmills 1
Scotland County 3.75%
Scotland County ABC 2.25%
Scotland Neck 1.5%
Selma 5%
Shallotte 2%
Shelby 5%
Siler City 2.5%
Simpson(town) 5%
Smithfield 4.47%
Smoky Mountain Center 5%
South Brunswick Water & Sewage 5%
Southern Pines 5%
Southern Shores 5%
Southport 5%
Spindale 5%
Spring Hope 5%
Stanley (town) 5%
Statesville ABC 5%
Stedman 5%
Stokes County 1
Sunset Beach 10%
Surry-Yadkin Mental Health 1
Tarboro 3%
Taylorsville 5%
Topsail Beach 5%
Trent Woods 5%
Triangle J COG 3%
Union County 5%
Vass 5%
Wadesboro 3%
Wake County 5%
Wake County ABC 5%
Wake Forest (town) 3.5%
Wallace 1
21
Davie Soil and Water District 2% Mocksville 3% Walnut Cove 1%
Dobson 4°k Monroe 5% Washington (city) $10 X 26
Dobson ABC 4% Monroe Housing Authority 5% Washington County 3%
Dunn 2% Montreat 5% Water and Sewer of Cabarrus 4%
Dunn ABC Board 2% Moore County 2.6% Wayne County ABC $201mon
Durham (city) 5% Moore County ABC 2.5% Weaverviile 5%
Dufiam County 5% Moore Water & Sewer Authority 8.8% Whispering Pines 5%
Edgecombe County 1 % Mooresville 5% White Lake 2%
Edgecombe County ABC 5% Morehead City 5% Wilson (city) 4.25°
Edge-Nash Mental Health 2.5% Mount Holly 2.5% Wilson County 2%
Electri-Cities of N.C., Inc. 2.5% Mount Olive 4°~ Wilson County ABC 2%
Elizabeth City 5% Murfreesboro 1.5% Windsor 5%
Elizabethtown 2% Nags Head 3% Winterviile 5%
Elkin 3% Nash County 5% Woodfin 2.5°I°
Elon College 5% Nash County ABC 5% Wrightsville Beach 2%
Emerald isle 2% Nashville 3% Yaupon Beach 4%
Erwin 2.5% New Bem 6% Zebulon 3.52%
Eureka 5% New Hanover ABC 5%
Farmville 2.75% NC Assn of County Commissioners 3%
i i•
April 30, 1999
Ms. Elaine Holmes
Personnel Director
Orange County
208 S. Cameron St.
Hillsborough, NC 27278
~~~~o~~D
uAr - s ~
ORANGE COUNTY PERSONNEL
Re: NC 401(k) Employer Contributions
Dear Elaine:
ATTACHMENT 4
22
Branch Banking & Trust Co.
State 401(k) Services
P.O. Box 29541
Raleigh, NC 27626-0541
(919) 716-9200
1-800-722-4015
To assist the County with its research of supplemental retirement contributions, I
have confirmed below the options available to the County through the NC 401(k)
Plan as I have discussed them with you:
Across the board. contributions based on a percentage of compensation or
on a per capita basis (i.e., flat dollar amount). If allocated as a percentage of
compensation, the percentage must be the same for all eligible employees.
Likewise, if allocated on a per capita basis, the dollar amount of employer
contribution must be the same for all eligible employees.
2. Matching contributions based on a percentage of compensation or on a per
capita basis. Again, the percentage or dollar amount must be the same for
all eligible employees..
3. A combination of across the board contribution and matching
contribution ,for example, a $10 per pay period across the board
contribution and a match of up to one percent of salary. Another example
would be a one percent across the board and a one percent match. Once
again, the percentage or dollar amount must be the same for all eligible
employees.
Access your NC 401(k) Plan account via the 401(k) Action Line at 1.800-228-6777 or the Web site at www.bbandt.com/nc40/ k.
23
There is not a provision in the NC 401(k) Plan that will permit employers to make
employer contributions on a tiered basis or at varying rates tied to salary level,
longevity, job classification or other factors.
Elaine, thank you for your interest in providing this benefit to your employees.
Please let me know if you need any additional information.
Sincerely,
~. ~ t~~
Jennifer O. Willis
Regional Sales Manager
cc: Beverly Berling, Vice President, BB&T
24
401(k) Options
Examples and Estimated Cost ATTACHMENT 5
401(k) Options 1999-00
Estimated Cost Full Year
Estimated Cost
A. Across the Board Percent
Contribution (Effective 7-1-99)
1% $ 176,360 $ 176,360
1.25% $ 220,450 $ 220,450
B. Across the Board Flat Dollar
Contribution (Effective 7-1-99)
$10 $ 138,580 $ 138,580
$15 $ 207,870 $ 207,870
C. County Match Based on Percent
(Effective 8-23-99)
1% $ 106,833 $ 122,095
1.25% $ 133,542 $ 152,619
2% $ 213,667 $ 244,191
D. County Match Based on Flat
Dollar Amount (Effective 8-23-99)
$10 $ 84,000 $ 96,000
$15 $ 126,000 $ 144,000
$20 $ 168,000 $ 192,000
E. Combination of Across the Board
and Match (Effective 8-23-99)
$10 across the boazd and $10 match* $ 195,930 $ 234,580
*The employee would have to contribute the full $10 per pay period for the match because ~ 1 U is the
required minimum employee contribution.
Notes: The across the board contribution is estimated at 100 percent participation for 26 payrolls. The
match is estimated at 75 percent participation for the 24 payrolls in which employee deductions are made.
Under the 401(k) Plan, an across the board contribution may be made with a retroactive effective date. A
match may be effective only with a prospective effective date. Based on a June 21, 1999 Board decision,
an across the board contribution could be effective July 1, 1999 and a match could be effective August 23,
1999.
As requested by the Board, options shown are within the same approximate cost range as the cost of $15
across the board contribution for 1999-00.
(K:~Health~Benef000.x1s)5/6/99