HomeMy WebLinkAboutReso 98-160 - Approving the provisions of the Plan Document for 457 Deferred Compensation Plans t
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RESOLUTION NO. 98-�l�D
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDDING
APPROVING THE PROVISIONS OF THE PLAN DOCUMENT FOR 457
DEFERRED COMPENSATION PLANS.
WHEREAS,the City ofRedding administers 457 Deferred Compensation Plans for employees
to invest pre-tax dollars for their retirement savings; and
WHEREAS,recent changes in federal legislation have imposed new regulations on the existing
plans; and
WHEREAS, it is prudent and efficient for the City of Redding to consolidate to one plan
document for all of its deferred compensation plans;
NOW, THEREFORE, IT IS HEREBY RESOLVED by the City Council of the City of
Redding that the aforesaid 457 Plan Document is hereby approved.
I HEREBY CERTIFY that the foregoing Resolution was introduced,read,and adopted at the
regular meeting of the City Council of the City of Redding on the 17"'day of November, 1998, by the
following vote:
AYES: COUNCIL MEMBERS: �'�nderson, Cibula, Ki;nt and McGeor,^,e
NOES: COUNCIL MEMBERS: ��one
ABSENT: COUNCIL MEMBERS: xehoe
ABSTAIN: COUNCIL MEMBERS: �Ione
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DAVID EHOE,May
ATTEST: FORM APPRO D:
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CONNIE ST QI�MA , ity Clerk ` W. LEONARD WIN A , City Attorney `
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City of Redding
Deferred Compensation Plan
Article I. INTRODUCTION
The City of Redding, hereinafter referred to as "Employer," hereby establishes the Employer's Defened
Compensation Plan,hereafter referred to as the"Plan." The Plan consists of the provisions set forth in this �
document.
The primary purpose of the Plan is to provide retirement income and other deferred benefits to the Employees
of the Employer in accordance with the provisions of Section 457 of the Internal Revenue Code of 1986, as
amended (the"Code").
The Plan shall be an agreement solely between the Employer and participating Employees. .
Article II. DEFINITIONS
Section 2.01 Account Investment Provider:
Section 2.02 Account Records:
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's Beneficiary and any fees or expenses charged against such
Participant's Deferred Compensation.
Section 2.03 Administrative Services and Investment Agreement:
A separate document between the Employer and Investment Provider describing the services and investments
to be provided.
Section 2.04 Administrator:
The Administrator shall be the City Manager or Designee.
Section 2.05 Beneficiary:
The person or persons designated by the Participant in his/her Participation Agreement who shall receive any
benefits payable hereunder in the event of the Participant's death. If the Participant is married, the primary
Beneficiary must be the Participant's spouse; or a spousal signature is required on the Participation
Agreement to authorize a different or additional primary beneficiary. A married Participant may choose
alternate or contingent beneficiaries without spousal permission as long as the spouse is the sole primary
Beneficiary. In the event that the Participant names two or more Beneficiaries, each Beneficiary shall be
entitled to equal shares of the benefits payable at the Participant's death, unless otherwise provided in
Participant's Participation Agreement. If the designated Beneficiary predeceases the Participant, if the
designated Beneficiary does not survive the Participant for a period of fifteen days, or if no Beneficiary is
designated in the Participation Agreement, then the estate of the Participant shall be the Beneficiary. .
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Section 2.06 Deferred Compensation:
The amount of Normal Compensation otherwise payable to the Participant which the Participant and the
Employer mutually agree to defer hereunder, any amount credited to a Participant's Account by reason of
a transfer under Section 6.04, or any other amount which the Employer agrees to credit to a Participant's
Account.
Section 2.07 Employee:
Any individual Employee who occupies a position other than a temporary position with the Employer.
Section 2.08 Includible Compensation:
The amount of an Employee's compensation that is attributable to services performed for the Employer and
that is includible in the Employee's gross income for that taxable year. Includible Compensation shall be
determined without regard to any community property laws.
Section 2.09 Normal Compensation:
The amount of compensation which would be payable to a Participant by the Employer for a taxable year if
no Participation Agreement were in effect to defer compensation under this Plan.
Section 2.10 Normal Retirement Age:
For all Employees,except those covered under the Ca1PERS Safety Retirement Plan,Normal Retirement Age
is defined as age 5 5. For Employees covered under the Ca1PERS Safety Retirement Plan,Normal Retirement
Age is defined as age 50. �
A Participant's Normal Retirement Age deterniines the period during which a Participant may utilize the
catch-up contribution limit of Section 5.03 hereunder. Once a Participant has to any extent utilized the catch-
up contribution limit of Section 5.03, his/her Normal Retirement Age may not be changed.
Section 2.11 Participant:
An Employee who has joined the Plan pursuant to the requirements of Article IV.
Section 2.12 Participation Agreement:
An agreement entered into between an Employee and the Employer, including any amendments or
modifications 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. The Employee
shall notify the Employer of any change in amount of contribution or Beneficiary designation.
Section 2.13 Plan Year:
The calendar year.
Section 2.14 Retirement:
The first date upon which both of the following shall have occurred with respect to a participant: Separation
from Service and attainment of normal retirement age as defined in Section 2.10.
Section 2.15 Separation from Service: �
Severance of the Participant's employment with the Employer which constitutes a"separation from service"
within the meaning of Section 402(e)(4)(A)(iii)of the Code. In general,a Participant shall be deemed to have
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severed his/her employment with the Employer for purposes of this Plan when, in accordance with the
established practices ofthe Employer,the ernployment relationship is considered to have actually ternunated.
Article III. ADMINISTRATION .
Section 3.01 Duties of Employer:
The Employer sha.11 have the authority to make all discretionary decisions affecting the rights or benefits of
Participants which may be required in the administration of this Plan.
Section 3.02 Duties of Administrator:
The Administrator, as agent for the Employer, shall perform nondiscretionary administrative functions in
connection with the Plan, including the maintenance of Participants' Accounts, the provision of periodic ,
reports of the status of each Account and the disbursement of benefits on behalf of the Employer in
accordance with the provisions of this Plan.
Article IV. PARTICIPATION IN THE PLAN
Section 4.41 Initial Participation:
An Employee may become a Participant by entering into a Participation Agreement prior to the beginning �
of the pay period in which the Participation Agreement is to become effective to defer compensation not yet
earned.
Section 4.02 Amendment of Participation Agreement: i
A Participant may amend an executed Participation Agreement to change the amount of compensation not
yet earned which is to be deferred(including the reduction of such future deferrals to zero)or change his/her
investment preference(subject to such restrictions as may result from the nature or terms of any investment
made by the Employer). Such amendment shall become effective as of the beginning of the pay period �
commencing after the date the amendment is executed. A Participant may at any time amend his/her
Participation Agreement to change the designated Beneficiary, and such amendment shall become effective
immediately.
Article V. LIMITATIONS ON DEFERRALS
Section 5.01 Minimum Contribution:
�- The Minimum Contribution shall be $10 per pay period for each investment option.
Section 5.02 Normal Contribution Limit:
Except as provided in Section 5.03, the maximum amount of deferred compensation for any Participant for
1998 shall not exceed the lesser of$8,000 or 33'/s percent of the Participant's Includible Compensation for
the taxable year. This limitation will ordinarily be equivalent to the lesser of$8,000 or 25 percent of the
Participant's Normal Compensation. For all years prior to 1998,the normal contribution limit was the lesser �
of$7,500 or 25 percent of the Participant's normal compensation.
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The Consumer Price Index(CPI)will be used to increase the current$8,000 contribution limit. Adjustments
will be determined by the Secretary of the Treasury, and changes shall be rnade only in multiples of$500.
This contribution limit indexing method is consistent with other retirement plans.
Section 5.03 Catch-up Contribution Limit:
For each of the last three (3) taxable years of a Participant ending before his/her attainment of Normal
Retirement Age,the maximum amount of Deferred Compensation shall be the lesser of: (1) $15,000 or(2)
the sum of(i)the Normal Contribution Limit for the taxable year,and(ii)the Normal Contribution Limit for
each prior taxable year of the Participant commencing after 1978 less the amount of the Participant's
Deferred Compensation for such prior taxable years. A prior ta�ble year shall be taken into account under
the preceding sentence only if(i)the Participant was eligible to participate in the Plan for such year(or in any
other eligible deferred compensation plan established under Section 457 of the Code which is properly taken .
into account pursuant to regulations under Section 457), and(u) compensation(if any)deferred under the
Plan(or such other plan) was subject to the deferral limitations set forth in Section 5.02.
Section 5.04 Other Plans:
The amount excludable from a Participant's gross income under this Plan or any other eligible deferred
compensation plan under Section 457 of the Code shall not exceed the normal conm�bution limit as defined
in Section 5.02 (or such greater amount allowed under Section 5.03 of the Plan),less any amount excluded
from gross income under section 403(b), and only for taxable years beginning after December 31,1988, �
section 402(a)(8),or section 402(h)(1)(B)of the Code,or any amount with respect to which a deduction is
allowable by reason of contribution to an organization described inspection 501(c)(18) of the Code.
Article VI. INVESTMENTS AND ACCOUNT VALUES
Section 6.01 Investment of Deferred Compensation: .
All investments of Participant's Deferred Compensation made by the Employer, including all contnbutions
past,present,and future,as well as all growth associated with these contributions shall be held in trust by the
Employer/Trustee for the exclusive benefit of the participants, beneficiaries or contingent beneficiaries. In
no event shall the amounts so held or applied be subject to the rights or claims of any creditor of the
Employer,nor shall any portion of such amounts be used in any manner for or diverted to purposes other than
for the exclusive benefit of participants and their beneficiaries or contingent beneficiaries.
Section 6.02 Investment Restrictions: �
Investments may not include trading on margin, "trade-awa}�' trades, investments in collectibles, futures,
commodities, precious metals, or currencies.
Section 6.03 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. It is anticipated that
the Employer's investments with respect to a Participant will conformto the investment preference specified
in the Participant's Deferred Compensation Participation Agreement. Each Participant shall receive periodic �
reports, not less frequently than quarterly from the investment provider, showing the then current value of
his/her Account.
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Section 6.04 Transfers:
(a) Incoming Transfers: A transfer may be accepted from an eligible deferred compensation plan
maintained by another employer and credited to a Participant's Account under this Plan if(i)the _
Participant has separated from service with that employer and has become an Employee of the
Employer, and (ii) the other employer's plan provides that such transfer may be made. The
Employer may require such documentation from the predecessor plan as it deems necessary to
effectuate the transfer,to confirm that such plan is an eligible deferred compensation plan within
the meaning of Section 457 of the Code,and to assure that transfers are provided for under such
plan. The Employer may refuse to accept a transfer in the form of assets other than cash,unless
the Employer and the Administrator agree to hold such other assets under the Plan. Any such
transferred amount shall not be treated as a deferral subject to the limitations of Sections 5.01- �
and 5.03. An amount deferred during any taxable year under the plan from which the transfer is
accepted shall be treated as if it has been deferred under this Pla.n during such taxable year and
compensation paid by the transferor employer shall be treated as if it had been paid by the
Employer.
(b) Outgoing Transfers: An amount may be transferred to an eligible deferred compensation plan
maintained by another employer,and charged to a Participant's Account under this Plan if(i)the
Participant has separated from service with the Employer and become an employee of the other '
employer,(u)the other employer's plan provides that such transfer will be accepted, and(iii)the
Participant and the employers have signed such agreements as are necessary to assure that the
Employer's liability to pay benefits to the Participant has been charged and assumed by the other
employer. The Employer may require such documentation from the other plan as it deems
necessary to effectuate the transfer,to confirm that such plan is an eligible deferred compensation
plan within the meaning of section 457 of the Code,and to assure that transfers are provided for
under such plan. Such transfers shall be made only under such circumstances as are permitted
under section 457 of the Code and the regulations thereunder.
Section 6.05 Employer Liability:
In no event shall the Employer's liability to pay benefits to a Participant under Article VI exceed the value
of the amounts credited to the Participant's Account;the Employer shall not be liable for losses arising from
depreciation or shrinkage in the value of any investments acquired under this Plan.
Article VII. BENEFITS
Section 7.01 Distribution Benefits:
In general, a Participant must have separated from service before any distribution may occur (except for
Section 7.02 Small Account Distribution/Closing and Section 7.03 Unforeseeable Emergencies).
Furthermore,no distribution may commence before the Employer's notification date set forth in Section 7.05.
Account balances of less than $5,000 at the time of separation will be paid as a lump sum normally within
60 days of separation.
Four types of separation are:
(a) Retirement
(b) Death
(c) Resignation or Discharge
(d) Disability(must result in separation)
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Section 7.02 Small Account Distribution/Closing:
Participants or Plan Administrators may request a onetime withdrawal of account balances of less than .
$5,000, providing the two following conditions are met:
(a) No amount has been deferred for the immediately preceding consecutive 24 months.
(b) No amount has been previously withdrawn with the exception of an unforeseeable emergency.
Section 7.03 Unforeseeable Emergencies:
In the event an unforeseeable emergency occurs,a Participant may apply to the Employer to receive that part
of the value of his/her Account that is reasonably needed to satisfy the emergency need. If such an
application is approved by the Employer, the Participant shall be paid only such amount as the Employer
deems necessary to meet the emergency need,but payment shall not be made to the extent that the financial
hardship may be relieved through cessation of deferral under the Plan,insurance or other reimbursement or
liquidation of other assets to the extent such liquidation would not itself cause severe financial hardship.
An unforeseeable emergency shall be deemed to involve only circumstances of severe financial hardship to
the Participant resulting from a sudden unexpected illness, accident, or disability of the Participant or of a
dependent(as defined in Section 152(a)ofthe Code)ofthe Participant,loss ofthe Participant's property due
to casualty, or other similar and extraordinary unforeseeable circumstances arising as a result of events
beyond the control of the Participant. The need to send a Participant's child to college, purchase a new
home, or pay outstanding consumer debt shall not be considered unforeseeable emergencies. The
determination as to whether such an unforeseeable emergency exists shall be based on the merits of each
individual case.
Section 7.04 Loan Provisions:
None are available. �
Section 7.05 Employer Notification:
Notwithstanding the foregoing,the Participant may elect within 60 days following Separation from Service
to have the commencement of distnbution deferred to some future determinable date not later than April 1
of the calendar year following the Participant's attainment of age 70'h. If a Participant or Beneficiary falls
to make a timely election, benefits shall be paid under the default payment option under Section 7.08. Only
the distn�bution date is required, not the payment option. �.
Section 7.06 Deferral of Benefit Election Date:
A onetime change of the previous irrevocable election date will be permitted after January 1, 1997. A delay
to a future date will be allowed as long as the payments have not commenced under the prior election and
are consistent with 401(a)(9) of the Code.
Section 7.07 Payment Options:
As provided in Sections 7.01, 7.05, 7.1 1, and 7.12, a Participant or Beneficiary may elect to have the value
of the Participant's Account distributed in accordance with one of the following payment options,provided �
that such option is consistent with the limitations set forth in Section 7. 10,and the account balance is greater
than $5,000, and the option is available through the Investment Provider:
(a) One lump-sum payment.
(b) Approximately equal monthly, quarterly,semiannual or annual payments, calculated to continue
for a period certain chosen by the Participant not to exceed his/her life expectancy.
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(c) Monthly, quarterly, semiannual or 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/her Beneficiary.
(d) Payments equal to payments made by the issuer of a retirement annuity.
Section 7.08 Default Payment Option
Monthly payments for a period of ten years or over such shorter period as may be necessary to assure that
the sum of installments is not less than$5,000/calendar year;however,any payments under this section must
comply with section 7. 10. Payments will commence 60 days after default.
Section 7.09 Payment Option Election Date:
A Participant's or Beneficiary's election of payment option must be made at least 60 days before the payment
of benefits is to commence. If a Participant or Beneficiary fails to make a timely election of a payment
option,benefits shall be paid under the default payment option under Section 7.08.
Section 7.10 Limitation on Options: �
No payment option may be selected by a Participant or Beneficiary under Sections 7.07,7.1 1,or 7.12 unless
it satisfies the requirements of sections 401(a)(9) and 457(d)(2) of the Code, including that payments
commencing before the death of the Participant shall satisfy the incidental death benefits requirement under
section 457(d)(2)(B)(i). Unless otherwise elected by the Participant, all determinations under section
401(a)(9) shall be made without recalculation of life e�ectancies.
Section 7.11 Post-retirement Death Benefits:
Should the Participant die after he/she has begun to receive benefits under a payment option,the remaining .
payments, if any, under the payment option shall be payable to the Participant's Beneficiary commencing
within the 30 day period commencing on the 61 st day after the Participant's death, unless the Beneficiary
elects payment under a different payment option that is available under Section 7.07 within 60 days of the
Participant's death. In the event that the Participant's estate is the Beneficiary the commuted value of any
remaining payments under the payment option shall be paid to the estate in a lump sum. Any different
payment option elected by a Beneficiary under this section must provide for payments at a rate that is at least
as rapid as under the payment option that was applicable to the Participant. In no event shall the Employer
or Administrator be liable to the Beneficiary for the amount of any payment ma.de in the name of the �
Participant before the Administrator receives proof of death of the Participant.
If the designated Beneficiary does not continue to live for the remaining period of payments under the
payment option,then the commuted value of any remaining payments under the payment option shall be paid
in a lump sum to the estate of the Beneficiary only if the distribution vehicle allows for such rights of
commutation.
Section 7.12 Pre-retirement Death Benefits:
Should the Participant die before he/she has begun to receive the benefits provided by Section 7.01,the value
of the Participant's Account shall be payable to the Beneficiary commencing within the 30 day period
commencing on the 91 st day after the Participant's death, unless the Beneficiary elects a different fixed or
determinable benefit commencement date within 90 days of the Participant's death. Such benefit
commencement date shall be not later than the later of(i)December 31 of the year following the year of the
Participant's death,or(u)if the Beneficiary is the Participant's spouse,December 31 of the year in which the
Participant would have attained age 70'/z. �
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If a Beneficiary fails to make a timely election,benefits shall be paid under the default payment option under
Section 7.08. A Beneficiary shall be treated as if he/she were a Participant for purposes of determining the
payment options available under Section 7.07, provided, however, that the payment option chosen by the
Beneficiary must provide for payments to the Beneficiary over a period no longer than the life expectancy
of the Beneficiary, and provided that such period may not exceed fifteen(15)years if the Beneficiary is not
the Participant's spouse.
In the event that the Beneficiary dies before the payment of death benefits has commenced or been completed, �
the remaining value of the Participant's Account shall be paid to the estate of the Beneficiary. Payment shall
be made to the estate in a lump sum.
Section 7.13 Transitional Rule for Pre1989 Benefit Elections:
In the event that, prior to January 1, 1989, a Participant or Beneficiary has commenced receiving benefits
under a payment option or has irrevocably elected a payment option or benefit commencement date,then that
payment option or election shall remain in effect notwithstanding any other provision of this Plan. .
Article VIII. NON-ASSIGNABILITY
Section 8.01 In General:
Except as provided in Section 8.02, no Participant or Beneficiary shall have any right to commute, sell,
assign,pledge,transfer or otherwise convey or encumber the right to receive any payments hereunder,which
payments and rights are expressly declared to be nonassignable and nontransferable. �
Section 8.02 Domestic Relations Orders:
(a) Allowance of Transfers:To the eactent required under a final judgment,decree,or order(including
approval of a property settlement agreement made pursuant to a domestic relations law), any
portion of a Participant's Account may be paid or set aside for payment to a spouse, former
spouse, or child of the Participant. Where necessary to carry out the terms of such an order, a
separate Account shall be established with respect to the spouse, former spouse, or child who
shall be entitled to make investment selections with respect thereto in the same manner as the �
Participant; any amount so set aside for a spouse, former spouse, or child shall be paid out in a
lump sum at the earliest date that benefits may be paid to the Participant,unless the order directs
a different time or form of payment. Nothing in this Section shall be construed to authorize any
amount to be distributed under the Plan at a time or in a form that is not permitted under Section
457 of the Code. Any payment made to a person other than the Participant pursuant to this
Section shall be reduced by required income tax withholding;the fact that payment is made to a
person other than the Participant may not prevent such payment from being includible in the gross .
income of the Participant for withholding and income tax reporting purposes.
(b) Release fromLiabilityto Participant:The Employer's liabilityto pay benefits to a Participant shall
be reduced to the extent that amounts have been paid or set aside for payment to a spouse,former
spouse, or child pursuant to paragraph(a)of this Section. No such transfer shall be effectuated
unless the Employer or Administrator has been provided with satisfactory evidence that the
Ernployer and the Administrator are released from any further claim by the Participant with
respect to such amounts. The Participant shall be deemed to have released the Employer and the �
Administrator from any claim with respect to such amounts,in any case in which(i)the Employer
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or Administrator has been served with legal process or otherwise joined in a proceeding relating
to such transfer, (u)the Participant has been notified of the pendency of such proceeding in the
manner prescribed by the law of the jurisdiction in which the proceeding is pending for service
of process in such action or by mail from the Employer or Administrator to the Participant's last
known mailing address, and (ui) the Participant fails to obtain an order of the court in the
proceeding relieving the Employer or Administrator from the obligation to comply with the _
judgment, decree, or order.
(c) Participation in Legal Proceedings: The Employer and Administrator shall not be obligated to
defend against or set aside any judgment,decree,or order described in paragraph(a)or any legal
order relating to the garnishment of a Participant's benefits,unless the full expense of such legal
action is borne by the Participant. In the event that the Participant's action (or inaction)
nonetheless causes the Employer or Administrator to incur such expense, the amount of the
expense may be charged against the Participant's Account and thereby reduce the Employer's �
obligation to pay benefits to the Participant. In the course of any proceeding relating to divorce,
separation, or child support, the Employer and Administrator shall be authorized to disclose
information relating to the Participant's Account to the Participant's spouse, former spouse, or
child (including the legal representatives of the spouse, former spouse, or child), or to a court.
Article IX. RELATIONSHIP TO OTHER PLANS AND EMPLOYMENT AGREEMENTS
This Plan serves in addition to any other retirement,pension,or benefit plan or system presently in existence
or hereinafter established for the benefit of the Employer's employees, and participation hereunder shall not
affect benefits receivable under any such plan or system. Nothing contained in this Plan shall be deemed to
constitute an employment contract or agreement between any Participant and the Employer nor does it
constitute the right of the Participant to be retained in the employ of the Employer. Nothing herein shall be
construed to modify the terms of any employment contract or agreement between a Participant and the
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Article X. AMENDMENT OR TERMINATION OF PLAN
The Employer may at any time amend the Plan provided that it transmits such amendment in writing to the
Administrator at least 30 days prior to the effective date ofthe amendment. The consent ofthe Administrator
shall not be required in order for such amendment to become effective, but the Administrator shall be under
no obligation to continue acting as Administrator hereunder if it disapproves of such amendment. The �
Employer may at any time terniinate this Plan.
The Administrator may at any time propose an amendment to the Plan by an instrument in writing transmitted
to the Employer at least 30 days before the effective date of the amendment. Such amendment shall become
effective unless, within such 30-day period, the Employer notifies the Administrator in writing that it
disapproves such amendment,in which case such amendment shall not become effective. In the event of such
disapproval, the Administrator shall be under no obligation to continue acting as Administrator hereunder.
This Plan document constitutes an amendment and/or restatement of the Plan previously adopted by the �
Employer, and shall become effective on the date signed below.
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Except as may be required to maintain the status of the Plan as an eligible deferred compensation plan under
section 457 of the Code or to comply with other applicable laws, no amendment or termination of the Plan
shall divest any Participant of any rights with respect to compensation deferred before the date of the .
amendment or termination.
Article XI. APPLICABLE LAW
The Plan shall be construed under the laws of the state where the Employer is located and is established with
the intent that it meet the requirements of an"eligible deferred compensation plan"under Section 457 of the
Code,as amended. The provisions of the Plan shall be interpreted wherever possible in conformity with the �
requirements of that section.
This plan and its provisions were adopted by City Council Resolution No. on November 17, 1998.
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