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Agenda Police Pension 121608
Agenda City of Palm Beach Gardens Police Officers' Pension Fund Special Meeting MEETING OF DECEMBER 16, 2008 LOCATION: City Council Chambers' Police Conference Room 10500 North Military Trail Palm Beach Gardens, FL 33410 TIME: 3:00 PM 1. Call Meeting To Order 2. Roll Call: • Lt. Jay Spencer, Chairman • David Pierson, Secretary • Jules Barone, Trustee • Brad Seidensticker, Trustee • Wayne Sidey, Trustee 3. Investment Consultant Report - Thistle Assets Consulting (John McCann) • Review of the current market situation 4. Administrator Report - TPA (Audrey Ross) • Audit Engagement Letter • Fiduciary Insurance Renewal • Health Insurance Premium Deductions 5. Attorney Report - Hanson, Perry & Jensen, P.A. (Bonni Jensen) • DROP & Share Distribution Policy Normal Retirement Age Regulations for Governmental Plans Memo 6. 2009 Meeting Dates Next Meeting Date: *Thursday January 29, 2009 @ 9AM d-, :iced tO en�.,re C'13t a ve'Cahm ,;ti ..:: "!e , ,:Y . "! -,�'.. -' , - _:E " 1' ..h, th 1O. ',edl +5 tC1 h° ? ?:A. - 3CC. danc. _'C R �. Y- ::i ... . r_. ...i'l. .,' _,..+ +� rr' p3'tu: ;?8te n Y- ;, ., _ ?.,. r:., .r'. ': - E -.'t. �' �..,. +.:, .. - . t ti -c PALM BEACH GARDENS POLICE 12/16/2008 RHUMBLINE ICC INTNL CASH $0 0% LARGE GROWTH(10% ) _ $3,310,467 13% FIXE 3596 $12,385,850 49% -- S &P500(25% ) $4,127,507 - 16% - S&P 10% $1,378,685 5% upsoo(10%) - - $1,534, 878 6"% INTERNATIONAL(940 -2008 _ $2,427,735 10% TOTALS $15,696,317 $7,041,070 $2,427,735 FIXED & CASH % 49% EQUITY % 51°% POLICY 55/10/35 GRAND TOTAL $25.165.122 REBALANCING FIXED POLICY % 35% $8,807,793 ACTUAL FIXED % 49% $12,385,850 MV 11/30/2008 $25165,122 REBALANCE TO 35% $3,578,057 RECOMMEND S &P500 9% $2,264,861 I - - - -- - - -- _ $754,9_54 $2,250,000 8.94% S &P400 3% $750,000 2.98% S &P600 2% - $558,243 - -- $5.78,057 2.30% - _ TOTAL 1 $3,578,057 $3,578,057 DRAFT - December 15, 2008 PALM BEACH GARDENS POLICE PENSION FUND STATEMENT OF POLICY REGARDING DROP AND SHARE ACCOUNT DISTRIBUTIONS WHEREAS, the Palm Beach Gardens Police Pension Plan ( "Plan ") provides for Share Account and Deferred Retirement Option Plan ( "DROP ") benefits; WHEREAS, the Board of Trustees of the Plan ( "Trustees ") desire to adopt a Statement of Policy regarding the distributions of these benefits; NOW, THEREFORE, it is hereby resolved that the following Statement of Policy Regarding DROP and Share Account Distributions is hereby adopted. I. DISTRIBUTION METHODS A. Lump sum - If the lump sum method of distribution is selected then the entire account balance will be paid. The full amount, or a portion thereof, will be paid to the Retirant or can be rolled over to another qualified plan, at the discretion of the Retirant. The payout/rollover can be made in any amount of the Retirant's choosing but the full amount must be taken from the plan. Any amounts paid directly to a Retirant will have a 20% withholding deduction and may be subject to other taxes and /or penalties. B. Three Installments - If this method is chosen, the account balance will be paid out to the Retirant in three equal annual payments paid over a three year period. These amounts may be paid directly to the Retirant or can be rolled over to another eligible retirement plan, at the discretion of the Retirant. Any amount paid directly to a Retirant will have a 20% withholding Page 1 of 6 f deduction and may be subject to other taxes and /or penalties. C. Annuity - If a Retirant chooses monthly installments, then the account balance will be paid out on a monthly basis. The following rules will apply to this method of distribution: 1. For retirees who are age 50 and older upon separation from employment - The monthly amounts may be determined by the Retirant according to his /her need. For Retirants who are under age 50 when the monthly installments begin, the Retirant may choose any amount provided the amount of the payment is within the minimum and maximum as determined in accordance with the attached annuity tables. For Retirants under age 50 when the installment payments begin, the amount chosen cannot be modified before the Retirant attains age 59'/2 or within 5 years from the date of the first payment, whichever occurs last. If the amount of the payment is above the maximum, the Retirant can be subject to additional taxes and /or penalties. At age 70'/2, the monthly installment shall be paid at a rate which meets the minimum distribution rules of Internal Revenue Code §401(a)(9). 2. For Retirants who are under age 50 upon separation from service when the monthly installments begin - The amount of the monthly benefit or the method of payment (for example, from monthly to lump sum) can be changed on an annual basis during the open enrollment period. For Retirants who are older than age 55 when the installment payments begin, Page 2 of 6 the amount of the monthly payment can be reduced to zero unless the payee has reached age 701/2. The open enrollment period will be during the months of August and February each year. Additionally, during the open enrollment period only, a member may request a partial lump sum withdrawal and still continue to receive the monthly payments. 3. A 20% withholding tax applies to all payments paid directly to a Retirant. 4. If there are less than 15 times the monthly installment at the start of the fiscal year, then the remaining balance will be paid in a lump sum. 5. Between open enrollment periods, there will be no changes in the method or amount of the payment unless a Retirant has a hardship. Hardship withdrawals are permitted if both a and b below are met. a. The Retirant has an immediate and heavy financial need - A need may be immediate and heavy even though it was foreseeable or voluntarily incurred. A need is deemed to be immediate and heavy if it is: 1) medical expenses previously incurred by the Retirant, the Retirant's spouse or dependents, or amounts necessary for these persons to obtain medical care; 2) costs related to the Retirant's purchase of a principal residence (not including mortgage payments); 3) payment of tuition and related educational fees and room and board expenses for the next 12 months of post- secondary education for the Retirant, the Retirant's Page 3 of 6 spouse, children or dependents; or 4) payments necessary to prevent the eviction of the employee from the principal residence or to avoid foreclosure on the mortgage on that residence. b. the distribution is necessary to satisfy the Retirant's financial need - A distribution generally may be treated as necessary to satisfy a financial need if the need cannot be relieved: 1) through reimbursement or compensation by insurance or otherwise; 2) by reasonable liquidation of the participants's assets (to the extent that such liquidation would not itself cause an immediate and heavy financial need); 3) by other distributions or nontaxable (at the time of the loan) loans from the plans of the employer or by borrowing from commercial sources at reasonable terms; or 4) by cessation of elective contributions to other plans. II. GENERAL CONSIDERATIONS A. A Retirant may defer election of payment until age 70'/2. Any account balances participate in earnings according to the Retirant's election of earnings method. B. Loans are available to all DROP participants who have terminated Page 4 of 6 I employment and who have deferred election of payment up to maximum of $50,000.00 or one half account balance which ever is less. C. Final distributions from the DROP account will be subject to a 10% hold back to account for the crediting of interest. Final disbursements of Share Accounts will be made once the actuarial returns of the Fund have been calculated. Final disbursements of DROP accounts will be made once the DROP statements for the prior quarter have been distributed. D. The Retirant may withdraw both the Share account or the DROP Account on a monthly basis, or the Retirant may request different withdrawal methods for each. If both the Share Account and DROP payment methods are monthly, then the Retirant must first withdraw from the Share Account. E. Participants and Retirants may designate beneficiaries to receive any balances in the Share and DROP accounts upon their death. In the absence of such designation, the benefit will be paid to the Retirant's estate. F. Distributions from the transfer of accumulated sick and vacation leave shall not be made until 12 months after the money has been transferred in to the Fund. G. Lump sum payments in excess of $50,000.00 will be paid as soon as administratively possible but no later than 60 days after the date of approval by the Board of Trustees. Page 5 of 6 DRAFT - December 15, 2008 IN WITNESS WHEREOF the Board of Trustees of the Palm Beach Gardens Police Pension Fund has adopted this STATEMENT OF POLICY REGARDING DROP AND SHARE ACCOUNT DISTRIBUTIONS this day of , 2008 TRUSTEES Witnessed by: HAPBG 0003TOLICYOROP & Share PMTMETH.wpd BSJ /ka - December is, 2008 Page 6 of 6 HANSON, PERRY & JENSEN, P.A. 400 EXECUTIVE CENTER DRIVE, SUITE 207 — WEST PALM BEACH, FLORIDA 33401 -2922 JILL HANSON• mjhanson ®hpjlaw.com ANN H. PERRY aperry 0 hpjlaw.com BONNI SPATARA JENSEN bsjensen ® hpjlaw.com •Atso AoMrrreo in N.Y. MEMORANDUM TO: Board of Trustees Palm Beach Gardens Police Pension Plan FROM: Bonni S. Jensen Hanson, Perry & Jensen, P.A. DATE: December 15, 2008 SUBJECT: Normal Retirement Age Regulations for Governmental Plans TELEPHONE (561) 688-6550 FACSIMILE (561) 686 -2802 Afterthe Pension Protection Act of 2006, the IRS issued regulations underTD 9325, regarding the definition of "normal retirement age." It was intended to have governmental plans comply with the new regulations and change their definition of normal retirement age effective January 1, 2009, under Notice 2007 -69. However, Notice 2007 -69 recognized problems within the 2007 final regulations. Under Notice 2008 -98, governmental plans are granted a delay in the effective date of implementing the 2007 final regulations until January 1, 2011, when amendment of the 2007 final regulations are expected to be completed. Attached for your review are the following documents: Notice 2008 -98 titled "Extension of Effective Date of Normal Retirement Age Regulations for Governmental Plans (2 pages) 2. Gabriel Roeder Smith & Company Research Memorandum, from Paul Zorn dated December 21, 2007, regarding Implications of Normal Retirement Age for Governmental Plans (3 pages); 3. Pension Regulations: Chapter 1.401(a) -1. Post -ERISA qualified plans and qualified trusts; in general (2 pages); and 4. U.S. Department of the Treasury, Internal Revenue Service, Code Sec. 401 and Code Sec. 411 publication TD 9325 Dated May 22, 2007 (7 pages). Palm Beach Gardens Police Pension Fund Normal Retirement Age December 15, 2008 Page 2 of 2 Please review this memo for discussion at your meeting tomorrow, Tuesday, December 16, 2008. 1 will go over it with you at the meeting. If you have any questions in the meantime, please do not hesitate to contact me. BSJIka Enclosures E -Copy: Trustees Administrator H:1Ali Miscellaneous\ALL BOARDS120081Normal Retirement\Normal Ret Age Memo Notice 2008- 98.wpd a _r a vi i TD, 2007FED 2007FED 747,032 Qualified plans: Phased retirement: Normal retirement age: In- service distributions: Anti - cutback rule transition relief., T.D. 9325 (May 22, 2007) © 2008, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company 2007FED 147,032 T.D. 9325 May 22, 2007 Code Sec. 401 Code Sec. 411 Qualified plans: Phased retirement: Normal retirement age: In- service distributions: Anti - cutback rule transition relief. DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [ TD 9325] RIN 1545 -BD23 Distributions From a Pension Plan Upon Attainment of Normal Retirement Age AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. SUMMARY: This document contains final regulations under sections 4010 and 411(d)L6j_of the Internal Revenue Code. These regulations provide rules permitting distributions to be made from a pension plan upon the attainment of normal retirement age prior to a participant's severance from employment with the employer maintaining the plan. These regulations provide the public with guidance regarding distributions from qualified pension plans and will affect administrators of, and participants in, such plans. DATES: Effective Date: These regulations are effective May 22, 2007. Applicability Dates: These regulations are generally applicable May 22, 2007. For dates of applicability, see §.§1.401(a)- 1(b)(4) and 1.411(d) -4, A-1 2(a). FOR FURTHER INFORMATION CONTACT: Cathy A. Vohs at (202) 622 -6090 or Janet A. Laufer at (202) 622- 6080 (not a toll -free number). SUPPLEMENTARY INFORMATION: Background Section 401(a) sets forth the qualification requirements for a trust forming part of a stock bonus, pension, or profit - sharing plan of an employer. Several of these qualification requirements are based on a plan's normal retirement age. Section 411(J_(8) defines the term "normal retirement age" as the earlier of (a) the time a participant attains normal retirement age under the plan or (b) the later of the time a plan participant attains age 65 or the 5th anniversary of the time a plan participant commenced participation in the plan. The definition of normal retirement age is important in applying the rules under section 411(b) which are designed to preclude avoidance of the minimum vesting standards through the backloading of benefits (for example, a benefit formula under which the rate of benefit accrual is increased disproportionately for employees with longer service) because those rules are based on the benefit payable at normal retirement age. Normal retirement age is also relevant for applying the rules relating to suspension of benefits under section 411 (a 3 B and the rules - -o_ - . I under section 411(b)(1)(H)(iii) that permit a plan to offset accruals after normal retirement age by either the actuarial value of distributions made after normal retirement age or the actuarial value of increases in the benefits due to delay in payment. Normal retirement age is also used in determining the minimum benefit for non -key employees in the case of a top -heavy defined benefit plan. See section 416 c 1 A) and (E). Also, the vesting requirements of sections 401(a Z). and 411 are based upon normal retirement age. Section 411 (dffl generally prohibits a qualified plan from being amended to reduce a participant's accrued benefit and, for this purpose, an elimination or reduction of an early retirement benefit or a retirement -type subsidy, or an elimination of an optional form of benefit, is treated as a reduction in the accrued benefit. The Secretary has the authority under section 411(M(8) to allow amendments that eliminate an optional form of benefit. Section 401 (a) permits three types of plans to qualify under section 401(a): stock bonus, pension, and profit - sharing plans. Section 1.401- 1(a)j2j(i. and (b)(1)(i) of the Income Tax Regulations interprets what it means to be a "pension plan," and has done so since the publication of those regulations as TD 6203 (1956 -2 CB 219) (see §601.601(d)(2)(ii)(b)). These regulations (the 1956 regulations) provide that a qualified plan under section 401(a) is a program and arrangement which is established and maintained by an employer "in the case of a pension plan, to provide for the livelihood of the employees or their beneficiaries after the retirement of such employees through the payment of benefits determined without regard to profits." i The 1956 regulations defining a qualified pension plan further provide that a pension plan must be "a plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employees over a period of years, usually for life, after retirement." Following the enactment of the Employee Retirement Income Security Act of 1974 (ERISA), 93 Public Law 406 (88 Stat. 829), the regulations under section 401 (a) were modified to provide that the 1956 regulations continued to apply, except as otherwise provided. See §1,401(a) -1 b 1 (i) and (ii). Accordingly, a pension plan is generally not permitted to pay benefits before retirement. See also Rev. Rul. 56 -693 (1956 -2 CB 282), as modified by Rev. Rul. 60 -323 (1960 -2 CB 148) (see §601.601(d)(2)(ii)(b)). Rev. Rul. 71 -24 (1971 -1 CB 114) (see §601.601(d)(2)(ii)(b)) provides guidance for the treatment of benefits under a pension plan for employees who continue employment after normal retirement age. Rev. Rul. 71 -24 includes an example that indicates that benefits are permitted to commence during employment after normal retirement age. Rev. Rul. 71 -147 (1971 -1 CB 116) (see §601.601(d)(2)(ii)(b)) provides that the normal retirement age in a pension or annuity plan is generally the lowest age specified in the plan at which the employee has the right to retire without the consent of the employer and receive retirement benefits based on the amount of the employee's service on the date of retirement at the full rate set forth in the plan (that is, without actuarial or similar reduction because of retirement before some later specified age). While ordinarily the normal retirement age under pension and annuity plans is age 65, Rev. Rul. 71 -147 permitted a different age to be specified, but an age lower than 65 was permitted only if the age represented the age at which employees customarily retire in the particular company or industry, and was not a device to accelerate funding. Following the enactment of section 411(a}(8) (defining normal retirement age as described earlier in this preamble) under ERISA, Rev. Rul. 71 -147 was modified by Rev. Rul. 78 -120 (1978 -1 CB 117) (see §601.601(d) (2)(ii)(b)). Under Rev. Rul. 78 -120, for purposes of section 411, a pension plan is permitted to have a normal retirement age lower than age 65, regardless of the age at which employees customarily retire in the particular company or industry. Section 401(aY36), added by section 905(b) of the Pension Protection Act of 2006, Public Law 109 -280 (120 Stat. 780) (PPA'06), provides that a trust forming part of a pension plan is not treated as failing to constitute a qualified trust under section 401(a). solely because the plan provides that a distribution may be made from such trust to an employee who has attained age 62 and who is not separated from employment at the time of such distribution. Section 401(a)(36) applies to distributions in plan years beginning after December 31, 2006. On November 10, 2004, a notice of proposed rulemaking (REG- 114726 -04) under section 401 was published in the Federal Register (69 FR 65108) (the proposed regulations). The proposed regulations would have allowed in- service distributions after normal retirement age, but would not have permitted a normal retirement age to be set so low as to be a subterfuge to avoid qualification requirements. The proposed regulations would also have permitted in- service distributions before normal retirement age under a bona fide phased retirement program. On March 14, 2005, the IRS held a public hearing on the proposed regulations. Written comments responding to the notice of proposed rulemaking were also received. In light of the enactment of section 401 (a)(36) by PPA'06, only portions of the proposed regulations are being finalized at this time. The IRS recently issued a notice requesting comments as to whether the portions of the proposed regulations relating to in- service distributions pursuant to a bona fide phased retirement program should be finalized. See Notice 2007 -8 (2007 -3 IRB 276) (see §601.601(d)(2)(ii)(b)). The portions of the proposed regulations relating to normal retirement age and in- service distribution upon attainment of normal retirement age are being finalized by this Treasury Decision. The significant revisions to the proposed regulations are discussed in this preamble. Explanation of Provisions and Summary of Comments I. Overview This Treasury Decision modifies existing regulations, including the regulations at §L401 La)-_1 which generally require a pension plan to be maintained primarily to provide systematically for the payment of definitely determinable benefits after retirement. These regulations provide two exceptions to this rule. First, they clarify that a pension plan is permitted to commence payment of retirement benefits to a participant after the participant has attained normal retirement age. The regulations also provide rules on how low a plan's normal retirement age is permitted to be and include a related exception to the anti - cutback rules of section 411(dN6) to allow conforming amendments during a transitional period. Second, the regulations reflect the provisions of new section 401(a)(36). II. Normal Retirement Age A. In General These regulations adopt the rule of the proposed regulations under which a pension plan (a defined benefit plan or money purchase pension plan) is permitted to pay benefits upon an employee's attainment of normal retirement age, even if the employee has not yet had a severance from employment with the employer maintaining the plan. Comments generally supported the inclusion of this rule as reflecting existing practice among some pension plans, based on an example in Rev. Rul. 71 -24. These regulations also include rules restricting a plan's normal retirement age. The proposed regulations would have provided that a plan's normal retirement age could not be set so low as to be a subterfuge to avoid the requirements of section 401(a), and, accordingly, normal retirement age could not be earlier than the earliest age that is reasonably representative of a typical retirement age for the covered workforce. z Some comments expressed concern about the specifics of this rule, including concern about how it might be applied in various circumstances, and suggested that the regulations contain a safe harbor for which there would be no need for a demonstration of the typical retirement age for the covered workforce. These final regulations modify the proposed regulations to replace the subterfuge standard with a requirement that the normal retirement age under a plan be an age that is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. To address comments about the need for a safe harbor age, these regulations provide that a normal retirement age of at least age 62 is deemed to be not earlier than the typical retirement age for the industry in which the covered workforce is employed. Thus, a plan satisfies this safe harbor if its normal retirement age is age 62, or if its normal retirement age is the later of age 62 or another specified date, such as the later of age 62 or the fifth anniversary of plan participation. However, a plan that is subject to section 411 cannot provide for a normal retirement age that is later than the later of the time the participant attains age 65 or the fifth anniversary of the time the participant commenced participation in the plan. See section 411(a 8 LB). If a plan's normal retirement age is earlier than age 62, the determination of whether the age is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed is based on all of the relevant facts and circumstances. If the normal retirement age is between ages 55 and 62, then it is generally expected that a good faith determination of the typical retirement age for the industry in which the covered workforce is employed that is made by the employer (or, in the case of a multiemployer plan, made by the trustees) will be given deference, assuming that the determination is reasonable under the facts and circumstances. However, a normal retirement age that is lower than age 55 is presumed to be earlier than the earliest age that is reasonably representative of the typical retirement age for the industry of the relevant covered workforce absent facts and circumstances that demonstrate otherwise to the Commissioner. In the case of a plan where substantially all of the participants in the plan are qualified public safety employees (within the meaning of section 72 t 10 (, as added by section 828 of PPA'06), a normal retirement age of age 50 or later is deemed not to be earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. Under section 72(t)(10)(B), a qualified public safety employee means any employee of a State or political subdivision of a State who provides police protection, firefighting services, or emergency medical services for any area within the jurisdiction of such State or political subdivision. B. Section 411(d)(6) Relief These regulations include an amendment to the existing regulations under section 411(d)(6) to permit a plan to be amended during a transition period to conform to the rules concerning normal retirement age. Thus, a plan amendment that changes the normal retirement age under the plan to a later normal retirement age (pursuant to these regulations) does not violate section 411(J(6) merely because the amendment eliminates a right to an in- service distribution prior to the amended normal retirement age. However, this rule does not provide any other relief. For example, this rule does not permit the amendment to reduce benefits in some other manner that fails to satisfy section 411(d_6). Neither does the rule provide relief under section 411(a)(9) (requiring that the normal retirement benefit not be less than the greater of any early retirement benefit payable under the plan or the benefit under the plan commencing at normal retirement age), section 411(a).(10) (if the amendment changes the plan's vesting rules), or section 498OF (or section 204(h), the parallel provision of ERISA) (relating to amendments that reduce the rate of future benefit accrual). See also Rev. Rul. 81 -210 (1981 -2 CB 89) (see §601.601(d)(2)(ii)(b)). An example is included to illustrate this rule. Effective Dates These regulations are generally applicable May 22, 2007. In the case of a governmental plan (as defined in section 414(d)), these regulations apply with respect to plan years beginning on or after January 1, 2009. In the case of a plan maintained pursuant to one or more collective bargaining agreements that have been ratified and are in effect on May 22, 2007, these regulations do not apply before the first plan year that begins after the last of the agreements terminates determined without regard to any extension thereof (or, if earlier, May 24, 2010. A provision of a plan that results in the failure of the plan to satisfy §1.401(a -1 (b) ) or (3) is a disqualifying provision described in §1.401(b)-1 Therefore, the remedial amendment period rules of 41.401 b 1 apply. For example, in the case of a plan with a calendar plan year that is maintained by an employer with a calendar taxable year (and the plan is not a governmental plan and is not maintained pursuant to a collective bargaining agreement), the plan's remedial amendment period with respect to §1.401 (a)1(b)_�2) and (3) ends on the date prescribed by law for the filing of the employer's income tax return (including extensions) for the 2007 taxable year. In the case of a plan amendment that increases the plan's normal retirement age pursuant to this regulation, the amendment may also eliminate a right to an in- service distribution prior to the normal retirement age under the plan as amended without violating section 411 L)(6) if the amendment is adopted after May 22, 2007 and on or before the last day of the applicable remedial amendment period under §1.401 Lb) -1 with respect to the requirements of §1.401 a)- 1(b)_(2) and (3). For purposes of section 1107 of PPA'06, such an amendment is not made pursuant to PPA '06 and is not made pursuant to any regulation issued under PPA'06. Special Analyses It has been determined that this Treasury Decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulation does not impose a collection of information requirement upon small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 78050 of the Internal Revenue Code, the notice of proposed rulemaking preceding these regulations was submitted to the Small Business Administration for comment on its impact on small business. Drafting Information The principal authors of these regulations are Christopher A. Crouch (formerly of the Office of the Division Counsel /Associate Chief Counsel (Tax Exempt and Government Entities)), Cathy A. Vohs and Janet A. Laufer of the Office of the Division Counsel /Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Treasury Department participated in their development. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Adoption of Amendments to the Regulations Accordingly, 26 CFR part 1 is amended as follows: PART 1 — INCOME TAXES Paragraph 1. The authority citation for part 1 is amended by adding an entry in numerical order to read in part as follows: Authority: 26 U.S.C. 7805 Section 1.401(a) -1 also issued under 26 U.S.C. 401.' *' Par. 2. Section 1.4010 -1 is amended by: 1. Revising paragraph (b)(1)(i). 2. Adding paragraphs (b)(2), (b)(3), and (b)(4). The additions and revision read as follows: § 1.401(a) -1 Post -ERISA qualified plans and qualified trusts; in general. * * * *, (b) ... (i) In order for a pension plan to be a qualified plan under section 401 a), the plan must be established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to its employees over a period of years, usually for life, after retirement or attainment of normal retirement age (subject to paragraph (b)(2) of this section). A plan does not fail to satisfy this paragraph (b)(1)(i) merely because the plan provides, in accordance with section 401(a)_(36), that a distribution may be made from the plan to an employee who has attained age 62 and who is not separated from employment at the time of such distribution. (2) Normal retirement age - -(i) General rule. The normal retirement age under a plan must be an age that is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. (ii) Age 62 safe harbor. A normal retirement age under a plan that is age 62 or later is deemed to be not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. (iii) Age 55 to age 62. In the case of a normal retirement age that is not earlier than age 55 and is earlier than age 62, whether the age is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed is based on all of the relevant facts and circumstances. (iv) Under age 55. A normal retirement age that is lower than age 55 is presumed to be earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed, unless the Commissioner determines that under the facts and circumstances the normal retirement age is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. (v) Age 50 safe harbor for qualified public safety employees. A normal retirement age under a plan that is age 50 or later is deemed to be not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed if substantially all of the participants in the plan are qualified public safety employees (within the meaning of section 720t _( 0 (3) Benefit distribution prior to retirement. For purposes of paragraph (b)(1)(i) of this section, retirement does not include a mere reduction in the number of hours that an employee works. Accordingly, benefits may not be distributed prior to normal retirement age solely due to a reduction in the number of hours that an employee works. (4) Effective date. Except as otherwise provided in this paragraph (b)(4), paragraphs (b)(2) and (3) of this section are effective May 22, 2007. In the case of a governmental plan (as defined in section 4140), paragraphs (b)(2) and (3) of this section are effective for plan years beginning on or after January 1, 2009. In the case of a plan maintained pursuant to one or more collective bargaining agreements that have been ratified and are in effect on May 22, 2007, paragraphs (b)(2) and (3) of this section do not apply before the first plan year that begins after the last of such agreements terminate determined without regard to any extension thereof (or, if earlier, May 24, 2010. See §1.411 d -4, A -12, for a special transition rule in the case of a plan amendment that increases a plan's normal retirement age pursuant to paragraph (b)(2) of this section. Par. 3. Section 1.4110 -4 is amended by adding Q &A -12 as follows: § 1.411(d) -4 Section 411(d)(6) protected benefits. Q -12. Is there a transition period during which a plan is permitted to eliminate a right to in- service distributions in connection with an amendment to ensure that the plan's normal retirement age satisfies the requirements of §1.401a -1 bI2)? A -12. (a) In general. A plan amendment that changes the normal retirement age under the plan to a later normal retirement age pursuant to §1.4010 -1(b)0 does not violate section 411(d�. merely because it eliminates a right to an in- service distribution prior to the amended normal retirement age. However, this paragraph does not provide relief from any other applicable requirements; for example, this relief does not permit the amendment to violate section 411(a) (9) (requiring that the normal retirement benefit not be less than the greater of any early retirement benefit payable under the plan or the benefit under the plan commencing at normal retirement age), section 411(a)(1 0 (if the amendment changes the plan's vesting rules), section 411(d)(6) (other than elimination of the right to an in- service distribution prior to the amended normal retirement age), or section 4980F (relating to an amendment that reduces the rate of future benefit accrual). This paragraph only applies to a plan amendment that is adopted after May 22, 2007 and on or before the last day of the applicable remedial amendment period under 1.401(b) -1 with respect to the requirements of §1.401 La)- 1(U2) and (3). (b) Example. The following example illustrates the application of this section: (i) Facts. (A) Plan A is a defined benefit plan intended to be qualified under section 4010. Plan A is maintained by a calendar year taxpayer and has a normal retirement age that is age 45. For employees who cease employment before normal retirement age with a vested benefit, Plan A permits benefits to commence at any date after the attainment of normal retirement age through attainment of age 70 1/2 and provides for benefits to be actuarially increased to the extent they commence after normal retirement age. For employees who continue employment after attainment of normal retirement age, Plan A provides for benefits to continue to accrue and permits benefits to commence at any time, with an actuarial increase in benefits to apply to the extent benefits do not commence after normal retirement age. Age 45 is an age that is earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. (B) On February 18, 2008, Plan A is amended, effective May 21, 2007, to change its normal retirement age to the later of age 65 or the fifth anniversary of participation in the plan. The amendment provides full vesting for any participating employee who is employed on May 21, 2007, and who terminates employment on or after attaining age 45. The amendment provides employees who cease employment before the revised normal retirement age and who are entitled to a vested benefit with the right to be able to commence benefits at any date from age 45 to age 70 1/2. The plan amendment also revises the plan's benefit accrual formula so that the benefit for prior service (payable commencing at the revised normal retirement age or any other age after age 45) is not less than would have applied under the plan's formula before the amendment (also payable commencing at the corresponding dates), based on the benefit accrued on May 21, 2007, and provides for service thereafter to have the same rate of future benefit accrual. Thus, for any participant employed on May 21, 2007, with respect to benefits accrued for service after May 21, 2007, the amount payable under the plan (as amended) at any benefit commencement date after age 45 is the same amount that would have been payable at that benefit commencement date under the plan prior to amendment. The plan amendment also eliminates the right to an in- service distribution between age 45 and the revised normal retirement age. Plan A has been operated since May 22, , in conformity with the amendment adopted on February 18, 2008. (ii) Conclusion. The plan amendment does not violate section 411 (d) 6 . Although the amendment eliminates the right to commence benefits in- service between age 45 and the revised normal retirement age, the amendment is made before the last day of the remedial amendment period applicable to the plan under 1.401 b 1 with respect to the requirements of §1.401 La U(b)Q and (3), and therefore the amendment is permitted under paragraph (a) of this A -12. Further, the amendment does not result in a reduction in any benefit for service after May 22, 2007. Thus, the amendment does not result in a reduction in any benefit for future service, and advance notice of a significant reduction in the rate of future benefit accrual is not required under section 4980F. Kevin M. Brown, Deputy Commissioner for Services and Enforcement. Approved: May 9, 2007. Eric Solomon, Assistant Secretary of the Treasury (Tax Policy). 1 This rule is limited to a pension plan, which is either a defined benefit plan or a defined contribution plan that is not a stock bonus or profit- sharing plan (generally referred to as a money purchase pension plan). Other rules apply to stock bonus plans and profit- sharing plans. 2 The preamble to the proposed regulations noted that, while a low normal retirement age may have a significant cost effect on a traditional defined benefit plan, this effect is not as significant for defined contribution plans or for certain hybrid defined benefit plans. © 2008, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company Part III - Administrative, Procedural and Miscellaneous Extension of Effective Date of Normal Retirement Age Regulations for Governmental Plans Notice 2008 -98 I. Purpose The Service and Treasury intend to extend the date by which a governmental plan must comply with final regulations on distributions from a pension plan upon attainment of normal retirement age, which were published in the Federal Register as T.D. 9325 (72 FR 28604) on May 22, 2007 ( "the 2007 final regulations "). Under the extension, the 2007 final regulations will be effective for a governmental plan (as defined in § 414(d) of the Internal Revenue Code) for plan years beginning on or after January 1, 2011. This notice does not change the effective date of the 2007 final regulations for a plan that is not a governmental plan or modify the relief previously provided in Notice 2007 -69, 2007- 2 C.B. 468. 11. Background Section 411(a)(8) provides that the term "normal retirement age" means the earlier of (A) the time a plan participant attains normal retirement age under the plan or (B) the later of age 65 or the fifth anniversary of the time a plan participant commenced participation in the plan. A plan's normal retirement age is relevant for a number of purposes, including for purposes of determining the date at which a participant is eligible to receive his or her normal retirement benefit and calculating the amount of the benefit received. Prior to being amended by the 2007 final regulations, § 1.401(a)- 1(b)(1)(i) of the Income Tax Regulations required a pension plan to be maintained primarily to provide systematically for the payment of definitely determinable benefits after retirement. The 2007 final regulations amended § 1.401(a)- 1(b)(1)(i) to provide an exception to the rule that pension benefits be paid only after retirement by permitting a pension plan to commence payment of retirement benefits to a participant after the participant has attained normal retirement age even if the participant has not yet had a severance from employment with the employer maintaining the plan. The 2007 final regulations require a pension plan's normal retirement age to be an age that is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. The 2007 final regulations provide that a normal retirement age of 62 or later (or age 50 or later, in the case of a plan in which substantially all of the participants are qualified public safety employees (within the meaning of § 72(t)(10)(B))) is deemed to satisfy this requirement, and a normal retirement age lower than 55 is presumed not to satisfy the requirement unless the Commissioner determines otherwise on the basis of facts and circumstances. Whether a normal retirement age that is at least 55 but below 62 satisfies the requirement is based on facts and circumstances. The 2007 final regulations are generally effective May 22, 2007, with a later effective date for governmental plans and certain collectively bargained plans. For governmental plans, the 2007 final regulations are effective for plan years beginning on or after January 1, 2009. Notice 2007 -69 provided temporary relief for certain plans that may have to change their definition of normal retirement age to satisfy the 2007 final regulations. The relief is available to certain plans that might otherwise be required to be amended to raise the plan's normal retirement age effective before the first day of the first plan year beginning after June 30, 2008. Because the 2007 final regulations are not effective for governmental plans until 2009, the relief in Notice 2007 -69 does not apply to governmental plans. Notice 2007 -69 pointed out that the 2007 final regulations do not contain a safe harbor or other guidance with respect to a normal retirement age conditioned on the completion of a stated number of years of service, stating that a plan under which a participant's normal retirement age changes to an earlier date upon completion of a stated number of years of service typically will not satisfy the vesting or accrual rules of § 411. The notice asked for comments from sponsors of plans that are not subject to the requirements of § 411, such as governmental plans, on whether such a plan may define normal retirement age based on years of service. Specifically, comments were requested on whether and how a pension plan with a normal retirement age conditioned on the completion of a stated number of years of service satisfies the requirement in § 1.401 (a)-1 (b)(1 )(i) that a pension plan be maintained primarily to provide for the payment of definitely determinable benefits after retirement or attainment of normal retirement age and how such a plan satisfies the pre -ERISA vesting rules. Ill. Extension of Effective Date of 2007 Final Regulations for Governmental Plans The Service and Treasury intend to amend the 2007 final regulations to change the effective date for governmental plans to plan years beginning on or after January 1, 2011. Governmental plan sponsors may rely on this notice with respect to the extension until such time as the 2007 final regulations are so amended. DRAFTING INFORMATION The principal author of this notice is James P. Flannery of the Employee Plans, Tax Exempt and Government Entities Division. For further information regarding this notice, please contact Mr. Flannery via e-mail at retirementplanquestions (cilirs.gov. Gabriel Roeder Smith &: Company Research GR S C:onsul[anrs & Actuaries Memorandum RE: Implications of Normal Retirement Age Regulations for Governmental Plans' FROM: Paul Zorn DATE: December 21, 2007 On May 22, 2007, the IRS issued final regulations related to the definition of normal retirement age (TD 9325). The new regulations were developed to provide guidance related to the addition of Internal Revenue Code (Code) § 401(a)(36) by the 2006 Pension Protection Act, allowing in- service distributions from pension plans beginning at age 62. Among other changes, the final regulations amend Treas. Reg. § 1.401(a) -1 to allow in- service distributions beginning at age 62. However, in so doing, they define normal retirement age as being "not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry..." In addition, the regulations provide several safe harbors that the IRS will presume to be the "typical" earliest normal retirement ages: • Age 55 for non - public safety employees, • Age 50 for public safety employees. Retirement ages below age 55 (or age 50 for public safety) are presumed not to be typical and so in- service distributions before these ages would not be allowed. However, the regulations do allow the IRS Commissioner to determine whether earlier retirement ages may be considered typical based on relevant facts and circumstances. The new regulations are generally effective as of May 22, 2007. In the case of governmental plans, they are effective for plan years beginning on or after January 1, 2009. Plans that fail to satisfy these rules may be disqualified. Notice 2007 -69 The new regulations raised concerns regarding their meaning and the time needed to comply. In response, the IRS issued Notice 2007 -69, providing temporary relief for private- sector plans until the first day of the plan year beginning after June 30, 2008. (The temporary relief does not apply to governmental plans because of their extended effective date.) Under the Notice, the IRS will not disqualify a plan with a normal retirement age earlier than age 62 (but not earlier than age 55) solely because it does not meet the new regulations, provided: The plan, immediately prior to May 22, 2007, provided a definition of normal retirement age that was earlier than age 62; No possible plan participant hired at age 18 or older could attain the plan's normal retirement age before age 40; The plan sponsor adopts a good faith interim amendment effective no later than the first day of the plan year beginning after June 30, 2008, and the plan is operated in accordance with the amendment as of the amendment's effective date; and 1 This memorandum describes changes to certain tax rules applicable to retirement plans. The author is not an attorney and the statements made are not intended as legal advice or opinion. Plan administrators should seek the advice of qualified legal counsel to ensure that plan provisions and documents comply with applicable federal laws and regulations. 12/21/07 © Gabriel Roeder Smith & Company Page 1 The plan sponsor adopts the interim amendment in a timely manner based on the employer's plan year and tax year. In addition, Notice 2007 -69 also provides a temporary presumption of reasonableness for plans with a normal retirement age earlier than age 55, provided: The plan, immediately prior to May 22, 2007, provided a definition of normal retirement age that was earlier than age 55; No possible plan participant hired at age 18 or older could attain the plan's normal retirement age before age 40; The plan sponsor submits a letter ruling request to the IRS by June 30, 2008, on whether its definition of normal retirement age satisfies the final regulations. Normal Retirement Age Based on Service Notice 2007 -69 also states that the new regulations do not provide a safe harbor or other guidance with respect to a normal retirement age that is based on years of service. Moreover, Treasury and the IRS expect that a plan under which the normal retirement age changes to an earlier date based on years of service would not satisfy the vesting rules of Code § 411 (from which governmental plans are exempt). However, Notice 2007 -69 goes on to say that the new regulations do not mean a plan cannot provide benefits based on the completion of years of service. As stated in the Notice, "an early retirement benefit, including an unreduced early retirement benefit, is permitted to be conditioned on completion of a stated number of years of service." However, the early retirement benefit may only begin to be paid after separation from service. Implications for Governmental Plans The implications of the new regulations for governmental plans are unclear and potentially problematic. Since they are located within the regulations related to Code § 401(a), they are applicable to governmental plans. However, as stated in the regulations' preamble, the rules were added in the context of allowing pension plans to make in- service distributions for participants who have reached normal retirement age. Consequently, while they clearly apply to in- service distributions, their application (if any) outside of that context is less clear. In addition, Notice 2007 -69 points out that the regulations would not prevent plans from providing an unreduced benefit paid at a date that is earlier than the normal retirement age or that is based on years of service. However, such distributions would only be permitted after severance of employment. These clarifications are especially relevant for governmental plans, since they often allow unreduced benefits to be paid based on several combinations of age and service (for example, age 50 with 30 years of service or age 55 with 25 years). As a result of these age /service combinations for unreduced retirement, fewer governmental plans allow in- service distributions, particularly at these earlier ages. It appears that the governmental plans most affected by the new regulations will be those that offer in- service distributions now or in the future. If they do not define normal retirement age in accordance with the regulations, they will have to amend their plan accordingly to provide the in- service distributions. However, in defining normal retirement age, they may be able to restrict the definition to the purpose of in- service distributions, rather than applying it broadly for benefit accruals or other purposes. This is something that should be discussed with legal counsel. 12/21/07 © Gabriel Roeder Smith & Company Page 2 It is unclear how the IRS will apply these rules to governmental plans beyond the context of in- service distributions, if at all. If the rules were applied generally to governmental plans, it would likely raise significant concerns. For plans that currently allow unreduced retirement benefits to be paid before age 55 (or 50 for public safety employees), increasing the retirement age could result in a breech of contract under state and federal constitutions. On the other hand, for plans that allow unreduced retirement only after 62, the new regulations could lower the retirement age, thereby increasing plan costs. In Notice 2007 -69, the IRS requested comments on whether normal retirement age under governmental plans may be based on years of service, and whether and how such a plan would satisfy the pre -ERISA vesting rules. It is likely the IRS will issue further guidance in 2008 about the application of these regulations to governmental plans. Circular 230 Notice: Pursuant to regulations issued by the IRS, to the extent this communication (or any attachment) concerns tax matters, it is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax - related penalties under the Internal Revenue Code or (ii) marketing or recommending to another party any tax - related matter addressed within. Each taxpayer should seek advice based on the individual's circumstances from an independent tax advisor. 12/21/07 © Gabriel Roeder Smith & Company Page 3 <<may 22, zuu / to ys/_>» rags i vi 4 FINAL -REG, PEN -REGS, §1.401(a) -1. Post -ERISA qualified plans and qualified trusts; in general © 2008, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company Reg. §1.401(a) -1 does not reflect P.L, 98 -397. §1.401(a) -1. Post -ERISA qualified plans and qualified trusts; in general PEN -REGS ¶11,715 (a) Introduction (1) In general. - -This section and the following regulation sections under section 401 reflect the provisions of section 401 after amendment by the Employee Retirement Income Security Act of 1974 (Pub. L. 93 -406) ( "ERISA "). (2) [Reserved) (b) Requirements for pension plans (1) Definitely determinable benefits (i) In order for a pension plan to be a qualified plan under section 401(a), the plan must be established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to its employees over a period of years, usually for life, after retirement or attainment of normal retirement age (subject to paragraph (b)(2) of this section). A plan does not fail to satisfy this paragraph (b)(1)(i) merely because the plan provides, in accordance with section 401(a)(36), that a distribution may be made from the plan to an employee who has attained age 62 and who is not separated from employment at the time of such distribution. (ii) Section 1.401- 1(b)(1)(i), a pre -ERISA regulation, provides rules applicable to this requirement, and that regulation is applicable except as otherwise provided. (iii) The use of the type of plan provision described in §1.415(a) -1 (d)(1) which automatically freezes or reduces the rate of benefit accrual or the annual addition to insure that the limitations of section 415 will not be exceeded, will not be considered to violate the requirements of this subparagraph provided that the operation of such provision precludes discretion by the employer. (2) Normal retirement age (i) General rule. - -The normal retirement age under a plan must be an age that is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. (ii) Age 62 safe harbor. - -A normal retirement age under a plan that is age 62 or later is deemed to be not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. (iii) Age 55 to age 62. - -In the case of a normal retirement age that is not earlier than age 55 and is earlier than age 62, whether the age is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed is based on all of the relevant facts and circumstances. (iv) Under age 55. - -A normal retirement age that is lower than age 55 is presumed to be earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the <<may LL, LUU / Ta y3LJ» L a6Q A. u1 L. covered workforce is employed, unless the Commissioner determines that under the facts and circumstances the normal retirement age is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed. (v) Age 50 safe harbor for qualified public safety employees. - -A normal retirement age under a plan that is age 50 or later is deemed to be not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed if substantially all of the participants in the plan are qualified public safety employees (within the meaning of section 72(t)(10) (B))• (3) Benefit distribution prior to retirement. - -For purposes of paragraph (b)(1)(i) of this section, retirement does not include a mere reduction in the number of hours that an employee works. Accordingly, benefits may not be distributed prior to normal retirement age solely due to a reduction in the number of hours that an employee works. (4) Effective date. -- Except as otherwise provided in this paragraph (b)(4), paragraphs (b)(2) and (3) of this section are effective May 22, 2007. In the case of a governmental plan (as defined in section 414(d)), paragraphs (b)(2) and (3) of this section are effective for plan years beginning on or after January 1, 2009. In the case of a plan maintained pursuant to one or more collective bargaining agreements that have been ratified and are in effect on May 22, 2007, paragraphs (b)(2) and (3) of this section do not apply before the first plan year that begins after the last of such agreements terminate determined without regard to any extension thereof (or, if earlier, May 24, 2010. See §1.411(d) -4, A -12, for a special transition rule in the case of a plan amendment that increases a plan's normal retirement age pursuant to paragraph (b)(2) of this section. [Reg. §1.401(a) -1.] [T D. 7748,12-30-80. Amended by T.D. 9319, 4 -4 -2007 and T.D. 9325, 5 -21- 2007.] © 2008, CCH INCORPORATED. All Rights Reserved. A WoltersKluwer Company Tegrit Plan Administrators s 4360 Northlake Blvd. Suite 206 rit Pa ±m Beach Gardens, FL 33410 Ph. 561.624.3277 Plan Administrators Fax 561.624.3278 www.togrit4pa.com PALM BEACH GARDENS POLICE OFFICERS' PENSION FUND 2009 MEETING DATES THE BOARD MEETS ON THE 1ST MONTH FOLLOWING THE END OF A QUARTER ON THE LAST THURSDAY Qa) 9AM January 29, 2009 April 30, 2009 July 30, 2009 October 29, 2009 Resource Centers LLC — Omega Recordkeeping Group LLC Pension Resource Center LLC — Financial Resource Center LLC PALM BEACH GARDENS POLICE 12/16/2008 ICC RHUMBLINE INTNL. _ CASH $0 - - - _ LARGE GROWTH(10%) $3,310,467 _ 13% _ FIXED(35 %) $12,385,850 49% S &P500(25%) $4,127,507 16% S &P400(10 %) $1,378,685 5% SSP600(10 %) $1,534,878 6% _ INTERNATIONAL(9 -30 -2008) $2,427,735 10% TOTALS $15,696,317 $_7,041,070 $_ 2_ ,427,735 FIXED & CASH % 49% EQUITY % 51% POLICY 55110/35 GRAND TOTAL E29.165.122 REBALANCING FIXED POLICY % 35% $8,807,793 _ ACTUAL FIXED % 49% $12,385,850 _ MV 11/30/2008 $25,165,122 REBALANCE TO 35% $3,578,057 RECOMMEND S &P500 9% $2,264,861 $2,250,000 8.94% - S &P400 3% $754,9541 $750,000 2.98% S &P600 2% $558,243 $578,057 2.30% TOTAL $3,578,0571 $3,578,057 PALM BEACH GARDENS POLICE _..._ 12/16/2008 ICC RHUMBLINE INTNL. CASH $0 0% LARGE GROWTH(10 %) $3,310,467 _ 14% FIXED(35 %) $12,385,850 _ 51% -- S &P500(25 %) $4,127,507 _ 17% S &P400(10 %) $1,378,685 _ 6% - S &P600(10 %) $1,534,878 6% INTERNATIONAL(11 -28 -2008) $1,756,154 7% TOTALS $15,696,317 $7,041,070 $1,_7.56,154 FIXED & CASH % 51% EQUITY % 49% POLICY 55/10/35 GRAND TOTAL 524,493,541 REBALANCING FIXED POLICY % 35% $8,572,739 ACTUAL FIXED % 51% $12,385,850 MV 11130/2008 $24,493,541 REBALANCE TO 35% $3,813,111 RECOMMEND _ S &P500 8% $1,959,483 $1,900,000 7.76% S &P400 4% $979,742 $970,000 S&P600 4% $873,886 $943,111 _3.96% 3.85% _ TOTAL $3,813,111 $3,813,111