Agenda - 10-04-1982 - Laserfiche WebLink

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0?.ANGE COUtiTT 666 BOARD 0? CanISSIONERS Item ACTION 11124 ABSTRACT METING DATE Subject: Deferred Compensation Program Public lloring: .( yes, no D='oart---.nentt: Personnel & Purrhasing . I Information Coat-act,: Attachment(s) Yes . Beverly Whitehead Mark Rees (1) Data Sheet on Deterred.CoMpensation- phons.. Itimber: ext 515 ext 498 (2) Resolution • PURPOSE: To consider adopting a Deferred Compensation Program for Orange County Employees. NEED: Adoption of a Deferred Compensation Program would provide County employees with an additional benefit at virtually no cost to the county.' Deferred compensation is a method whereby participating employees can set aside a portion of their incomes and not have to pay taxes on that income. In effect, our employees will be able tc add tax dollars to their own dollars and build up a fund to provide supplemental retirement income. Because of the tax shelter advantages and the higher earnings the employees can achieve through mass purchasing power, the employees will be able to accomplish far more than they could if they were trying to save on their own using after-tax dollars. In its simplest form, deferred compensation means, that, - — employees in a 20 percent tax bracket can put $5 into savings for only $4 of thee' own money. The higher the tax bracket, the more they get to keep for each dollar set aside. The extra tax dollar is tax money that would otherwise be gone forever With deferred compensation, employees get to hold on to that tax money and use it, along with their own, to earn more money. And they pay no taxes on the earnings the accumulate until the funds are received. The proceeds of this accumulation are tax- able when received but only on the amount received in any one year and at the em- ployee's itax rate at that time. If this is at retirement, with Sdcail Security ta: free and with double exemptions for persons over age 65, the employee can expect tt be in a lower tax bracket. In an effort to make a sound decision,on the feasibility of offering such a benefit to the employees three Deferred Compensation Plan Administrators were asked to present their proposals. The three were NACo, ICMA, and National Plan Coordinators. All proposals were judged on the basis of the following aspects: Service and Administration, Design, Investments, Communications, Flexibility, Local Accounta- bility, and Cost. Throughout the analysis it became quite clear that all three entities were well respected in the field of Befgrred compensation and were almost parallel in there offerings. However, the deferred compensation program offered by NACo does excell in two very important areas: Service and Flexibility of Invest- ments. As indicated in attachment #1, NACo uses only full time, fully trained, and fully dedicated deferred compensation staff that have proven experience in communicating with County employees, They will provide local staff to enroll and service the plan on an individual participant basis, In addition, they can offer the employees nine investment options, so that the employee can tailor his invest- ments to personal philosophy. Once enrolled, the employee may change his investmen package to maximize yields, IMPACT: As an additional benefit to the employees of Orange County in the fight against the effect of taxes and inflation Deferred Compensation provides (1) no current tax on savings, (2) no current tax on interest or other earnings, (a) signifi- cantly higher earnings on the money because of the mass purchasing power of member NACo counties. RECOMMENDATION: The Board adopt the Resolution establishing a Deferred Compensation Plan for the County of Orange, through the NACo Deferred Compensation Program, and authorize the Chair to sign it. •