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2001-296RESOLUTION NO. 2001R-296 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ANAHEIM AMENDING RESOLUTION NO. 75R-431, AS LAST AMENDED BY RESOLUTION 98R-242, WHICH ESTABLISHED A DEFERRED COMPENSATION PLAN FOR FULL-TIME EMPLOYEES, TO INCORPORATE NEW LEGISLATION WHEREAS, the City Treasurer has recommended in a staff report dated December 11, 2001, that Resolution No. 75R-431, as last amended by Resolution 98R-242, be amended in the manner herein set forth, effective January 1, 2002; and WHEREAS, as a result thereof, the need exists to amend Resolution 75R-431 which established the City of Anaheim Deferred Compensation Plan (hereinafter called "Plan"), for full- time employees in compliance with Section 457 of the Internal Revenue Code; and WHEREAS, the Economic Growth and Tax Relief Act of 2001 provides for changes in Section 457 of the Internal Revenue code; and WHEREAS, the City Council of the City of Anaheim does find that the aforementioned amendment is in the best interest of the City of Anaheim; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Anaheim that the Plan be amended and restated. A copy of the Plan is attached as Exhibit "A". BE IT FURTHER RESOLVED that the effective date of said amendment to Resolution No. 75R-431 is January 1, 2002. AND BE IT FURTHER RESOLVED that, except as amended herein, Resolution No. 75R- 431 shall remain in full force and effect. THE FOREGOING RESOLUTION is approved and adopted by the City Council of the City of Anaheim this 1 lth day of December 2001. MA~E CITY OF AN EIM ATTEST: CITY CLEaRK OF THE CITY OF ANAHEIM CITY ~TTOR?I'E][ OF THE CITY OF ANAHEIM H:\DEFCpMP\RES(~N NO OIR- FT.doc STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss. CITY OF ANAHEIM ) I, SHERYLL SCHROEDER, City Clerk of the City of Anaheim, do hereby certify that the foregoing Resolution No. 2001R-296 was introduced and adopted at a regular meeting provided by law, of the Anaheim City Council held on the 11th day of December, 2001, by the following vote of the members thereof: AYES: MAYOR/COUNCIL MEMBERS: Feldhaus, Tait, Kring, McCracken, Daly NOES: MAYOR/COUNCIL MEMBERS: None ABSTAINED: MAYOR/COUNCIL MEMBERS: None ABSENT: MAYOR/COUNCIL MEMBERS: None (SEAL) EXHIBIT A CITY OF ANAHEIM DEFERRED COMPENSATION PLAN ARTICLE I. NAME The Employer hereby amends and restates the Employer's Deferred Compensation Plan and Trust. The name of this plan is the City of Anaheim Deferred Compensation Plan hereinafter referred to as the "Plan." The Plan consists of the provisions set forth in this document. This amendment and restatement of the Plan is effective January 1, 2002, pursuant to PL 107-16 (HR1836) (June 7, 2001) the Economic Growth and Tax Relief Reconciliation Act of 2001 and as may be adopted by California Revenue Taxation Code 17024.5, as amended. ARTICLE I1. PURPOSE 2.01 The primary purpose of this Plan is to provide retirement income and other deferred benefits to the Employees of the Employer and the Employees' Beneficiaries in accordance with the provisions of Section 457 of the Internal Revenue Code of 1986, as amended (the "Code"). 2.02 This Plan shall be an agreement solely between the Employer and participating Employees. The Plan and Trust forming a part hereof are established and shall be maintained for the exclusive benefit of eligible Employees and their Beneficiaries. No part of the corpus or income of the Trust shall revert to the Employer or be used for or diverted to purposes other than the exclusive benefit of Participants and their Beneficiaries. 2.03 The Employer does not and cannot represent or guarantee that any particular federal and state income, payroll or other tax consequences will occur by reason of an Employee's participation in this Plan. The Participant should consult with his own attorney or other representative regarding all tax or other consequences of participation in this Plan. ARTICLE III. DEFINITIONS For the purposes of this Plan, certain words or phrases used herein will have the following meanings: 3.01 Account: 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 investment of the Participant's Deferred Compensation, and further reflecting any distributions to the Participant or the Participant's Beneficiary and any fees or expenses charged against such Participant's Deferred Compensation. 3.02 Automatic Distribution Date: On or after January 1, 2002, "Automatic Distribution Date" means April 1 of the calendar year after the Plan year the Participant attains age 70 1/2, or, if later, has a Severance Event. 3.03 Beneficiary: Any person, trust, corporation or firm, or the estate of the Participant, or any combination of the foregoing designated by a Participant to receive benefits under the Plan. Designation shall be made on a City of Anaheim Participation Agreement executed by the Participant to the Plan Administrator, unless otherwise provided. Beneficiary may be singular or plural, primary or contingent. 3.04 Compensation: The salary or wages which would be paid by the Employer to or for the benefit of an Employee (if he were not a Participant in the Plan) for actual services performed for the Employer for the period that he is a Participant. 3.05 Contract Administrator: An administrator employed under contract authorized by the City Council and under the direction of the Plan Administrator. 3.06 Deferred Compensation: The portion of Compensation which the Participant and the Employer mutually agree to defer in accordance with the provisions of this Plan; any amount credited to the Participant's Account. 3.07 Deferred Compensation Committee: Shall mean the Committee, consisting of the Plan Administrator, as Chairperson; the City Manager or his appointee; the Finance Director or his appointee; the Human Resources Director or his appointee; and a Participating Employee. 3.08 Disability: The substantial permanent inability of a Participant to engage in his usual occupation by reason of a medically determinable physical or mental impairment as determined by the Employer or by the Public Employees' Retirement System, on the basis of advice from a physician or physicians. 3.09 Employee: Any individual who provides services for the Employer, whether as an employee or officer of the Employer and who has been designated by the Employer as eligible to participate in the Plan. 3.10 Employer: Shall mean the City of Anaheim 3.11 Includible Compensation: The amount of an Employee's compensation from the Employer for a taxable year that is attributable to services performed for the Employer and that is includible in the Employee's gross income for the taxable year for federal income tax purposes; such term does not include any amount excludable from gross income under this Plan or any other plan described in Section 457(b) of the Internal Revenue Code or any other amount excludable from gross income for federal income tax purposes. Includible Compensation shall be determined without regard to any community property laws. 2 3.12 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. 3.13 Normal Retirement Age: Shall mean age 70-1/2. For purposes of Article 6.02, the Participant may elect an alternate Normal Retirement Age by written Participation Agreement delivered to the Plan Administrator prior to a Severance Event. Once a Participant has to any extent utilized the catch-up limitation of Article 6.02, his designated Normal Retirement Age for purposes of such section may not be changed or redesignated for this purpose. A Participant's alternate Normal Retirement Age shall be any date elected by the Participant in a Participation Agreement filed with the Plan Administrator. Such date shall be no earlier than the earliest date that the Participant will become eligible to retire (without the consent of the Employer) and to receive retirement benefits under the California Public Employees Retirement System without actuarial or similar reduction because of retirement before an age which is later than such alternate age. A Participant may designate an age greater than 70-112 if the Participant continues employment after attaining age 70-1/2, not having previously elected an alternate Normal Retirement age. However, the Participant's alternate Normal Retirement Age shall not be later than the mandatory retirement age, if any, established by the Employer, or the age at which the Participant actually Separates from Service (if the Employer has no mandatory retirement age). If the participant will not become eligible to receive benefits under the California Public Employees Retirement System, the Participant's alternate Normal Retirement Age may not be earlier than attainment of age 65. 3.14 Participant: Any member of the Plan who has elected, pursuant to the Plan, to defer a portion of this compensation and who fulfills the requirements of participation in the Plan 3.15 Participating Employee: An appointed member to the Deferred Compensation Committee. The Participating Employee must submit an Application for Appointment to the Committee. The Committee will select the Participating Employee. The Participating Employee must be a full-time employee with the City of Anaheim and must be a Participant of the Plan. This member shall be limited to a two (2) year term. 3.16 Participation Agreement: An agreement entered into between an Employee and the Employer, including any amendments or modifications, thereof. Such agreement shall: (a) fix the amount of Deferred Compensation; (b) specify a preference among the Providers designated by the Employer; (c) designate the Employee's Beneficiary or Beneficiaries; and (d) incorporate the terms, conditions, and provisions of the Plan by reference. 3.17 Plan Administrator: The City Treasurer unless another person or entity is designated by the City Council. 3.18 Plan Year: The calendar year. 3.19 Provider: An institution providing investments or deposit vehicles. 3.20 Required Beginning Date: April 1 of the calendar year following the calendar year in which the Participant attains age 70-1/2 or a Severance Event, whichever is later. 3.21 Retirement: The first date upon which both of the following shall have occurred with respect to a Participant: Severance Event and attainment of age 50. 3.22 Severance Event: Severance of the Participant's employment with the Employer which constitutes a "separation from service" within the meaning of Section 402(d)(4)(A)(iii) of the Code as amended. In general, a Participant shall be deemed to have severed his employment with the Employer for purposes of this Plan when, in accordance with the established practices of the Employer, but not earlier than such time as the person is no longer on the payroll of the Employer. 3.23 Sub-Committee: A subdivision of the Committee and shall be less than a quorum of the Committee. 3.24 Trust: The Trust created under Article VIII of the Plan which shall consist of all compensation deferred under the Plan, plus any income and gains thereon, less any losses, expenses and distributions to Participants and Beneficiaries. 3.25 Trustee: The Deferred Compensation Committee Members shall act as Trustees. ARTICLE IV. ADMINISTRATION 4.01 The Plan shall be administered by the Plan Administrator but may be administered through a Contract Administrator under the direction of the Plan Administrator. Participants receiving services from said Plan Administrator and/or Contract Administrator may be charged a fee for said services. The Trustees shall determine said fees in a manner deemed fair and equitable. The Trustees may have withheld or collect, such fee, in such manner as it deems equitable, from the compensation deferred pursuant to the Plan, or the income produced from the compensation deferred pursuant to the Plan. 4.02 Duties of the Plan Administrator: The Plan Administrator shall 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. The Plan Administrator's decisions shall be afforded the maximum deference permitted by applicable law. 4.03 Duties of the Provider: The Provider, as agent for the Trust, shall perform nondiscretionary administrative functions in connection with the Plan, including but not limited to; the maintenance of Participants' Accounts, the provision of 4 periodic reports of the status of each Account, and the disbursement of benefits on behalf of the Trust in accordance with the provisions of this Plan. ARTICLE V. PARTICIPATION IN THE PLAN 5.01 Employer and Participant mutually acknowledge that the compensation of each Employee is as set forth in the salary resolution or personnel ordinance of the Employer and that said compensation includes the dollar amount of funds deferred under this Plan. Each employee may elect to become a Participant and to defer payment of part of his compensation by executing and delivering to the Employer a written Participation Agreement. 5.02 Initial Participation: An Employee may become a Participant by executing a Participation Agreement prior to the beginning of the calendar month in which the Participation Agreement is to become effective to defer compensation not yet paid, or such other date as may be permitted under the Internal Revenue Code. The minimum deferral is $10.00 per pay period. At the Employer's option, there may be established one or more open enrollment dates during the year in which an employee may commence or make changes to his account. 5.03 Amendment of Participation Agreement: A Participant may amend an executed Participation Agreement to change the amount of compensation not yet paid which is to be deferred (including the reduction of such future deferrals to zero) or to change his investment preference (subject to such restrictions as may result from the nature of terms of any investment made by the Employer). Such amendments for deferral increases shall become effective as of the beginning of the calendar month commencing after the date the amendment is executed. A Participation Agreement shall remain in full force and effect from month to month unless modified, revoked or superseded by a new Participation Agreement. No Compensation previously deferred shall be payable to an Employee upon revocation of his Participation Agreement unless otherwise due pursuant to Article X. 5.04 A Participant may designate by Participation Agreement, delivered to the Plan Administrator, a Beneficiary to receive any benefits which may be payable under the Plan upon the death of such Participant. A Participant may at any time amend his Participation Agreement to change the designated Beneficiary and such amendment shall become effective as of the date of delivery to the Plan Administrator. ARTICLE VI. LIMITATIONS ON DEFERRALS 6.01 Normal Limitation: Except as provided in Article 6.02, the maximum amount of the compensation of any Participant which may be deferred under the 457 plans for each calendar year shall be the lesser of 100% of the Participants includible compensation or $11,000.00, with annual increases of $1,000.00 until the year 2006 and thereafter adjusted for the calendar year to reflect increases in the cost-of- living in accordance with Sections 457(e)(15) and 415(d) of the Internal Revenue Code. 6.02 Catch-Up Limitations: (a) Normal Catch-up Provision: Effective January 1, 2002, for each of the last three (3) taxable years of a Participant ending before his attainment of Normal Retirement Age, the maximum amount of Deferred Compensation shall be the lesser of: (1) double the Normal Limitation as stated in Section 6.01 or (2) the sum of (i) the Normal Limitation for the taxable year, and (ii) the Normal Limitation 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 taxable year shall be taken into account under the preceding sentence only if (i) the Participant was eligible to participate in the Plan for all or part of 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 (ii) compensation (if any) deferred under the Plan (or such other plan) was subject to the deferral limitations set forth in Article 6.01. (b) 50 Plus Catch-up Provision: Effective January 1, 2002 participants 50 years of age or older before the close of the plan year may contribute additional annual contributions each year. Participants may contribute an additional $1,000.00 in the year 2002, an additional $2,000.00 in the year 2003, an additional $3,000.00 in the year 2004, an additional $4,000.00 in the year 2005 and an additional $5,000.00 in the year 2006, thereafter adjusted for the calendar year to reflect increases in the cost-of-living in accordance with Sections 457(e)(15) and 415(d) of the Internal Revenue Code. The 50 Plus Catch-up Provision does not apply during years when a participant is utilizing the Normal Catch-up Provision. The amounts deferred under the 50 Plus Catch-up Provision will not be considered when determining the amounts eligible to be contributed under the Normal Catch- up Provision. ARTICLE VII. NON-RESPONSIBILITY CLAUSE The Employer may, but is not required to, invest funds held pursuant to agreements between Participants and the Employer in accordance with the preference or preferences indicated by each Participant at the time of enrollment or change in enrollment, prospectively only. The Employer shall retain the right to approve or disapprove such investment request or requests, for transfer of investment among different modes of investment available under the Plan. Any such action by the Employer in investing funds, or approving of any investment of funds, shall not be considered to be either an endorsement or guarantee of any investment, nor shall it be considered to attest to the financial soundness or the suitability of any investment for the purpose of meeting future obligations. 6 In no event shall the Employer's obligation to pay benefits to a Participant 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 VIII. TRUST AND INVESTMENT OF ACCOUNTS 8.01 Investment Funds: In accordance with uniform and nondiscriminatory rules established by the Employer and the Provider, the Participant may direct his Accounts to be invested in one (1) or more investment funds available under the Plan; provided, however, that the Participant's investment directions shall not violate any investment restrictions established by the Employer. Neither the Employer, the Provider, nor any other person shall be liable for any losses incurred by virtue of following such directions or with any reasonable administrative delay in implementing such directions. 8.02 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. Each Participant shall receive periodic reports from the Providers, not less frequently than annually, showing the then current value of his Account. Investment and market valuation of mutual funds can be made only when the New York Stock Exchange is open for trading. 8.03 Trust: Notwithstanding any contrary provision of the Plan, in accordance with Section 457(g) of the Internal Revenue Code, all amounts of compensation deferred pursuant to the Plan, all property and rights purchased with such amounts, and all income attributable to such amounts, property, or rights shall be held in trust for the exclusive benefit of participants and beneficiaries under the Plan. Any trust under the Plan shall be established pursuant to a written agreement that constitutes a valid trust under the law of the State of California. All amounts of compensation deferred under the Plan shall be transferred to a trust established under the Plan within a period that is not longer than is reasonable for the proper administration of the accounts of participants. Attached hereto as Exhibit A, an incorporated herein by reference is the City of Anaheim Section 457 Deferred Compensation Plan Trust. ARTICLE IX. ELIGIBLE ROLLOVERS 9.01 Eligible Rollover Distributions: (a) Effective Date: This Article 9.01 is effective January 1, 2002. (b) Incoming Rollovers: An eligible rollover distribution may be accepted from an eligible retirement plan. The Employer may require such documentation from the distributing plan as it deems necessary to effectuate the rollover in accordance with Section 402 of the Code and to confirm that such plan is an 7 eligible retirement plan within the meaning of Section 402(c)(8)(B) of the Code. The Plan shall separately account for eligible rollover distributions from any eligible retirement plan that is not an eligible deferred con~pensation plan described in Section 457(b) of the Code maintained by an eligible governmental employer described in Section 457(e)(1)(A) of Code. The Employer may refuse to accept a transfer in the form of assets other than cash, unless the Employer or Provider agree to hold such assets under the Plan. (c) Outgoing Rollovers: Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. (d) Definitions: (1) (2) (3) Eligible Rollover Distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Sections 401(a)(9) and 457(d)(2) of the Code; and any distribution made as a result of an unforeseeable emergency of the employee. For purposes of distributions from other eligible retirement plans rolled over into this Plan, the term eligible rollover distribution shall not include the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). Eligible Retirement Plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Sections 403(a) or 403(b) of the Code, a qualified trust described in Section 401(a) of the Code, or an eligible deferred compensation plan described in Section 457(b) of the Code which is maintained by an eligible governmental employer described in Section 457(e)(1)(A) of the Code, that accepts the distributee's eligible rollover distribution. Distributee: A distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. 8 (4) Direct Rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee. 9.02 Trustee-to-Trustee Transfers to Purchase Permissive Service Credit: All or a portion of a Participant's Account may be transferred directly to the trustee of a defined benefit governmental plan (as defined in Section 414(d) of the Code) and as permitted for acceptance by the Defined Benefit Governmental Plan, if such transfer is (A) for the purchase of permissive service credit (as defined in Section 415(n)(3)(A) of the Code) under such plan, or (B) a repayment to which Section 415 of the Code does not apply by reason of subsection (k)(3) thereof, within the meaning of Section 457(e)(17) of the Code. 9.03 Treatment of Distributions of Amounts Previously Rolled Over From 401(a) and 403(b) Plans and IRAs. For purposes of Section 72(t) of the Code, a distribution from this Plan shall be treated as a distribution from a qualified retirement plan described in Section 4974(c)(1) of the Code to the extent that such distribution is attributable to an amount transferred to an eligible deferred compensation plan from a qualified retirement plan (as defined in Section 4974(c) of the Code). 9.04 Deemed IRAs: Effective for Plan Years beginning after December 31, 2002, the Employer will allow Employees to make voluntary employee contributions to a separate account or annuity established under the Plan that complies with the requirements of Code section 408(q) and any regulations promulgated thereunder. Such accounts or annuities shall meet the applicable requirements of Code sections 408 or 408A and shall be treated as an individual retirement plan that is not part of the Plan. Such accounts shall be restricted to the Employer's Providers and Investment Funds. ARTICLE X. DISTRIBUTION OF BENEFITS '10.01 Retirement Benefits and Election on Severance Event: (a) General Rule: Except as otherwise provided in this Article X, the distribution of a Participant's Account shall commence as of a Participant's Automatic Distribution Date, and the distribution of such benefits shall be made in accordance with one of the payment options described in Article 10.02. Notwithstanding the foregoing, but subject to the following paragraphs of this Article 10.01, the Participant may elect following a Severance Event to have the distribution of benefits commence on a fixed determinable date other than that described in the preceding sentence, but not later than April I of the year following the year of the Participant's Retirement or attainment of age 70-1/2, whichever is later. Prior to January 1, 2002, an election made pursuant to the preceding sentence shall not be valid unless such election is made not less than 30 days prior to the date that the distribution of a Participant's Account would otherwise commence. (b) Additional Delay in Distribution: The Participant may elect to defer the commencement of distribution of benefits to a fixed determinable date later than the date provided in Article 10.01(a), but not later than Ap£il 1 of the year following the year of the Participant's retirement or attainment of age 70-1/2, whichever is later, provided, however, that in the case of elections made prior to January 1, 2002, (a) such election is made after the 61st day following the Participant's Severance Event and before commencement of distributions, (b) the Participant may only make only one (1) such election, and (c) such election is made not less than 30 days prior to the date the distribution of a Participant's Account would otherwise commence. Notwithstanding the foregoing, the Plan Administrator, in order to ensure the orderly administration of this provision, may establish a deadline after which such election to defer the commencement of distribution of benefits shall not be allowed. (c) Loans: Notwithstanding the foregoing provisions of this Article 10.01, no election to defer the commencement of benefits after a Severance Event shall operate to defer the distribution of any amount in the Participant's Loan Account in the event of a default of the Participant's loan. 10.02 Payment Options: As provided in Articles 10.01, 10.05, 10.06 and 10.07, 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 Article 10.04: (a) Equal monthly, quarterly, semi-annual or annual payments in an amount chosen by the Participant, continuing until his Account is exhausted; (b) One lump-sum payment; (c) Approximately equal monthly, quarterly, semi-annual or annual payments, calculated to continue for a certain period chosen by the Participant. (d) Annual Payments equal to the minimum distributions required under Section 401(a)(9) of the Code, including the incidental death benefit requirements of Section 401(a)(9)(G), over the life expectancy of the Participant or over the life expectancies of the Participant and his or her Beneficiary. (e) Payments equal to payments made by the issuer of a retirement annuity policy acquired by the Provider. (f) A split distribution under which payments under options (a), (b), (c) or (e) commence or are made at the same time, as elected by the Participant under Article 10.01, provided that all payments commence (or are made) by the latest benefit commencement date under Article 10.01. (g) Any payment option elected by the Participant and agreed to by the Employer and Provider and as provided for by the Internal Revenue Service. 10 A Participant's or Beneficiary's selection of a payment option made after December 31, 1995, under Subsections (a), (c), or (g) above may include the selection of an automatic annual cost-of-living increase. Such increase will be based on the rise in the Consumer Price Index for All Urban Consumers (CPI-U) from the third quarter of the last year in which a cost-of-living increase was provided to the third quarter of the current year. Any increase will be made in periodic payment checks beginning the following January. 10.03 Default: A Participant's or Beneficiary's election of a payment option must be made at least 30 days before the payment of benefits is to commence. If, prior to January 1, 2002, a Participant or Beneficiary made a timely election of a payment date but failed to specify a payment option or failed to make a timely election of both payment date and option, and as a result, either was defaulted to benefit commencement at age 65, or such other date as the Participant or Beneficiary may have specified, benefits shall be paid annually in the amount of $100 per year commencing at age 65 or the date specified by the Participant or Beneficiary until the Participant or Beneficiary reaches age 70-1/2. When the Participant or Beneficiary reaches age 70-1/2, payments shall be made in accordance with Code section 401(a)(9) and the regulations thereunder. 10.04 Limitation on Options: No payment option may be selected by a Participant under subsections 10.02(a) or (c) unless the amount of any installment is not less than $100 per year. No payment option may be selected by a Participant under Sections 10.02, 10.06, or 10.07 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 benefit requirements under Section 401(a)(S)(G). 10.05 Minimum Distribution: Starting the year a Participant who has a Severance Event reaches age 70-1/2 he is required to withdraw a minimum amount annually from his account. If the Participant works past age 70-1/2, he is required to begin withdrawals for the year in which he actually has a Severance Event. For purposes of this Section, the Internal Revenue Code Regulations shall apply when determining the minimum distribution. 10.06 Post-retirement Death Benefits: (a) Should the Participant die after he 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 within the 30-day period beginning with the 61st day after the Participant's death, unless the Beneficiary elects payment under a different payment option that is available under Article 10.02 11 within 60 days of the Participant's death. Any different payment option elected by a Beneficiary under this section must provide for payments at a rate that is at least as rapid under the payment option that was applicable to the Participant. In no event shall the Employer or Provider be liable to the Beneficiary for the amount of any payment made in the name of the Participant before the Employer or Provider receives proof of death of the Participant. (b) 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 Beneficiary(ies) of the Beneficiary. In the event that the Beneficiary has no named Beneficiary(ies) on file, payment shall be made in a lump sum to the estate of the Beneficiary. (c) If the beneficiary is a spouse, the Beneficiary may rollover distributions to an IRA or a 401,403(b) or governmental 457 plan in which the spouse participates. 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 Participant's estate in a lump sum. 10.07 Pre-retirement Death Benefits: (a) Should the Participant die before he has begun to receive the benefits provided by Article 10.01, the value of the Participant's Account shall be payable to the Beneficiary commencing within the 30-day period beginning on the 91st 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 (ii) if the Beneficiary is the Participant's spouse, December 31 of the year in which the Participant would have attained age 70-1/2. (b) Unless a Beneficiary elects a different payment option prior to the benefit commencement date, death benefits under this Section shall be paid in approximately equal annual installments over five years, or over such shorter period as may be necessary to assure that the amount of any annual installment is not less than $1,200. A Beneficiary shall be treated as if he were a Participant for purposes of determining the payment options available under Article 40.02, 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 (15) years if the Beneficiary is not the Participant's spouse. (c) 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 in a lump sum to the Beneflciary(ies) of the Beneficiary. 12 (d) If the beneficiary is a spouse, the Beneficiary may rollover distributions to an IRA or a 401,403(b) or governmental 457 plan in which the spouse participates. In the event that the Participant's estate is the Beneficiary, payment shall be made to the Participant's estate in a lump sum. 10.08 Unforeseeable Emergencies: (a) In the event an unforeseeable emergency occurs, a Participant may apply to the Plan Administrator to receive that part of the value of his Account that is reasonably needed to satisfy the emergency need. If such an application is approved by the Plan Administrator, the Participant shall be paid only such amount as the Plan Administrator 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. (b) 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) of the Code) of the Participant, loss of the 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. For example the need to send a Participant's child to college, divorce, or to purchase a new home 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. The Plan Administrator shall determine whether such unforeseeable emergency exists. If a request for an unforeseeable emergency is denied, the Participant may appeal the decision to the Deferred Compensation Committee. The written appeal must be filed with the Plan Administrator within 30 days of the date of the denial. The decision of the Deferred Compensation Committee shall be final. Withdrawals of amounts because of an unforeseeable emergency will be permitted only to the extent reasonably needed to satisfy the emergency. If the Participant receives a withdrawal for a Unforeseeable Emergency, he must stop contributions to the Deferred Compensation Plan for a period of one (1) year, or as allowable by IRS Regulations. 10.09 Transitional Rule for Pre-1989 Benefit Elections: In the event that, prior to January 1, 1989, a Participant or Beneficiary has commenced receiving benefits under a payment option then that payment shall remain in effect unless a change is allowed by the Internal Revenue Service. 10.10 Inactive Accounts (De Minimis) 13 Voluntary In-Service Distribution: A Participant who is an active Employee of the Employer shall receive a distribution of the total amount payable in a lump sum to the Participant under the Plan if the following requirements are met: (i) the total amount payable to the Participant's under the Plan does not exceed $5,000 (or as may be revised by the Internal Revenue Service and/or the Department of Labor), (ii) the Participant has not previously received an in-service distribution of the total amount payable to the Participant under the Plan, (iii) no amount has been deferred under the Plan with respect to the Participant during the two-year period ending on the date of the in- service distribution; and (iv) the Participant elects to receive the distribution. 10.11 Other Distributions: Notwithstanding any other provisions of the Plan, the Employer may change the time or methods of benefit payment pursuant this Plan. If the balance due the participant or beneficiary is less than $5,000 (or as may be revised by the Internal Revenue Service and/or the Department of Labor), the Employer shall discharge its obligation by a lump sum payment. Article XI. Loans to Participants 11.01 Availability of Loans to Participants: (a) The Employer has elected to make loans available to Participants, the Participant may apply for a loan from the Plan subject to the limitations and other provisions of this Article XI and the Internal Revenue Service Code restrictions. (b) The Plan Administrator shall establish written guidelines governing the granting of loans, provided that such guidelines are approved by the Provider and are not inconsistent with the provisions of this Article, and that loans are made available to all Participants on a reasonably equivalent basis. 11.02 Terms and Conditions of Loans to Participants: Any loan by the Plan to a Participant under Article 11.01 of the Plan shall satisfy the following requirements: (a) Availability. Loans shall be made available to all Participants on a reasonably equivalent basis. (b) Interest Rate. interest rate. Loans must be adequately secured and bear a reasonable 14 (c) Loan Limit. No Participant loan shall exceed the present value of the Participant's Account. (d) Foreclosure. In the event of default on any installment payment, the outstanding balance of the loan shall be a deemed distribution. In such event, an actual distribution of a plan loan offset amount will not occur until a distributable event occurs in the Plan. (e) Reduction of Account. Notwithstanding any other provision of this Plan, the portion of the Participant's Account balance used as a security interest held by the Plan by reason of a loan outstanding to the Participant shall be taken into account for purposes of determining the amount of the Account balance payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. (f) Amount of Loan. At the time the loan is made, the principal amount of the loan plus the outstanding balance (principal plus accrued interest) due on any other outstanding loans to the Participant from the Plan and from all other plans of the Employer that are qualified employer plans under Section 72(p)(4) of the Code shall not exceed the lesser of: (1) $50,000, reduced by the excess (if any) of (a) The highest outstanding balance of loans from the Plan during the one (1) year period ending on the day before the date on which the loan is made, over (b) The outstanding balance of loans from the Plan on the date on which such loan is made; or (2) One-half of the value of the Participant's interest in all of his or her Accounts under this Plan. (g) Application for Loan. The Participant must give the Employer adequate written notice, as determined by the Plan Administrator, of the amount and desired time for receiving a loan. No more than one (1) loan may be made by the Plan to a Participant's in any calendar year. No loan shall be approved if an existing loan from the Plan to the Participant is in default to any extent. (h) Length of Loan. Any loan issued shall require the Participant to repay the loan in substantially equal installments of principal and interest, at least monthly, over a period that does not exceed five (5) years from the date of the loan; provided, however, that if the proceeds of the loan are applied by the Participant to acquire any dwelling unit that is to be used within a reasonable time (determined at the time of the loan is made) after the loan is made as the principal residence of the Participant, the five (5) year limit shall not apply. In this event, the period of repayment shall not exceed a reasonable period determined by the Employer. Principal installments and interest payments otherwise due may be suspended for up to one (1) year during an authorized 15 leave of absence, if the promissory note so provides, but not beyond the original term permitted under this subsection (h), with a revised payment schedule (within such term) instituted at the end of such period of suspension. All loans will be due and payable within 90 days of a Severance Event. No payments are required during this grace period. (i) Prepayment. The Participant shall be permitted to repay the loan in whole or in part at any time prior to maturity, without penalty. 0) Promissory Note. The loan shall be evidenced by a promissory note executed by the Participant and delivered to the Plan Administrator, and shall bear interest at a reasonable rate determined by the Plan Administrator. (k) Security. The loan shall be secured by an assignment of the participant's right, title and interest in and to his or her Account. Assignment or Pledge. For the purposes of paragraphs (f) and (g), assignment or pledge of any portion of the Participant's interest in the Plan and a loan, pledge, or assignment with respect to any insurance contract purchased under the Plan, will be treated as a loan. (m) Other Terms and Conditions. The Plan Administrator shall fix such other terms and conditions of the loan as it deems necessary to comply with legal requirements, to maintain the qualification of the Plan and Trust under Section 457 of the Code, or to prevent the treatment of the loan for tax purposes as a distribution to the Participant. The Employer, in its discretion for any reason, may also fix other terms and conditions of the loan, including, but not limited to, the provision of grace periods following an event of default, not inconsistent with the provisions of this Article and Section 72(p) of the Code, and any applicable regulations thereunder. 11.03 Participant Loan Accounts: (a) Upon approval of a loan to a Participant by the Plan Administrator, an amount not in excess of the loan shall be transferred from the Participant's other investment fund(s), described in Article 8.01 of the Plan, to the Participant's Loan Account as of the Accounting Date immediately preceding the agreed upon date on which the loan is to be made. (b) The assets of a Participant's Loan Account may be invested and reinvested only in promissory notes received by the Plan from the Participant as consideration for a loan permitted by Article 11.01 of the Plan or in cash. Uninvested cash balances in a Participant's Loan Account shall not bear interest. Neither the Employer, the Provider, nor any other person shall be liable for any loss, or by reason of any breach, that results from the Participant's exercise of such control. (c) Repayment of principal and payment of interest shall be made by payroll deduction or, where repayment cannot be made by payroll deduction, by 16 check, and shall be invested in one (1) or more other investment funds, in accordance with Article 8.01 of the Plan, as of the next Accounting Date after payment thereof to the Trust. The amount so invested shall be deducted from the Participant's Loan Account. (d) The Employer shall have the authority to establish other reasonable rules, not inconsistent with the provisions of the Plan, governing the establishment and maintenance of Participant Loan Accounts. ARTICLE XlI. NON-ASSIGNABILITY 12.01 In General: Except as provided in Article 12.02, 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 non-assignable and non-transferable. 12.02 Domestic Relations Orders: (a) Allowance of Transfers: To the extent required under final judgment, decree, or order (including approval of a property settlement agreement that (i) relates to the provision of child support, alimony payments, or marital property rights and (ii) is made pursuant to a state domestic relations law, any portion of a Participant's Account may be paid or set aside for payment to a spouse, former spouse, child, or other dependent 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 at the earliest date that benefits may be paid to the Participant, unless the order directs a different time or form of payment. The alternate payee may elect to transfer this separate account to their existing 401(a), 403(b), 457 or Traditional IRA account. Nothing in this Article 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 Article shall be reduced by any required income tax withholding and shall be taxable to the alternate payee. (b) Release from Liability to Participant: The Employer's liability to 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 the Article. No such transfer shall be effectuated unless the Employer has been provided with satisfactory evidence that the Employer is released from any further claim by the Participant with respect to such amounts. The Participant shall be deemed to have released the Employer from any claim with respect to such amounts, in any case in which (i) the Employer has been served with legal process or otherwise joined in a proceeding relating to such transfer, (ii) 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 17 service of process in such action or by mail from the Employer to the Participant's last known mailing address, and (iii) the Participant fails to obtain an order of the court in the proceeding relieving the Employer from the obligation to comply with the judgment, decree, or order. (c) Participation in Legal Proceedings: The Employer 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 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 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 XIII. 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. Nothing contained in this Plan shall be deemed to constitute an employment contract or agreement between any Participant and the Employer or to give any Participant the right to be retained in the employ of the Employer. Nor shall anything herein be construed to modify the terms of any employment contract or agreement between a Participant and the Employer. ARTICLE XlV. APPLICABLE LAW This Plan and Trust shall be construed under the laws of the State of California and is established with the intent that it meets the requirements of an "eligible deferred compensation plan" under Section 457 of the Code, as amended. The provisions of this Plan and Trust shall be interpreted and applied so as to conform with the requirements of Section 457 of the Code. ARTICLE XV. GENDER AND NUMBER The masculine pronoun, whenever used herein, shall include the feminine pronoun, and the singular shall include the plural, except where the context requires otherwise. ARTICLE XVI. MISCELLANEOUS 18 16.01 The Deferred Compensation Committee, as defined in Article 3.07 is empowered to review, evaluate, and make recommendations for product providers to the City Council. Additionally, the Deferred Compensation Committee will serve as an advisor to the Plan Administrator in decisions such as unforeseeable emergency limitations, etc. and specific duties and responsibilities for overall deferred compensation plan administration are noted below; A. CITY COUNCIL Authorize, by resolution, the Anaheim Deferred Compensation Plan Document, in compliance with Section 457 of the Code. Approves additions or removal of Plan Providers, as well as approves major amendments to approved plans. 3. Authorize the administration of the Plan. B. PLAN ADMINISTRATOR Day to day administration, including approval of Plan participation agreements and preliminary evaluation of unforeseeable emergencies. Authority to sign all legal agreements with approved Plan Providers, including minor Plan amendments. Provide recommendations on adding or deleting Plan Providers, to the City Council. Communicating the Deferred Compensation Program to employees. Maintain Deferred Compensation Procedures Manual and related Plan documents. 6. Coordinate Plan Provider/City employee meeting schedule. The Plan Administrator shall have the right to delegate any of the above duties to staff. C. DEFERRED COMPENSATION COMMITTEE Conduct reviews of the Deferred Compensation Program and make recommendations as necessary. Review Plan Provider performance and assist the Plan Administrator in developing recommendations on adding, deleting or amending Plan Providers to the City Council. 19 Review and make determinations on adding, deleting or amending Investment Options. Assist the Plan Administrator on unforeseeable emergency determinations, as necessary. 5. The Committee shall have the power to appoint subcommittees. The five (5) Deferred Compensation Committee Members shall serve as Trustees of the Trust. The Committee will select the 5th member (Participating Employee) of the Committee. D. SUBCOMMITTEE Performs task within the scope of the Committee's responsibility The subcommittee makes reports and recommendations for consideration to the Committee. 16.02 No Participant or other person shall have any legal or equitable right against the Employer except as provided in the Plan, and in no event shall the terms of employment of any Employee or Participant be modified or in any way affected thereby. 16.03 Each Participant herein expressly agrees for himself, his successors, assignees and his beneficiaries that he shall look solely to the general assets of the Trust for the payment of any such benefit to which he may become entitled under the Plan. 16.04 The Plan has been adopted in the State of California and shall be construed and governed and administered in compliance with all applicable State law. 16.05 The Plan shall be binding upon and shall inure to the benefit of the Employer, its successors and assigns, all Participants and Beneficiaries, and their heirs, and legal representatives. 16.06 Any notice or other communication required or permitted under the Plan shall be in writing, and if directed to the Employer shall be sent to the Employer or Contract Administrator at its principal office, as applicable; and, if directed to a Participant or a Beneficiary, shall be sent to such Participant or Beneficiary at his last-known address as it appears on the Employer's records. Such notice shall be deemed given when mailed. 16.07 Deductions for Participant's contributions to the Public Employees' Retirement System, Social Security, or other retirement plan or associations, shall be made regardless of amounts deferred pursuant to the Plan. 2o 16.08 A permitted leave of absence without pay shall be considered to be a temporary suspension of contribution to the Plan. Contribution shall be automatically reinstated in accordance with the Participation Agreement as of the first day of the next payperiod subsequent to the termination of such leave of absence status. In the event of a non-permitted leave of absence without pay, the Employer at its discretion may deem such absence a revocation of the Participation Agreement. ARTICLE XVll. AMENDMENT OR TERMINATION OF PLAN The Employer has the sole and exclusive right to terminate this Plan for all Participants at any time. Upon such termination, each Participant in the Plan will be deemed to have revoked his Participation Agreement as of the date of such termination. Such termination shall have no effect on the rights of the Participant with respect to amounts already deferred under the Plan or transferred pursuant to Article IX. The Employer may also amend the provisions of this Plan at any time; provided, however, that no amendment shall affect the rights of the Participants or their Beneficiaries to the receipt of payment of benefits, to the extent of any Compensation deferred at the time of the amendment as adjusted for income or losses attributable to such Deferred Compensation prior to and subsequent to the amendment. To the extent that there are legislative changes affecting Section 457 of the Internal Revenue Service Code, this plan shall be interpreted to allow implementation of mandatory changes. This Plan is intended to qualify as an eligible deferred compensation plan under Section 457 of the Code and shall be interpreted and administered in a manner consistent with such qualifications. The Employer reserves the right to amend the Plan to the extent that may be necessary to conform the Plan to the requirements of Section 457 of the Code and any other applicable law, regulation or ruling, including amendments that are retroactive to the effective date of the Plan. In the event that the Plan is deemed by the Internal Revenue Service to be administered in a manner inconsistent with Section 457 of the Code, the Employer shall correct such inconsistency within the period provided in Section 457 of the Code, or terminate the Plan. The Employer reserves the right to take such action and do such things as are required to make the Plan, as administered, consistent with Section 457 of the Code. ARTICLE XVlll. TOTAL AGREEMENT This Plan and the Participation Agreement, and any subsequently adopted amendment thereof, shall constitute the total agreement or contract between the Employer and the Participant regarding the Plan. No oral statement regarding the Plan may be relied upon by the Participant. 21 DATE: The Employer hereby establishes this Deferred Compensation Plan on the terms and conditions set forth herein. ATTEST: APPROVED AS TO FORM 22