Memorandum 18-128 State of Alaska Public Employees’ Deferred Compensation Plan

MEMORANDUM 18-128

TO:                        City Council

THRU:                  Katie Koester, City Manager

FROM:                 Andrea Browning, HR Director

DATE:                   November 7, 2018

RE:                         State of Alaska Public Employees’ Deferred Compensation Plan

                The City of Homer currently offers multiple deferred compensation plans to all regular and part-time employees.   These plans are at no cost to the City, requiring employee contributions only- no employer contribution.  Enrollment in a deferred compensation plan allows employees to voluntarily set aside a portion of their income either before it is taxed or after it has been taxed under the Internal Revenue Code Section 457.  The amount set aside, plus any change in value (interest, gains and losses), is payable to the employee or their beneficiary at a future date. Employees may elect to defer their income on a pre-tax or post-tax basis. By doing so, they agree to reduce their salary by an agreed-upon amount.

The Alaska Deferred Compensation Plan (DCP), the State’s deferred compensation plan, was previously only available to State employees.  This is no longer the case.  Now, municipalities have the option to participate in the DCP as well.  This is exciting news for the City of Homer employees!   Participation in the DCP allows City employees who were previously employed by the State to resume making contributions into their current accounts, and provides other employees the opportunity to enroll. 

This City is not required to get rid of the other currently offered deferred compensation plans.  However, that will be something to consider moving forward.  Employees that have deferred compensation plans with various plans such as ICMA or GWN will have the option to move their current investments over to the DCP. 

Advantages to the DCP:

• Lower participation fees
• The State Division of Retirement and Benefits is responsible for the overall administration of this plan, which means the City does not have the fiduciary responsibility that we current shoulder with the other plans
• PERS Tier I-III employees will have their retirement $$$ in one place.  This means a PERS rep can easily view their investments and offer advice based on all aggregate information.
• PERS Tier IV employees can view their deferred compensation account online with their retirement account!  DCP info can be uploaded to the Empower Retirement employee page, so all funds are viewable and become part of the employee’s portfolio.  This makes retirement planning easier!