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April 25, 2017 17 - 187 - Adoption of an ordinance to amend and reordain Articles II and III of Chapter 30 of the Code of the City of Portsmouth, Virginia (2006) pertaining to the Portsmouth Supplemental Retirement System and the Fire and Police Retirement System by amending Sections 30-26, 30-100, 30-151, 30-219, and 30-221. Background:  The city has two closed retirement systems that it is responsible for administering, the Portsmouth Supplement Retirement System (PSRS) and the Fire and Police Retirement System (FPRS). Both of these retirement systems are qualified plans. A qualified plan is an employer-sponsored retirement plan that qualifies for special tax treatment under Section 401(a) of the Internal Revenue Code.  In the past, in order for the plans to remain qualified, the city was required to apply every five years for a determination to the Internal Revenue Service (IRS). The IRS would issue a favorable or unfavorable letter and would frequently require changes to the plans to meet Treasury Regulations.  IRS Requirements have recently changed and after this year, determination letters will no longer be issued by the IRS. In the future, the law will require qualified plans to independently review the IRS Requirements to ensure that their plan meets applicable Treasury Regulations to maintain its status.  Since a favorable determination letter from the IRS provides a measure of protection for plans and the determination letter program is ending after this year, the city took the initiative to apply for determination letters for PSRS and FPRS.  On March 20, 2017, the IRS issued favorable determination letters for the city’s two retirement systems, contingent upon the adoption of an ordinance to more clearly identify who is eligible to participate in PSRS and FPRS consistent with the applicable Treasury Regulations. Discussion:  As a condition for granting the determination letters, the IRS is requiring that PSRS and FPRS codes be amended to clarify the meaning of a “full-time” employee under Sections 30-26, 30-100, 30-151, 30-219, and 30-221 of Portsmouth’s Code, retroactive to July 1, 2011. The basis for this requirement is that this would more clearly identify who is eligible to participate in the Plans, consistent with the applicable Treasury Regulations. The changes indicate that an employee is “full-time” depending on the payroll classification of the employee.  Since both PSRS and FPRS were closed to full-time employees prior to the July 1, 2011 effective date of the amendments, the amendments are technical in nature and are proposed for adoption solely for the purpose of complying with federal regulations. The amendments do not have any practical impact on plan membership. Financial Impact:  There is no cost to update the city code. The city has hired a specialized legal firm to conduct annual reviews of the city codes to ensure compliance with IRS Requirements and Treasury Regulations.  The retirement trust fund will cover the cost for this service, and it is estimated to be $15,000-$30,000 annually depending on the complexity of any tax law changes. Recommended Action:  Adoption of the ordinance. Next Steps Following Council Action:  The City Attorney’s office will partner with the outside firm to submit the revised code to the IRS, as necessary. Motion by Mr. Moody, and seconded by Ms. Psimas, to adopt the following ordinance, and was adopted by the following vote: