HomeMy WebLinkAboutCC AG PKT 2010-06-14 #JAGENDA STAFF REPORT
DATE: June 14, 2010
TO: Honorable Mayor and City Council
THRU: David Carmany, City Manager
FROM: Robbeyn Bird, CPA
Director of Administrative Services /City Treasurer
SUBJECT: CALIFORNIA PUBLIC EMPLOYEES RETIREMENT
SYSTEM (CaIPERS) - RESOLUTION AUTHORIZING
CONTINUED TAX DEFER MEMBER PAID
CONTRIBUTIONS
SUMMARY OF REQUEST:
Adopt Resolution No. 6008 agreeing to continue tax defer member paid
contributions — Internal Revenue Code Section 414 (h)(2) Employer Pick -Up.
BACKGROUND:
Internal Revenue Code (IRC) Section 414(h)(2) allows public agencies to
designate required employee contributions as being "picked up" by the employer
and treated as employer contributions for tax purposes. The effect of the pick -up
is to defer tax on employee contribution amounts until the member retires and
receives retirement benefits, or separates from employment and takes a refund
of contributions. Absent the 414(h)(2) provision applicable to governmental
plans, employee contributions to a defined benefit pension plan would
automatically be after -tax contributions (e.g. taxable income to the employee at
the time the contribution was made).
Revenue Ruling 2006 -43 stipulates that each contracting agency who reports tax
deferred member contributions provide a copy of their documentation, or if
necessary, adopt conforming documentation. Recently the Public Employees
Retirement System (PERS) contacted the Administrative Services Department to
inform staff that a Resolution is required by all agencies that pay the employee
portion of PERS. At the time that the City implemented the employee "pick-up", a
Resolution was not required to be adopted. However, PERS subsequently
amended the requirements of this provision and is now requiring all agencies to
submit a resolution authorizing IRC Section 414(h)(2).
Agenda Item J
Page 2
In accordance with all four of the City of Seal Beach's collective bargaining
agreements, the City has "picked up" the employee contributions and has
reported this pick up as tax deferred member contributions to CalPERS for quite
some time. In order to ensure our ongoing compliance with federal tax reporting
requirements and avoid any complications with payroll reporting to CalPERS, it is
imperative that the City Council adopts Resolution No. 6008. Failure to adopt
this resolution and provide the documentation to CalPERS will result in the City's
records being rejected until the documentation is received.
FINANCIAL IMPACT:
There is no financial impact created by this Resolution.
RECOMMENDATION:
Adopt Resolution No. 6008 approving authority to implement section 414(h)(2) of
the Internal Revenue Code.
SUBMITTED BY:
NOTED AND APPROVED:
AN- 4 6 ka�,n & a O
Robbeyn Bird, CPA David Carmany City Manager
Director of Administrative Services/Treasurer
Attachment:
A. Resolution No. 6008
RESOLUTION NUMBER 6008
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEAL
BEACH APPROVING THE AGREEMENT TO TAX DEFER
MEMBER PAID CONTRIBUTIONS — INTERNAL REVENUE
CODE 414(h)(2) EMPLOYER PICK - UP
THE CITY COUNCIL OF THE CITY OF SEAL BEACH DOES HEREBY
RESOLVE:
WHEREAS, the governing body of the City of Seal Beach has the authority to
implement the provisions of section 414(h)(2) of the Internal Revenue Code
(IRC); and
WHEREAS, the City of Seal Beach has determined that even though the
implementation of the Provisions of section 414(h)(2) IRC is not required by law,
the tax benefit offered by Section 414(h)(2) IRC should be provided to ALL
EMPLOYEES who are members of the California Public Employees' Retirement
System:
NOW, THEREFORE, BE IT RESOLVED:
That the City of Seal Beach will implement the provisions of section 414(h)(2)
Internal Revenue Code by making employee contributions pursuant to California
Government Code Section 20691 to the California Public Employees' Retirement
System on behalf of all its employees or all its employees in a recognized group
or class of employment who are members of the California Public Employees'
Retirement System. "Employee contributions" shall mean those contributions to
the Public Employees' Retirement System which are deducted from the salary of
employees and are credited to individual employee's accounts pursuant to
California Government Code Section 20691.
That the contributions made by the City of Seal Beach to the California Public
Employees' Retirement System, although designated as employee contributions,
are being paid by the City of Seal Beach in lieu of contributions by the employees
who are members of the California Public Employees' Retirement System.
That employees shall not have the option of choosing to receive the contributed
amounts directly instead of having them paid by the City of Seal Beach to the
California Public Employees' Retirement System.
That the City of Seal Beach shall pay to the California Public Employees'
Retirement System the contributions designated as employee contributions from
the same source of funds as used in paying salary.
That the amount of the contributions designated as employee contributions and
paid by the City of Seal Beach to the California Public Employees' Retirement
System on behalf of an employee shall be the entire contribution required of the
employee by the California Public Employees' Retirement Law (California
Government Code Sections 20000, et seq.).
That the contributions designated as employee contributions made by The City of
Seal Beach to the California Public Employees' Retirement System shall be
treated for all purposes, other than taxation, in the same way that member
contributions are treated by the California Public Employees' Retirement System.
Resolution Number 6008
PASSED, APPROVED and ADOPTED by the City Council of the City of Seal
Beach at a regular meeting held on the 14th day of June , 2010 by the
following vote:
AYES: Council Members
NOES: Council Members
ABSENT: Council Members
ABSTAIN: Council Members
ATTEST:
City Clerk
Mayor
STATE OF CALIFORNIA }
COUNTY OF ORANGE } SS
CITY OF SEAL BEACH }
I, Linda Devine, City Clerk of the City of Seal Beach, do hereby certify that the
foregoing resolution is the original copy of Resolution Number 6008 on file in
the office of the City Clerk, passed, approved, and adopted by the City Council at
a regular meeting held on the 14th day of June , 2010.
City Clerk