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Home My WebLink About2010/12/14 Item 2 CITY COUNCIL AGENDA STATEMENT ';;;-',j .,~~- ~!'f:. errv OF ~CHUI.A VISTA DECEMBER 14, 2010, ItemL SUBMITTED BY: REVIEWED BY: RESOLUTION TO TAX DEFER CALPERS MEMBER PAID CONTRlBUTIONS UNDER IRC 414(H)(2) EMPLOYER PICK-UP DIRECTOR OF HU~ SOURCES ~1j)ffY- CITY MANAGER - ASSISTANT CIT\: ANAGER '7 ) ITEM TITLE: 4/STHS VOTE: YES 0 NO [!] SUMMARY The Internal Revenue Code Section 414(h)(2), Employer Pick-Up, authorizes employers to report CalPERS member-paid contributions on a pre-tax basis. To implement the 414(h)(2) provision, Council must adopt the resolution. Once adopted, contributions of all employees in the affected group or class wilI be reported to CalPERS on tax-deferred basis. ENVIRONMENTAL REVIEW Not applicable. RECOMMENDATION Council adopt the resolution. BOARDS/COMMISSION RECOMMENDATION Not applicable. DISCUSSION The Internal Revenue Code Section 414(h)(2), Employer Pick-Up, authorizes employers to report CalPERS member-paid contributions on a pre-tax basis. Under the Employer Pick-Up provision, the employee's contributions will be treated as employer contributions for federal and state tax purposes, thus lowering the employee's taxable gross income. 2-1 DECEMBER 14, 2010 Item~ Page 2 of3 To implement the 414(h)(2) provision, Council must adopt the resolution. Once adopted, contributions of all employees in the affected group or class will be reported to CalPERS on tax-deferred basis. The aforementioned resolution is in the form prescribed by CaIPERS. Pursuant to Government Code Section 20691, the City ofChula Vista has been reporting the value of the Employer Paid Member Contribution (EPMC) for Miscellaneous members effective 12/28/2001, for Fire Safety effective 06/29/2001 and Police Safety effective 06/25/2004. The Employer Pick-Up provision applies to employer paid member contributions for all Miscellaneous, Safety Police and Safety Fire. DECISION MAKER CONFLICT Staff has reviewed the decision contemplated by this action and has determined that it is not site specific and consequently the 500 foot rule found in California Code of Regulations section 18704.2(a)(1) is not applicable to this decision. CURRENT YEAR FISCAL IMP ACT Earlier this year, the City's non-represented employees agreed to begin paying towards their pension costs in January 2011. The City has also reached agreement with the Chula Vista Mid Managers and Professionals Association (CVMMlPROF A) to begin paying towards their pension costs in January 2011. For miscellaneous employees the contribution rate will be 8% and for safety employees the contribution rate will be 9%. The annual savings for all funds from these two groups contributing towards their pension costs are as follows: . D . ,~:t1ft'il,-'j~..~.~~:ttl.'U!i!:~~ ~iaffli'lll,~ ' " _~ Non Represented including City Council, City Manager, $852,300 City Attorney, City Clerk, Executives, Senior Managers, Confidential, Mid Managers Confidential and Unclassified, Professionals Confidential and Unclassified Chula Vista Mid Managers and Professionals Association $432,200 Total Estimated Annual Savin s $1,284,500 The savings for the current fiscal year are approximately $642,250 for all funds including the General Fund, Development Services Fund, CV Housing Authority, and Redevelopment Agency. ONGOING FISCAL IMPACT Contributions from CVMM/PROF A and non-represented employees will result in reduced pension costs for the City, as the employees will contribute towards their pension 2-2 DECEMBER 14, 201OItem~ Page 3 of3 costs at a rate of 8% for miscellaneous employees and 9% for safety employees. The estimated annual savings resulting from this change totals $1.3 million for all funds. ATTACHMENTS For signature: CalPERS Resolution to Tax Defer Member Paid Contributions - IRC 414(h)(2) Employer Pick-Up 2-3 RESOLUTION NO. RESOLUTION TO TAX DEFER MEMBER PAID CONTRIBUTIONS IRC 414(h)(2) EMPLOYER PICK-UP WHEREAS, the governing body of the City of Chula Vista has the authority to implement the provisions of section 414(h)(2) of the Internal Revenue Code (IRC); and WHEREAS, the City of Chula Vista 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 miscellaneous and all Safety Police and Fire employees, who are members of the California Public Employees' Retirement System: NOW, THEREFORE, BE IT RESOLVED: That the City of Chula Vista 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 miscellaneous and safety Police and Fire employees 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. II. That the contributions made by the City of Chula Vista to the California Public Employees' Retirement System, although designated as employee contributions, are being paid by the City of Chula Vista in lieu of contributions by the employees who are members of the California Public Employees' Retirement System. III. That employees shall not have the option of choosing to receive the contributed amounts directly instead of having them paid by the City of Chula Vista to the California Public Employees' Retirement System. IV. That the City of Chula Vista 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. V. That the amount of the contributions designated as employee contributions and paid by the City of Chula Vista 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.) VI. That the contributions designated as employee contributions made by the City of Chula Vista 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. 2-4 PASSED AND ADOPTED by the governing body of the City of Chula Vista this day of December 14th, 2010 BY Kelley K. Bacon Director of Human Resources Approved as to form: J~;X Glen R. Googins,'City Attorney RETURN ADDRESS: City of Chula Vista Human Resources Department 276 Fourth Avenue Chula Vista, CA 91910 ---------------------------------------------~----------------------------------------------------------------------------------------- FOR CALPERS USE ONLY RESOLUTION TO TAX DEFER MEMBER PAID CONTRIBUTIONS -IRC 414(h)(2) Approved by. Title: 2-5