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Home My WebLink About0114.092-~:,-:-~ -' ,~ __ .~:,_ ~-;: __ o- . c 'j;~~~~t ~ L~~:,,~:;:;;-:-':" <ftt;·_~___.. 4). ,. ',,,,, ... '." ",C, Janua.')I 9. 1992 11iE HONORABLE CITY COl'NCiL Palo Alto, California ResollltiQn to Implement tbe PrO\'isions of SecH.Q..!L!.l4111)(2) of the Internal Revenue Code on Behalf or Manag£'menl Erg'pToy~_s or the City or Palo A]IQ Members of the Coundl: Report in Brier Att2ched for CouncE approval is a Re ... oluLlcm to implement the provisions of Sec-Jon 414(11)(2) cfthe Internal Revenue Code (the PERS "pick up" program on Behalf of Management Employees of the City of Palo Alto). Section H(M)(2) of the Management Compensation Plan provides thi1: upon filing a notice of retiremo!nt, the 7% City-paid PERS contribution (9% for sworn police and fire ITI .. nagemer.t penonnel) will be tOIwerted to a saJarj adjustment of equal aml)unt on a one·time irrevocable basis for the final tv.relve months immediately pr:or to retirement,. provided that the employee meets certain minimum requirements specified in Subparagraphs 2(a) and (b). Currently, during the 12·montn conversion period, the employee pays the PERS employee contnbutior.s. Scotio" II(M}(o) of tbe Management Compensation Plan, effective July 1, 1991, establishes that prov!sior..s will be impiemenred as soon as possible to alio"I/o' for these contributlo.ns io be made on a tax-deferred basis. Under the proposed PERS ~pick up~ program, these contnDutions would be considered to be made on a tax deferred basis. This practice has been re\rjewed by outside tax counsel arld is in accordance with IRS regulation~ as wen a'S the provisions contained in PERS Circulation Letter No. 100-180. dated January 22, 1986. which is included for ),our reference as Attachment I. Recommendation Staff recommends that Council approve the attached Resolution implementing the provisions of Section 414{h){2) of the Internal Revenue Code, and CMR:1l4:92 ---"-"C-. _. _"'cp<, .,-•.. ,.,~ ..• "\:):;;~::;:~" "<'--, :i:i':: .' . ~t;ll' .:": ;:·:~~fo~·~~;'( ; I~ - -.------- 3 Page Two adopting a PERS "pkk up" program C~ll behalf of ~Janagement Emplo)-'ees. of tl:e City of Paio Alto. Respect~Y,~bmitted, ~-/-' //,/ (£1tts; •. ' N, Emplo),e: Benefits ~ _\{ C /2n-v.J",_~ JAYC ROUNDS Director of Human Resources ~~ JUNE FLEMING Assistant City Manager Attachments: CMR:l14:92 Resolution Implementing the Provisions of the IRS Code on behalf of Management Empioyees PERS Circulation Lener No. 100-180, dated 1/22/86 ." -0" ... ~, J: i 1 -. -=< .::-.-. ,"-~-. ,j,;,.' . ~~v1~ir--. -----------------.... ---- ~. -==PERS rcular Letter uronlla PubIIo Lr.mplo,.,es· Re~t System >._ tolO) ~CA~010l ."1 l14-<!HS ~ _ te-=ollUJNi:UcatIoIuI ~.ce rur C DcaI-(916' 44:5-1155 .... aml.ari' 22. 1986 J,llA, VI, XJl , s,rC~AL 100-160 PVBUC AGJ::NC:U:S,. COUNn SUP£R!NTENOE"N"] or SCHOOLS, SCHOOL DISTRICTS, BOUD 1tDCSE:RS. ctVlS ION " OFFICE READS !:.je:C:&: DlPtoY'EA ·PICX-t1P .. FOR. SCHOOLS AND LOCAI. AGENCIES ! ~ ·pr1v4te letter ruling" rEferr.d tQ In Circular ~tter flOO-l~l. ~t.d Deetmb.r 18. 1985. has nQ~ been reeeived .~d i •• tt.ched~ This rulinq efficially .~ti~ the ability for any P£?S .~hOQl cr local employer to parti~ip.t. in the ·pi~k-~p· pro&ram. "e.4 an ~ec.nt inquirle. there .till _p~ear~ to be &any que~tions or .u.~d.r.tanding. about the ·pie~-~p· program. the following w~ll hopefully clarity .any of the •• 1.~ues: • 8asleatly. the. Inttrnal Revenu. Co4c ('iRe' Sf!:«i.on (14. (hl (2.1 allO\tl'& public -.player. to designate ~equired .~loyee contribution. a. beinq ~lcke4-up· by ~ utployez: t.n4 tr •• t..t! .... rployer eonuibllt.ion.. for :Federal anc! SUt:. tax fU!JXI'" conly. '!:be tera -,pick-up· h a • .t.n;r~ Actually t.be ....oar conu-1butiOl\s continue to ~ 4.4u.et..d frOID tl\t &~t\"\&l 91'08' Mlary J:'efl.C'ted: on e Mmber'. pay .tub .. lIIo! Under EPHC the employer actually pay. the _mber cont.tibutions atl4 the ~r·. pay .tub does not refl~ct e de~~etion fZQQ 9%05& sal~~ fo: r.ti~ ... nt ~ontribut1ona .. The aDployer should only adopt the te~olutiOQ vnen L~ey vant to iapl • ..,nt the ·pick-up·· prcqraJII. Xl the elnploy~r is unaer tl'Ie UMC progr .. , ~ IRS required ~esclution 1s not n.ees'.ry~ Does p~ Ne.~ • coPY of the Re50lution !f ~e Imrle5ent the ·fi~k-Up· 'roqr .. ? No! All PEAS ne.ds is • letter fro~ the employer st.tinq that they are impl ... nting the ·piek-up· program .n~ indic.tinq the first pay period that ~ eontrlb~tiona vill ~ r.ported a& being ·picked-up·. 1 OIlS-ADM-ea _. II .. ) ----'e"""· ... · .. · ... "" ......... ' .. ?--~. -~ .. , •• 1 The State Taxation and ~.~~nue Code Section 17501 provide. that stat. tax •• follow ~e provision. of IRe Se~t10n 41. (h) (l). ,. •• r Anr compensat.ior. vhic-h iI· reportable 1:0 PER.5 urlder the Re-:.1re.nt LMw. Government Code Section 20022 la) and. there lore, .ubjeet to r.tire~nt tantributions is co\o'erad. by the -,pick-up· pr0'9r ... If you have any further question •• ple.e.se contac-t Rich Anaul-on at (916) 32~·-024S ° .. ~ /"" 'I " U., .. o. /.;;. / ... / ,/ ~'~ .. l.//"",':.-__ '" JtOB.!RT O. MALTON. CHIEF ACCOUNTING Cl~ISION I I • -" RESOLUTIO:"-NO.;-~:--;;;;: RESOLlJTION OF THE C0t'NCIL OF THE' CI'I'l· OF PALO ALTO IMPLEMENTING THE FROVISIONS OF SECTION 414 (HI {2) OF THE INTERN;'L EEVENliE -::0 DE ON BEfiALF OF MJo.....NAGEMENT EMPLOYEES OF THE CITi' OF PALO ALTO WHEREAS, the city of Palo Al to has the implement the provisions of section 414 {h} {2} of Revenue Code (IRC): anc authority to the Internal WHEREAS, the Board of Ad~inistration of the PUblic Employees' Retireoent system adopted its resolution regardir.g section 414(h) (2) on September 18, 1985~ ar.d WHEREAS, t}le Internal Revenue Service has ~tated or. December 1'5, 1985 that the implementation of the provisions of section 414(h) (2} of the IRC pursuant to the resolution of the Board of Administration would sat is:fy the legal req'...lire!:lents of sectiun 414 (h) (2) of the IRC; and WHEREAS, the City of Palo Alto has determined that even though the implementation of the provisions of section 414(h) (2) of the IRe is not required by law, the tax benefit offered by section 414 (h) (2) of the IRe should be provided to its Management employees who are members of the publ ic E:;;plcyees' Retirement. System; NOW, THEREFORE: The council of the City of palo Alto does hereby RESOLVE as follows: SECTION 1. The City of Palo Alto ·.'ill implement the provisions of section 414 (h) (2) of the Internal Revenue Code by making employee contributions pursuant to C~lifornia Government Code sectio~ 20615 to the Public Employees! Retireillent System on behal f of its Management employees who are lterr,bers of the Public Employees I Retirement System. "Emplcyee con'tributioJ:.s" s~a]l mean those contributions to the public Employees' Retirement System \tr,'hich are deducted fr~m th~ salary of employees and are credited to i:ldividual employ~e5' accounts pursuant to California Goye.rnment Code section 20615. SECTION 2. The contributions made by the City of Palo Alto to the Public Employees' Retirement System, although designated as employee contributions, are being paid by the city of Palo Alto in lieu of contributions by the Manage~ent employees "rho are members of the Public Employees I Retirement S}'stem. SECTION 3. The Managemen.t employees shall not have the option c.f choosing to receive the contributed Cimounts directly instead of having them paid by the city of Palo Alto to the Public Employees' Retirement System. 1 en ~f_<;'rJ_9J'L.1. The City cf Palo Alto shall pay to tr.e PUblic Employees r Retirement System thE ccntribut::'ons designated as eonployee cO:1tributior.s frurl the sar.,e source of funds as used in paying sala~y. ~ON 5. ~he amount of the contrihuticns designated as en".ployee contributiorls and paid t-y the City cf Palo Alto tc the PUblic Employees I Retirement Syste'1'\ on behalf of a lo:!anagement employee shall be the entire contribution required of the employee by the Public E:!':1ployees' Retirement La' .• (California Government Code sections 2000, et seq.). SECTION 6. The contributions designated as employee -:::ontributions made by the City of Palo Alto to the Public E:nplayees 1 Retirement systel'!1. shall be treated for all p·Jrposes, other than taxation .... in the same w-ay that member contributions are treated Py the Publio Employees 1 Retirel:lent System. SECTION 7. This is not 3. project for purposes of the Cdlifornia Environmental Quality Act ("CEQA'·). INTRODUCED AN~ PASSED: AYES; NOES: ABSENT: ABSTENTIONS: ATTEST: APPROVED: City Clerk APPRO'llED AS TO FORM: City M3nager Senior Asst. City Attorney Director of Financ"e------ Director of Human Resources 2 •