Rancho Palos Verdes City Council
   

TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS

FROM: CITY MANAGER

DATE: AUGUST 19, 2003

SUBJECT: EMPLOYEE PARTICIPATION IN CALPERS SERVICE CREDIT PURCHASE PLAN

Staff Coordinator: Gina Park, Senior Administrative Analyst

RECOMMENDATION

Approve Resolution No. _____authorizing the participation in the payroll deduction plan for employees desiring to purchase CalPERS service credit.

BACKGROUND

The California Public Employees’ Retirement System (CalPERS) offers its members upon resigning from a CalPERS agency the option of withdrawing their contributions for the purpose of investing the funds elsewhere (outside of CalPERS) instead of holding funds with CalPERS. On occasion an individual who has withdrawn from CalPERS wishes to re-deposit his/her funds into CalPERS. In order for a CalPERS member to re-deposit his/her CalPERS service credit (funds) with the benefit of deferring income tax liability, his/her employer agency must be a recognized participant in the Pre-Tax (Tax Deferred) Payroll Deduction Plan. The City of Rancho Palos Verdes is not a participant in the above Plan and in order to be so the City must file with CalPERS an approved resolution allowing tax deferred service credit payroll deductions for its employees.

DISCUSSION

A recently hired employee had withdrawn from CalPERS several years ago and wishes to purchase CalPERS service credit with the benefit of deferring tax. CalPERS allows pre-tax purchase of service credit only through payroll deductions. (CalPERS does not permit any lump sum, partial or direct payments to be tax deferred.) However CalPERS requires employers to have on file an approved Resolution authorizing tax-deferred purchase of service credit through employee payroll deductions and the City has not approved such a resolution.

Staff requests City Council’s approval of the attached resolution to allow employees to purchase previously withdrawn service credit through payroll deductions. CalPERS would determine the payroll deduction amount and the City agency would be responsible for implementing payroll deductions and reporting. The City would serve as the "collection agency" or third party; the City would collect employee payroll deductions and then "pay" CalPERS the employee’s contributions.

The attached Resolution applies to all City employees (CalPERS coverage group 70001, miscellaneous employees).

Staff anticipates the implementation of the pre-tax purchase of CalPERS service credit to be relatively simple with minimal additional reporting by the Finance and IT Department.

FISCAL IMPACT

According to the Finance and I.T. Department, the additional administrative work required for payroll reporting is minimal and implementation would not be burdensome. Therefore, there would be no direct financial impact.

PREPARED BY
Gina Park
Sr. Administrative Analyst

APPROVED BY
Les Evans
City Manager

Attachments:

  1. Resolution

Employer Code 1020

RESOLUTION NO. 2003-

A RESOLUTION OF THE CITY COUNCIL OF THE CITY

OF RANCHO PALOS VERDES AUTHORIZING PARTICIPATION IN THE PRE-TAX PAYROLL DEDUCTION PLAN FOR SERVICE CREDIT PURCHASES

(CONTRIBUTION CODE 14)

WHEREAS, the Board of Administration of the California Public Employees’ Retirement System (CalPERS) at the April 1996 meeting approved a pre-tax payroll deduction plan for service credit purchases under Internal Revenue Code (IRC) section 414(h)(2); and

WHEREAS, the City of Rancho Palos Verdes has the authority to implement the provisions of IRC section 414(h)(2) and has determined that even though implementation is not required by law, the tax benefit offered by this section should be provided to those employees who are members of CalPERS; and

WHEREAS, the City of Rancho Palos Verdes elects to participate in the pre-tax payroll deduction plan for all employees in the following CalPERS coverage groups: 70001 (Misc. Employees).

NOW THEREFORE BE IT RESOLVED:

    1. That the City of Rancho Palos Verdes will implement the provisions of IRC section 414 (h)(2) by making employee contributions for service credit purchases pursuant to the California State Government Code on behalf of its employees who are members of CalPERS and who have made a binding irrevocable election to participate in the pre-tax payroll deduction plan. "Employee contributions" shall mean those contributions reported to CalPERS which are deducted from the salary of employees and are credited to individual employee accounts for service credit purchase, thereby resulting in tax deferral of employee contributions.
    2. That the contributions made by the City of Rancho Palos Verdes to CalPERS, although designated as employee contributions, are being paid by the City of Rancho Palos Verdes in lieu of contributions by the employees who are members of CalPERS.
    3. That the employees shall not have the option of choosing to receive the contributed amounts directly instead of having them paid by the City of Rancho Palos Verdes to CalPERS.
    4. That the City of Rancho Palos Verdes shall pay to CalPERS that contributions designated as employee contributions from the same source of funds as used in paying salary, thereby resulting in tax deferral of employee contributions.
    5. That the effective date for commencement of the pre-tax payroll deduction plan cannot be any earlier than July 1, 1996, or the date the completed resolution is received and approved in CalPERS, whichever is later.
    6. That the governing body of the City of Rancho Palos Verdes shall participate in and adhere to requirements and restrictions of the pre-tax payroll deduction plan by reporting pre-tax payroll deductions when authorized by CalPERS for those employees of the above stated Coverage Group(s) who have elected to participate in this plan.

PASSED AND ADOPTED by the governing body of the City of Rancho Palos Verdes this 19th day of August, 2003.

________________________
Mayor

ATTEST:

_________________________
City Clerk

State of California )
County of Los Angeles ) ss
City of Rancho Palos Verdes )

I, JO PURCELL, City Clerk of the City of Rancho Palos Verdes, hereby certify that the above Resolution No. 2003- was duly and regularly passed and adopted by the said City Council at a regular meeting thereof held on August 19, 2003.

______________________________
City Clerk