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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
Approve Resolution No. _____authorizing the participation in the payroll deduction plan for employees desiring to purchase CalPERS service credit.
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 On occasion an individual who has withdrawn from CalPERS wishes to re-deposit his/her funds into CalPERS.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.
A recently hired employee had withdrawn from CalPERS several years ago and wishes to purchase CalPERS service credit with the benefit of deferring tax.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Staff requests City Council’s approval of the attached resolution to allow employees to purchase previously withdrawn service credit through payroll deductions.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.
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.
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:
PASSED AND ADOPTED by the governing body of the City of Rancho Palos Verdes this 19th day of August, 2003.
State of California )
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.