SR-6-DD
Reso ftCf(72- ~QQ
JUL 2 2 1997
f: \person' mlsc\councll\counCI24 Santa MOnica, California
Council Meeting July 22, 1997
TO Mayor and City CouncIl
FROM" City Staff
SUBJECT Adoption of Resolution Establishing a Pre-Tax Payroll Deduction Plan for
California Public Employees Retirement System Service Credit Purchases
INTRODUCTION
This report requests adoption of the attached resolution establishing a pre-tax payroll
deduction plan for service credit purchases with the California Public Employees
Retirement System (CaIPERS).
BACKGROUND
Under certain circumstances, City of Santa MOnica employees may purchase additional
servIce credIts wIth the CalIfornIa Public Employees Retirement System (CaIPERS)
through payroll deduction or direct payment arrangements wIth CaIPERS. Additional
servIce credit with CalPERS can be purchased to cover military serVice, to redeposit
retirement funds which have previously been withdrawn, or to cover service with a
CalPERS employer which occurred prior to the employee becoming a member of
CaIPERS. The purchase of additional service credits enables CIty employees to
Increase their retirement benefit from CalPERS Employees currently purchase these
service credits on an after-tax basIs, either through a payroll deduction or a direct
payment arrangement with CafPERS.
~DO
JUl 2 2 1991
The City's contribution to CalPERS (I e I the employer contribution and the employee
contribution on PERSable earnings) IS done on a pre-tax basIs. By adopting the
attached resolution and filing It with CaIPERS, under Internal Revenue Code (IRC)
414(h)(2), the City can extend this pre-tax payment status to those member
contnbutlons to CalPERS which are made by the employees themselves Santa
MOnica employees Will then have the option of electing a pre-tax payroll deduction plan
for the purchase of additional service credits
BUDGET/FINANCIAL IMPACT
It IS not pOSSible to quantify the dollar cost Impact of adopting the attached resolution.
Some computer programming changes and support from payroll will be needed to
Implement this plan, but It IS not pOSSible to determine whether or not those changes
and the requrred support from payroll WIll result In an Increased cost to the City. The
City Will not, however, be making any contributions to CalPERS to cover the purchase
of addItIonal servIce credIts for CIty employees. ImplementatIon of thIs plan WIll be
contingent upon whether or not necessary programming changes can be made to the
City's current payroll system.
RECOMMENDA TIONS
It IS recommended that the City Council adopt the attached resolution establishing a
pre-tax payroll deduction plan for CalPERS service credit purchases
Prepared By Karen L. Bancroft, Director of Personnel
Attachments' Resolution
,
RESOLUTION # 9172 (ecs)
(CITY COUNCIL SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA
AUTHORIZING THE CITY OF SANTA MONICA TO IMPLEMENT THE PROVISIONS
OF SECTION 414(h)(2) OF THE INTERNAL REVENUE CODE
.
WHEREAS, the Board of Administration of the California Public Employees'
Retirement System (CaIPERS) at the April 1996 meeting approved a pre-tax payroll
deduction plan for service credit purchases under Internal Revenue Code (IRCl section
414(h)(2); and
WHEREAS, the City of Santa MOnica 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 benef,t offered by th,s sectIon should
be prOVided to those employees who are members of CaIPERS; and
WHEREAS, the City of Santa Monica elects to partiCipate In the pre-tax payroll
deduction plan for all employees In the follOWing CalPERS coverage group(s):
Local Miscellaneous
Local Safety (FIre Fighters and Police Officers)
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES
RESOL VE AS FOLLOWS:
Section 1 That the City of Santa Monica will Implement the provIsion of IRC
,
section 414(h)(2) by makrng employee contnbutlons 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 purchases thereby
resultmg In tax deferral of employee contributions.
Section 2. That the contnbutlOns made by the City of Santa MOnica to
CalPERS, although desIgnated as employee contnbutlons, are being paId by the City
of Santa MOnica In lieu of contributions by the employees who are members of
CaJPERS.
Section 3. That the employees shall not have the option of chOOSing to receive
the contributed amounts directly Instead of havmg them paid by the City of Santa
MonIca to CaIPERS.
Section 4. That the CIty of Santa Momca shall pay to CalPERS the contnbutlons
designated as employee contributions from the same source of funds as used In paYing
salary, thereby resultmg In tax deferral of employee contributions.
Section 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 CaIPERS, whichever IS later.
Section 6. That the governing body of the City of Santa MOnica shall
particIpated In and adhere to requirements and restriction 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 Groups who have elected to partiCipate
In this plan
Section 7. The CIty Clerk shall certify to the adoption of this Resolution and
thenceforth and thereafter the same shall be In full force and effect.
APPROVED AS TO FORM:
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MARSHA JON MOUTRIE -. l
City Attorney
f
Adopted and approved thIS 22nd of July 1997
(
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Pap1 O'Connor. ]'vlayor
I
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1. Mana ~1 Stewan. Cny Clerk of the CIty of Santa MOllica. do hereby certIfy that the
foregomg ResolutIOn 9172(CCS) was duly adopted at a meetIng of the Cny CouncIl held on the
22nd of July. 1997 by the folloWIng vote
Ayes Councllmembers Femstelll. Genser, Mayor Pro Tern Holbrook, Mayor
O'Connor. Rosenstem
Noes CouncIlmembers 'None
Abstam Councllmembers None
Absent Councllmembers Ebner. Greenberg
A TrEST
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Mana 1\.1 Ste\vart, CIty Clerk
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