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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with CalPERS can be purchased to cover military serVice, to redeposit retirement funds which have previously been withdrawn, or to cover service with a CalPERS employer which occurred prior to the employee becoming a member of CaIPERS.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: '~ ),~~~ }~~.1 MARSHA JON MOUTRIE -. l City Attorney f Adopted and approved thIS 22nd of July 1997 ( ~ilj~ OC:t~1/lrw- - Pap1 O'Connor. ]'vlayor I \ 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 "- ~~ ~J \ Mana 1\.1 Ste\vart, CIty Clerk - --- ----