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Home My WebLink About2005-06-15 Agenda Packet - Board (14) Agenda Item # /0 i i u - ' Public TRUCKtility District Memorandum To: Board of Directors From: Stephen Hollabaugh Date: June 8, 2005 Subject: Cal PERS Pre-Tax Payroll Deduction Plan for Service Credit Purchases History- The Board adopted a Resolution Authorizing a Contract between the Board of Administration California Public Employees' Retirement System and the Board of Directors Truckee Donner Public Utility District. The effective date of this contract was August 21, 2004. New Information — Cal PERS has a program where an employee can purchase service credit. There are a number of TDPUD employees who are in the process of purchasing service credit from CalPERS and would like to pay for these credits with Pre-Tax payroll deductions. In order for the employees to purchase this service credit with a Pre-Tax payroll deduction (as opposed to Post-Tax payroll deduction), the Board must approve a resolution (attached). By filing a Resolution (attached) with Cal PERS, employers are allowed to extend the pick-up of member contributions under Internal Revenue Code section 414(h) (2) provisions for the member payments by payroll deductions for service credit purchases. Individual employers who opt to participate in this "pick-up" program provide their employees, who elect to participate, with the benefit of deferring income tax liability on member service credit purchases. The effective date for commencement of the Plan cannot be any earlier than the date the completed resolution is received and approved by CaIPERS. There is no additional cost to the District in approving this Resolution; it only lets the employee purchase these service credit pre-tax verses post-tax. Attached is some general information from the Cal PERS procedure manual describing the Plan restrictions and requirements for the employer and the member (employee). Recommendation — 1 recommend the Board approve Resolution No. 2005-XX, Employer Pickup Resolution Pre-Tax Payroll Deduction Plan for Service Credit Purchases and forward to Cal PERS as required. Employer code: 1899 f j District R solu ion No. 2005 - XXX t - Employer Pickup Resolution Pre-Tax Payroll Deduction Plan for Service Credit Purchases (Contribution code 14) 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 (IRC) section 414(h)(2); and WHEREAS, the Truckee Donner Public Utility District has the authority to implement the provisions of(IRC)section 41'4(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 CaIPERS; and WHEREAS, the Truckee Donner Public Utility District elects to participate in the pre-tax payroll deduction plan for all employees in the following CaIPERS coverage group:70001. NOW, THEREFORE, BE IT RESOLVED: L That the Truckee Donner Public Utility District will implement the provision 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 CaIPERS 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 CaIPERS which are deducted from the salary of employees and are credited to individual employee accounts for service credit purchases,thereby resulting in tax deferral of employee contributions. If. That the contributions made by the Truckee Donner Public Utility District to CaIPERS, although designated as employee contributions,are being paid by the Truckee Donner Public Utility District in lieu of contributions by the employees who are members of CaIPERS. 111. That the employees shall not have the option of choosing to receive that contributed amounts directly instead of having them paid by the Truckee Donner Public Utility District to CaIPERS. IV. That the Truckee Donner Public Utility District shall pay to CaIPERS the contributions designated as employee contributions from the same source of funds as used in paying salary, thereby resulting in tax deferral of employee contributions. Resolution 2005-XX 1 Employer code: 1899 V. That the effective date for commencement of the pre-tax payroll deduction plan cannot be any earlier than July 1, 1996, or the date of the completed resolution is received and approved in CalPERS, whichever is later. VI. That the governing body of the Truckee Donner Public Utility District shall participated 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 board of the Truckee Donner Public Utility District this day of , 2005 by the following roll call vote: AYES: NOES: ABSTAIN: ABSENT: TRUCKEE DONNER PUBLIC UTILITY DISTRICT J. Ron Hemig, President ATTEST: Peter L. Holzmeister, District Clerk RETURN ADDRESS: P.O. Box 309, Truckee, Ca. 96160 FOR CALPERS USE ONLY Pre-tax Payroll Deduction Plan Effective Date: Approved By: Title: MEMBER SERVCIES DIVISION, Service Credit Section — Unit 830 Resolution 2005-XX 2 PRE-TAX PAYROLL DEDUCTION PLAN (A.IL.A. 7.Pretax deductions will he completed through the PLAN) FOR SERVICE CREDIT PURCHASE(S) payroll reporting process using Code 14 instead of Code 04,Both contributions and contribution By filing a Resolution`with CaIPERS,employers are codes should be reported in the Tax-deferred allowed to extend the pick-up of member Member Contribution fields instead of the contributions under Internal Revenue Code section Normal Member Contribution fields. 414(h)(2) provisions for member payments by payroll deductions for service credit purchases.Individual 8.717te employer may report bath codes and employers who opt to participate in this"pick-up" contributions through a manual process by program provide their employees,who elect to submitting 5upplemental Payroll documents on participate,with the benefit of deferring income tax an interim basis until their payroll system can liability on member service credit purchases.County incorporate both the code and contribution on a Superintendents of Schools need submit only one pre-tax basis for each employee. Resolution which will cover all the districts/units g_Overpayments must be reported as negative within that superintendent's jurisdiction.The effective adjustments through the payroll reporting date for commencement of the Han cannot be any process.lht emplIgver wilt be responsible for earlier than the date the completed resolution is retnrnim such funds to them member taxable received and approved in CaIPERS. -- — jaS481� PLAN RESTRIMNS/REQUIREMENTB 10.Th nlov r is EMPLOYER Gaon ibi for ALL pwmfl mrreeh�luditur W-2 reporting)for the I.The employer must file with CalPERS a completed memo copy of the attached resolution to allow their 11 The employer report employees to participate in the H , e emoy will an. P po payroll deductions for service credit purchases for members who 2.The wording of the resolution cannot be altered; choose NOT to elect the Plan on an after-tax however,the resolution format is the employer's basis(Code 04). choice. 12.Once the Han Resolution is adopted,it is 3.The resolution applies to a employees in the irrevocable. specified coverage group(s) (i.e.,70001,70002, MEMBER 74001,75001 etc.). 1.Upon approval of the employer/CalPERS 4.Upon receipt of an approval letter from CaIPERS, resolution,the member has the option to file a the employer must also complete the"Readiness to binding irrevocable election with CalPERS to Report"form.This form certifies that their payroll elect the Han for each type of service credit system can concurrently report both Contribution pure, Code 04(after tax) and Contribution Code 14(pre- tax) payroll deductions for any employee with 2.Members with an existing(Code 04) receivable multiple service credit elections, will be notified by CalPERS of their opportunity to elect the Plan. 5.Pre-tax payroll deductions(Code 14's) must not be reported by the employer until the member has 3.Members requesting service credit purchase(s) elected the Plan.For each electing member, will be provided the pretax election opportunity CaIPERS will send a payroll deduction (if the employer is a Han participant)with their authorization form specifying their effective date of cost information letter. Contribution Code 14 reporting.IRS does not all ow 4.The Plan amount and time period are retroactive deductions. and cannot be adjusted at any time during irrevocable 6.The employer is responsible for reducing the payroll deduction schedule. taxable income of a member by the pre-tax payroll deduction amount. s 5.'Ibe deductions are member contributions and COMPENSATION PAID TO COURT REPORTERS are subject to income taxes when received by the member as either a retirement benefit or refund. Report compensation for Court Reporters who qualify for CalPERS membership,i.e.,those who 6.A member who elects the Plan deductions then serve half-time or more.Numerous statutes and a changes employers will automatically continue variety ofpayment pretax payroll deduction payments if the new ul standmethods prevent proceduaIPERSres from employer is a Plan participant If the new formulating standard reporting procedures for Court employer does not have a resolution on file with Reporters.Separate instructions are provided to the individual counties.Contact the Compensation CaIPERS,the deductions will be taken on an after- Review Unit for further information, tax basis. 7.A member who elects the Ran is not allowed to make additional direct cash payments(i.e.,lump sum,partial payments,or increased scheduled payments). 8.A member who elects the Plan and terminates employment will be given the option to pay the lump sum balance or continue payments on an after-tax basis through Direct Payments to CaIPERS. 9.A member who elects the Plan and retires }+ may request to pay the lump sum balance. If no request is made,payments will continue through retirement allowance deductions. 10.Electing the Plan will reduce the taxable gross and may lower the amount the member can contribute into a defined contribution plan.It is the member's responsibility to determine the potential impact prior to electing the Plan. 11.Once pretax deductions are elected,it is irrevocable unless#6 or#S above applies. "Resolution—See Sample NO1E: Par morn information,o6utact.the CalPERS;Member Services Division Service Credit Seetio%Ih it 830 P.O.-136a4000 - Sacramento,CA9531240Qt1 Telephone number 1400352 223&