HomeMy WebLinkAbout8 CalPERS Member Contributions Agenda Item # 8
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Public Utility District
n
CONSENT
To: Board of Directors
From: Nancy Waters
Date: November 05, 2008
Subject: Adopt CaIPERS Resolutions for Employer Paid Member
Contributions
1. WHY THIS MATTER IS BEFORE THE BOARD
Only the Board of Directors can adopt resolutions.
2. HISTORY
In 2004, the District signed a participation contract with the California Public
Employees' Retirement System (CaIPERS) to provide a retirement plan for
employees. During the negotiations with the bargaining unit in 2004, agreement was
reached that the District would pick-up 4% of the required 7% employee contribution.
Page one from the July 1, 2004 Staff Report is attached explaining the District's pick
up of 4% employee contribution. This agreement became effective on the CaIPERS
contract execution date of August 21, 2004.
3. NEW INFORMATION
CaIPERS has issued a notice to all participating agencies that an Internal Revenue
Code Section 414(h)(2), Revenue Ruling 2006-43 requires documentary evidence
authorizing employer pick-up contributions. CaIPERS is requiring that resolutions be
on file to distinguish whether the contributions were actually paid by the employer or
the employee. This will ensure ongoing compliance with federal tax reporting
requirements. CaIPERS letter dated October 3, 2008 is attached.
4. FISCAL IMPACT
There is no additional fiscal impact by adopting the resolutions authorizing the
employer paid member contributions.
5. RECOMMENDATION
Authorize the President of the Board to sign the resolutions authorizing CaIPERS
Employer Paid Member Contributions.
Mary Ch n Michael D. Holley
Administrative Services Manager General Manager
Agenda Item ##
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DONNER
Public Utility District
Staff Report
To: Board of Directors
From: Stephen Hollabaugh
Date: July 1, 2004
Subject: Consideration of expressing the District's intent to contract with
CalPERS Retirement System
Why this matter is before the Board: Because only the Board of Directors can
approve a resolution.
History: You will recall that the last MOU negotiated between the Union and the
District has an opener for the discussion of the Cal PERS retirement plan. The Labor
Management Steering Committee has been investigating costs and benefits of the
CalPERS retirement plan.
We have discussed this matter generally during the past couple of years. We have
wanted to set our compensation package so that we can attract and retain a highly
skilled professional staff. We have also recognized that constructing, maintaining
and operating the water and electric plant in our mountain environment and severe
winters imposes physical demands on our outside crews. These long term physical
demands take a toll on people and they eventually need to retire with reasonable
income security.
Within our overall compensation package, our current pension plan is not competitive
with what is offered by other utility employers in Northern California. When we recruit
staff we find that an adequate pension plan is important. We have an opportunity to
correct this deficiency in our compensation package at minimal cost increase to the
District because the employees are willing to participate in funding the pension plan.
New Information: The Labor Management Steering Committee has reached a
tentative agreement on the terms a PERS retirement plan. The proposal is to close
out the District's current defined benefit plan (covering union employees) and the
existing 401(a) money purchase plan (covering union and exempt employees) and
move the cash asset to PERS. We would implement a PERS retirement plan with a
benefit formula of 2% at age 60, with the employees contributing 3% of wages as part
of the funding of the plan.
1
P.O. Box 942709 Date: October 3, 2008
Sacramento, CA 94229-2709 Reference No.:
888 Ca1PERS (or 888-225-7377)
1)00,0�
Telecommunications Device for the Deaf 'Circular Letter No.: 200-049-08
No Voice (916)795-3240 Distribution: VI, XII, XVI
CaIPERS www.calpers.ca.gov Special:
Circular Letter
TO: PUBLIC AGENCIES, COUNTY SUPERINTENDENT OF SCHOOLS,
SCHOOL DISTRICTS
SUBJECT: EMPLOYER "PICK-UP" - REVENUE RULING 2006-43
DECEMBER 31, 2008 DEADLINE FOR ACTION
ATTENTION: FINANCE DIRECTORS, HUMAN RESOURCE DIRECTORS
This Circular Letter is being sent to advise employers of Revenue Ruling 2006-43
concerning 1i ie pick-up of employee contributions to California Public Employees
Retirement System (CalPERS), and of actions that an employer may be required to
take before December 31, 2008 to ensure compliance with pick-up requirements.
BACKGROUND AND PURPOSE
Internal Revenue Code (IRC) Section 414(h)(2.) allows public agencies and school
employers to designate required employee contributions as being "picked-up" by
the employer and treated as employer contributions for tax purposes. The effect of a
pick-up is to defer tax on employee contribution amounts until the member retires and
receives retirement benefits, or separates from employment and takes a refund of
contributions. Absent the 414(h)(2) provision applicable to governmental plans,
employee contributions to a defined benefit pension plan qualified under Section
401(a) would automatically be after-tax contributions (e.g. taxable income to the
employee at the time the contribution was maco).
Since the early 1980s, CalPERS has taken steps to ensure that contracting agency
and school employers have adopted and submitted to CalPERS appropriate written
evidence of pick-ups prior to reporting tax-deferred member contributions to CalPERS.
This Circular Letter is being sent as a reminder of the federal tax reporting
requirements, to encourage each contracting agency and school employer who reports
tax-deferred member contributions to review their documents and, if necessary, adopt
conforming documentation prior to the deadline set by Revenue Ruling 2006-43. To
view the ruling, visit CalPERS online.
Circular Letter#200-049-08 _2_ October 3, 2008
REVENUE RULING 2006-43
Re
venue Ruling2006-43 provides, in general, that an employee contribution will not be
treated as "picked-up" under IRC 414(h)(2) unless:
1)The employer specifies that the contributions, although designated a�
employee be
( to ee contributions, are being paid by the employer (this action must
memorialized in writing), and
2 The employer does not permit participating employees to opt out of the o pick-
up r to receive the contributed amounts directly instead of having them paid by
up
the employer to the plan.
R evenue Ruling2006-43 allows employers who do not have written evidence of a pick-
up,
but their actions show that they intended to establish and carry out a pick-up, to be
re-tax contributions �f the
treated as meeting the requirements of 414(h)(2)for p P
employer takes formal action in writing prior to December 31, 2008 with respec1to
008
future picked-up contributions. If formal action is not taken prior to December ,
only contributions taken after the written documentation is in place may be treated 0-33
picked-up.
WRITTEN DOCUMENTATION
Many of you offer a pick-up of employee contributions under a resolution approved by
the IRS in a private letter ruling issued to CalPERS on December 6, 1985, (PLR
8609084). Y 2
If our agency has adopted the approved resolution to implement 414(h)( )
pick-ups,
ick-u s you may continue to rely on that ruling and need not adopt a new resolution.
This approved form, which is Sample E---Resolution for Employer Pick-up can be
to
viewed at CalPERS online. If you have not previously sent a copy of the resoluti
on
us, or if you did not complete Sample E, but have other written documentation, please
send a copy of your document or resolution to us immediately.
After 1985, CaIPERS provided additional pick-up resc!ut±ons for adoption by
I aid b
contracting agencies that distinguishes whether the pick-up was to be actually p Y
the employer or by the employee. When an employer pays the employee contributions,
it is referred to as Employer Paid Member Contributions (EPMC). The employer may
also report the value of EPMC as special compensation. Contracting agencies that
adopted any of these resolutions were requested to submit the resolutions to
nline.
CalPERS. Samples of Resolutions A through D can be viewed at CalPERSYou may continue to rely on these resolutions but you should review are
and validate
that the resolution covers all of the employees whose contributions a ported as tax-
deferred. If you have not previously sent a copy of the resolution to us, please do so
immediately.
Circular Letter#200-049-08 -3- October 3, 2008
CALPERS NEW BUSINESS ENVIRONMENT
CalPERS is in the process of building and installing a new business reporting system.
One of the design features will enhance CalPERS ability to maintain accurate and up
to date information about contracting agency and school employer pick-ups. As a way
of ensuring that our system will accurately record your agency's pick-up provision,
CalPERS requires all affected agencies to provide a copy of their existing or future
pick-up resolutions or other written documentation. This will ensure ongoing
compliance with federal tax reporting requirements. The new system will validate that
you have documentation on file with CalPERS before accepting tax-deferred member
contributions. If documentation is not on file, your records will be rejected and will be
held until the appropriate documentation is received.
CONCLUSION
If you are submitting tax-deferred contributions on behalf of your members, we request
that you review your files for documentary evidence authorizing such employer pick-up
of employee contributions. If you do not have evidence, please take steps to have
your governing board adopt an appropriate resolution prior to December 31, 2008.
Please send a copy of your pick-up documentation to:
CalPERS
Employer Services Division
Compensation Review Unit
P.O. Box 942709
Sacramento CA 94229-2709
If you have any questions, please call the Employer Contact Center at 888 CaIPERS
or(888 225-7377).
Lori McGartland, Chief
Employer Services Division
Visit the CalPERS website at www.calpers.ca.gov (2008 Circular Letters) for more
information on the following:
1 - Revenue Ruling 2006-43
2 - Sample Resolution E
3 - Sample Resolutions A - D
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Public Utility District
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R s Au ion No. 2008 - XXX
CaIPERS RESOLUTION FOR EMPLOYER PAID
MEMBER CONTRIBUTIONS
WHEREAS, the governing body of the Truckee Donner Public Utility District has the authority to
implement Government Code Section 20691;
WHEREAS,the governing body of the Truckee Donner Public Utility District has a written labor policy
or agreement which specifically provides for the normal member contributions to be paid by the
employer;
WHEREAS, one of the steps in the procedures to implement Section 20691 is the adoption by the
governing body of the Truckee Donner Public Utility District of a Resolution to commence said
Employer Paid Member Contributions (EPMC);
WHEREAS, the governing body of the Truckee Donner Public Utility District has identified the
following conditions for the purpose of its election to pay EPMC:
• This benefit shall apply to all employees of the District
• This benefit shall consist of paying 4% of the normal member contributions as EPMC.
• The effective date of this Resolution shall be (Date).
NOW, THEREFORE, IT IS HEREBY RESOLVED, that the governing body of the Truckee Donner
Public Utility District elects to pay EPMC, as set forth above.
PASSED AND ADOPTED by the Board of Directors of the Truckee Donner Public Utility District in a
meeting duly called and held within said District on the 5th day of November 2008.
AYES:
NOES:
ABSTAIN:
ABSENT:
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
Tim F. Taylor, President
ATTEST:
Michael Holley, P.E. District Clerk
is
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4
Public Utility District
Resolution No. 2008 - XXX
CaIPERS RESOLUTION FOR EMPLOYER PICK-UP
WHEREAS, the Board of Directors of the Truckee Donner Public Utility District has the
authority to implement the provisions of section 414(h)(2) of the Internal Revenue Code
(IRC); and
WHEREAS, the Board of Administration of the Public Employees' Retirement System
adopted its resolution re section 414(h)(2) IRC on September 18, 1985; and
WHEREAS, the Internal Revenue Service has stated in December 1985, that the
implementation of the provisions of section 414(h)(2) IRC pursuant to the Resolution of the
Board of Administration would satisfy the legal requirements of section 414(h)(2) IRC; and
WHEREAS, the Truckee Donner Public Utility District has determined that even though the
implementation of the provisions of section 414(h)(2) IRC should be provided to its
employees who are members of the Public Employees' Retirement System.
NOW, THEREFORE, BE IT RESOLVED:
I. That the Truckee Donner Public Utility District will implement the provisions of section
414(h)(2)of the Internal Revenue Code by making employee contributions pursuant to
California Government Code section 20691 to the Public Employees' Retirement
System on behalf of its employees who are members of the Public Employees
Retirement System. "Employee contributions" shall mean those contributions to the
Public Employees' Retirement System which are deducted from the salary of
employees and are credited to individual employee's accounts pursuant to California
Government Code section 20691.
II. That the contributions made by the Truckee Donner Public Utility District to the Public
Employees' Retirement System, 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 the Public Employees' Retirement System.
III. That employees shall not have the option of choosing to receive the contributed
amounts directly instead of having them paid by the Truckee Donner Public Utility
District to the Public Employees' Retirement System.
IV. That the Truckee Donner Public Utility District shall pay to the Public Employees'
Retirement System the contributions designated as employee contributions from the
same source of funds as used in paying salary.
Resolution 2008-XX 1
V. That the amount of the contributions designated as employee contributions and paid by
the Truckee Donner Public Utility District to the Public Employees' Retirement System
on behalf of an employee shall be the entire contribution required of the employee by
the Public Employees' Retirement Law(California Government Code sections 20000,
et seg.).
VI. That the contributions designated as employee contributions made by Truckee Donner
Public Utility District to the Public Employees' Retirement System shall be treated for all
purposes, other than taxation, in the same way that member contributions are treated
by the Public Employees' Retirement System.
PASSED AND ADOPTED by the Board of Directors of the Truckee Donner Public Utility
District in a meeting duly called and held within said District on the 5th day of November
2008.
AYES:
NOES:
ABSTAIN:
ABSENT:
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
Tim F. Taylor, President
ATTEST:
Michael Holley, P.E. District Clerk
Resolution 2008-XX 2