HomeMy WebLinkAbout6850RESOLUTION NO. 6850
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF ARCADIA, CALIFORNIA, FOR EMPLOYEE
CONTRIBUTION TO OPTIONAL BENEFITS
WHEREAS, the City of Arcadia has the authority to implement Government Code
section 20516(f), which authorizes, under certain specified conditions, the City and its
employees to share the costs of optional benefits of the CalPERS retirement benefit
plan ( "Plan "); and
WHEREAS, the City has adopted optional benefits to be provided to its
employees pursuant to the Plan; and
WHEREAS, pursuant to section 20516(f), the City's unrepresented
miscellaneous and unrepresented safety employees will contribute an agreed
percentage of their base salary ( "Contributions ") towards the City's cost of the CalPERS
retirement benefits, including one -half of the City's cost for the Pre - retirement Option
2W Death Benefit, provided for such employees; and
WHEREAS, section 20516(f) authorizes the City of Arcadia to implement cost-
sharing arrangements without amending its existing pension contract with CaIPERS;
and
WHEREAS, pursuant to the terms of the Plan, the Contributions shall continue to
be designated as an employer contribution; and
WHEREAS, sections 3121(a)(5)(A) and 3401(a)(12)(A) of the Internal Revenue
Code ( "Code "), exclude employer contributions from an employee's wages until such
time as such contributions are distributed to the employee; and
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WHEREAS, as a result of the preceding, the Contributions will be taken on a pre-
tax basis since the Contributions are considered by the Plan to be employer
contributions; and
WHEREAS, if the IRS takes a contrary position, concluding that the Contributions
should be characterized as employee contributions rather than employer contributions,
the City wishes to ensure that the Contributions are not treated as currently taxable to
the employee; and
WHEREAS, notwithstanding its position that the Contributions are deemed to be
employer contributions by the Plan and, therefore, excludable from an employee's
income until distributed, the City wishes to implement the provisions of section 414(h)(2)
of the Code; and
WHEREAS, pursuant to section 414(h)(2), employee contributions to a public
employer pension plan may be picked up on a pre -tax basis by the public employer and
excluded from an employee's gross income if the employer specifies that the
contributions, although designated as employee contributions to the plan, are being paid
by the employer in lieu of contributions by the employee, and the employee cannot
choose to receive the amounts directly instead of having them paid by the employer;
and
WHEREAS, the City has determined that, even though the implementation of the
provisions of section 414(h)(2) is not required by law, the tax benefits of section
414(h)(2) in reducing taxable employee gross income should be provided to its
employees who are members of the Public Employees' Retirement System; and
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WHEREAS, Internal Revenue Service Revenue Ruling 2006 -43 requires that the
City take contemporaneous action evidencing an intent to establish a proper pick -up
under section 414(h)(2).
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARCADIA,
CALIFORNIA, DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS:
SECTION 1. Effective October 7, 2012, the City's unrepresented miscellaneous
and unrepresented safety employees will contribute one -half of the City's cost of
providing to such employees the Pre - retirement Option 2W Death Benefit, currently
estimated to be .138 percent for miscellaneous employees and .110% for safety
employees. This contribution, in addition to previously agreed to contributions, shall be
allocated toward the City's cost for retirement benefits provided to said employees
under CaIPERS.
SECTION 2. Unrepresented miscellaneous and unrepresented safety employees
( "Employees ") shall be permitted to make an irrevocable and binding election not to
receive said Contributions in cash in lieu thereof and to have the City of Arcadia pick up
and contribute such Contributions to the Plan towards the City's cost of the CalPERS
retirement benefits provided for such Employees. "Contributions" shall mean those
contributions to the Public Employees' Retirement System which are deducted from the
salary of employees and are credited to the employer account pursuant to California
Government Code section 20516(f).
SECTION 3. The City of Arcadia will implement the provisions of section
414(h)(2) of the Internal Revenue Code ( "Code ") with respect to the Contributions.
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SECTION 4. An Employee must elect, by executing a one -time, binding and
irrevocable agreement with the City of Arcadia, prior to October 15, 2012, to have the
Contribution contributed to the Plan as a pick -up under section 414(h)(2) of the Code.
SECTION 5. The Contributions, which may be designated as employee
contributions by the Internal Revenue Service, will be picked up on a pre -tax basis by
the City in lieu of employee contributions so that such Contributions are treated as
employer contributions.
SECTION 6. After executing the irrevocable election with respect to the
Contributions, an Employee may not elect to receive such Contributions directly instead
of having them paid by the City to the Plan.
SECTION 7. Amounts picked up by the City shall be paid from the same sources
of funds as used in paying salary.
SECTION 8. The effective date of the pick up by the City shall be the later of the
effective date of this Resolution or the employee's execution of the irrevocable election,
and the pick -up applies only to contributions made after this effective date.
SECTION 9. The City Clerk shall certify to the adoption of this Resolution.
[SIGNATURES ON THE NEXT PAGE]
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Passed, approved and adopted this 2nd day of October , 2012.
Mayor of the City of Arcadia
ATTEST:
City erk
APPROVED AS TO FORM:
Stephen P. Deitsch
City Attorney
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES) SS:
CITY OF ARCADIA )
I, GENE GLASCO, City Clerk of the City of Arcadia, hereby certifies that the
foregoing Resolution No. 6850 was passed and adopted by the City Council of the City of
Arcadia, signed by the Mayor and attested to by the City Clerk at a regular meeting of said
Council held on the 2nd day of October, 2012 and that said Resolution was adopted by the
following vote, to wit:
AYES: Council Member Kovacic, Segal, Wuo and Harbicht
NOES: None
ABSENT: Council Member Amundson
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rk of the City of Arcadia