HomeMy WebLinkAboutReso 76-22 Designating Cost Sharing as Employer Pick-upRESOLUTION NO. 76-22
RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MORRO BAY, CALIFORNIA,
DESIGNATING EMPLOYEES' CONTRIBUTIONS
TOWARD EMPLOYER PENSION COSTS AS
AN EMPLOYER PICK-UP PER SECTION 414(h)(2)
OF THE INTERNAL REVENUE CODE
THE CITY COUNCIL
City of Morro Bay, California
WHEREAS, the City of Morro Bay has the authority to implement Government Code
("GC") section 20516(f), which authorizes, under certain specified conditions, the City and its
employees to share the costs of the employer contribution towards retirement benefits under the
CaIPERS retirement benefit plan ("CaIPERS Plan"); and
WHEREAS, pursuant to section GC 20516(f), certain City employees will contribute an
agreed percentage of their base salary ("Contributions") towards the City's cost of the CaIPERS
retirement benefits provided for such employees; and
WHEREAS, GC section 20516(f) authorizes the City to implement cost -sharing
arrangements without amending its existing pension contract with CaIPERS; and
WHEREAS, section 3401(a)(12)(A) of the Internal Revenue Code ("Code") excludes
employer contributions from an employee's wages until such time as such contributions are
distributed to the employee; and
WHEREAS, as a result of the preceding, the Contributions will be taken on a pre-tax basis
since the Contributions are considered by the CaIPERS Plan to be employer contributions; and
WHEREAS, notwithstanding its position that the Contributions are deemed to be
employer contributions by the CaIPERS 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 member
of CaIPERS; and
WHEREAS, Internal Revenue Service Revenue Ruling 2006-43 requires the City take
contemporaneous action evidencing an intent to establish a proper pick-up under section
414(h)(2).
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NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MORRO BAY,
CALIFORNIA, DOES HEREBY RESOLVE AS FOLLOWS:
SECTION 1. Certain employees ("Employees") of the City are contributing or will be
contributing a percentage of their PERSable compensation toward the City's cost for retirement
benefits provided to said employees under the CalPERS Plan, as specified in an applicable
memoranda of understanding or any successor thereto or benefits resolutions.
SECTION 2. Employees covered by a collective bargained agreement or benefits
resolution shall be required to contribute such Contributions as specified therein. "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 GC section
20516(f).
SECTION 3. That the City will implement the provisions of Code section 414(h)(2) with
respect to the Contributions.
SECTION 4. The Contributions, which may be designed 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 5. An Employee may not elect to receive Contributions directly instead of
having them paid by the City to the CalPERS Plan.
SECTION 6. Amounts picked up by the City shall be paid from the same sources of
funds as used in paying salary.
SECTION 7. The effective date of the pick-up by the City shall be the June 27, 2022 and
the pick-up applies only to contributions made after this effective date.
SECTION 8. The City Clerk shall certify to the adoption of this Resolution and enter it into
the book of original Resolutions.
PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting
thereof held on the 9th day of August 2022 by the following vote:
AYES:
NOES:
ABSENT
ATTEST:
Headding, Addis, Barton, Ford, Heller
None
None
JOHN flEAbDI _Mayor
_PkVV11_ �fGrp �4VN-
D A SWANSON, City Clerk
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