RPVCCA_CC_SR_2012_11_07_K_Pick_Up_Reso_Employee_Contribution_Pension_PlanCITY OF
MEMORANDUM
RANCHO PALOS VERDES
TO:
FROM:
DATE:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
CAROLYNN PETRU,DEPUTY CITY MANAGE~
DENNIS McLEAN~ECTOR OF FINANCE AND INFORMATION
TECHNOLOGY ~
NOVEMBER 7,2012
SUBJECT:PICK UP RESOLUTION FOR EMPLOYEE CONTRIBUTIONS TO
PENSION PLAN
REVIEWED BY:CAROLYN LEHR,CITY MANAGER ~
Staff Coordinator:Kathryn Downs,Deputy Director of Finance and Information
Technology l[,[)
RECOMMENDATION
Adopt Resolution No.2012-__;providing for deductions from employees'compensation
to qualify for pre-tax treatment by designating the deductions as "pick-up"contributions
made by the City on behalf of employees to the California Public Employees'Retirement
System (PERS).
DISCUSSION
The City's employees pay the entire employee contribution to PERS on a pre-tax basis (8%
for first tier employees and 7%for second tier employees).Recently,PERS conducted a
review of the City's employer files for completeness of documentation and determined that
the City did not have a resolution on file designating the pre-tax treatment of these
contributions.
The attached resolution will designate amounts deducted from employees'compensation
to fund retirement benefits under PERS as "picked-up"by the City and treated as paid by
the City in lieu of contributions by the employee.By taking this action,the amounts
deducted from employees'compensation will qualify for pre-tax treatment under 414(h)(2)
of the Internal Revenue Code.This action is a matter of housekeeping and does not affect
in any way the City's pension obligation or employer contributions.
Attachment:
Draft Resolution No.2012-;
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CITY COUNCIL RESOLUTION NO.2012-_
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
RANCHO PALOS VERDES,CALIFORNIA,PROVIDING FOR
THE PICK UP UNDER INTERNAL REVENUE CODE SECTION
414(H)(2)OF EMPLOYEE CONTRIBUTIONS TO THE
CALIFORNIA PUBLIC EMPLOYEES'RETIREMENT SYSTEM
WHEREAS,the City of Rancho Palos Verdes provides retirement benefits to eligible
employees under the California Public Employees'Retirement System ("PERS");
WHEREAS,amounts are deducted at various times from City employees'compensation
in order to fund benefits under PERS;
WHEREAS,under section 414(h)(2)of the Internal Revenue Code (Code)and related
guidance from the Internal Revenue Service,such deductions from employees'compensation
qualify for pre-tax treatment only if the City takes formal action to desigflate the deductions,for
tax purposes,as "pick-up"contributions;and ~i"
WHEREAS,the City wishes to adopt this resolution in order to ratify,consolidate,and
further clarify its prior actions to,in accordance with section 414(h)(2)of the Code,designate
amounts deducted from employees'compensation to fund benefits under PERS as pick-up
contributions.
NOW THEREFORE,THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES,CALIFORNIA,DOES HEREBY RESOLVE AS FOLLOWS:
Section 1:The following deductions from City employees'compensation are hereby
designated as "employee contributions":(1)deductions for regular member contributions
under PERS,(2)deductions for purchases of service credit under PERS,and (3)deductions
for employer contributions under PERS.
Section 2:Although designated as employee contributions and deducted from
employees'compensation,the contributions shall,for tax purposes,be characterized as
"picked up"by the City in accordance with section 414(h)(2)of the Code and shall be treated
as paid by the City in lieu of contributions by the employee.
Section 3:Employees shall not have the option of choosing,directly or indirectly,to
receive the contributions instead of having them paid by the City to PERS.
Section 4:The City shall pay to PERS the contributions designated as employee
contributions from the same source of funds as used in paying salary.
Section 5:Contributions picked up under this resolution shall be tax deferred to the
extent provided under the Code,Treasury Regulations,and other guidance issued
thereunder.
Section 6:Each section of this Resolution is severable.Accordingly,if a court rules
that any section of this Resolution is for any reason invalid,the remaining sections shall
remain in effect as long as the substantive effect of those sections is consistent with the
intended purpose of this Resolution.
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Section 7:This Resolution shall be in full force and effect immediately upon its
passage and approval and pUblication as provided by law.If this Resolution conflicts with
any ordinance,resolution,motion,or order,the Resolution shall prevail except as otherwise
required by law.
Section 8:The City Clerk shall certify to the adoption of this Resolution.
PASSED,APPROVED and ADOPTED this i h day of November,2012.
Mayor
Attest:
City Clerk
STATE OF CALIFORNIA }
COUNTY OF LOS ANGELES }ss
CITY OF RANCHO PALOS VERDES }
I,Carla Morreale,City Clerk of the City of Rancho Palos Verdes,hereby certify that the above
Resolution No.2012-_was duly and regularly passed and adopted by the said City Council at
a regular meeting held on November 7,2012
City Clerk
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