TO:
Honorable Mayor and Members of the City Council
THROUGH:
David N. Carmany, City Manager
FROM:
Bruce Moe, Finance Director
SUBJECT:Title
Resolution No. 13-0021 Allowing Employee Paid Member Pension Contributions to be Processed on a Pre-Tax Basis in Accordance with Internal Revenue Code Section 414(h)(2)
ADOPT RESOLUTION NO. 13-0021
Line
_____________________________________________________________________
Recommended Action
RECOMMENDATION:
Staff recommends that the City Council adopt Resolution No. 13-0021 allowing employee paid member pension contributions to be processed on a pre-tax basis in accordance with Internal Revenue Code Section 414(h)(2).
Body
FISCAL IMPLICATIONS:
There is no fiscal implication to the City by adopting this resolution. Employee contributions will be paid from the employees’ compensation on a pre-tax basis, which will reduce the impact on employees’ take-home pay due to a lower immediate tax burden. However, under current law, employees will be taxed upon the pension benefits received during retirement, including the amounts contributed on a tax-deferred basis.
BACKGROUND:
This resolution is associated with the expected approval of the Memoranda of Understanding with the Teamsters, Police Officers’ Association, and Firefighters’ Associations. Through those labor agreements, employees will begin paying the Employee contribution portion of the pension costs, which previously (through the collective bargaining process) have been paid by the City on the employees’ behalf.
DISCUSSION:
Staff has prepared the attached Resolution that will allow newly enacted employee pension contributions to be paid from the employees’ compensation on a pre-tax basis. This will reduce the immediate impact on employees’ take-home pay since those contributed amounts will be deducted from employees’ gross pay prior to the calculation of income tax withholdings (excluding Medicare taxes). However, under current law, employees will be taxed upon t...
Click here for full text