BOARD MEETING DATE: May 5, 2006
AGENDA NO. 11
Adopt Resolution for Voluntary Employee Medicare Participation
SYNOPSIS:
Three-year labor contracts approved by the Board in January 2006 included an agreement to recommend the Board adopt a resolution that would enable employees currently not paying Medicare taxes to elect, on a voluntary basis, to do so. This action is to adopt such a resolution, requesting the State of California Public Employees Retirement System (CALPERS), as agents for the Federal Social Security system, to conduct a Medicare election. The election would be open to all full-time regular employees not currently subject to Medicare taxes, and Medicare tax deductions would begin April 9, 2007. Based on employee survey results and current tax rates, staff anticipates AQMD’s annual cost would not exceed $35,000.
COMMITTEE:
Administrative, April 14, 2006, Recommended for Approval
RECOMMENDED ACTION:
Adopt the attached CALPERS-provided Resolution requesting CALPERS to conduct an election to allow employees voluntarily to become subject to Medicare tax deductions beginning April 9, 2007.
Barry R. Wallerstein, D.Env.
Executive Officer
Background
In January 2006, the Board approved three-year labor contracts that included a provision to recommend the Board adopt a resolution that would enable full-time, regular employees currently not paying Medicare taxes to elect, on a voluntary basis, to pay such taxes. This action implements this provision of the labor agreements and extends the provision to non-represented employees.
Proposal
AQMD employees hired prior to April 1, 1986, do not pay Medicare taxes and, thus, do not earn Medicare credits. Survey results indicate a small number of these employees are interested in paying Medicare taxes in order to earn sufficient credits to participate in the program when eligible. The attached Resolution requests CALPERS to conduct an election so employees who choose to participate in Medicare may begin paying Medicare taxes April 9, 2007. Those hired on or after April 1, 1986, currently pay Medicare taxes and will not participate in this election.
Resource Impacts
Current rates require participating employees and employers each to pay 1.45% of salary in Medicare taxes. As noted above, this tax is currently paid for employees hired since April 1, 1986. Based on a survey results, staff anticipates AQMD’s annual cost for allowing pre-1986 employees the option of participating will not exceed $35,000. CALPERS has indicated it will waive any costs associated with the election.
Attachment
Resolution
ATTACHMENT
RESOLUTION NO. 06-
A Resolution of the South Coast Air Quality Management District Board to establish a “deemed” retirement system pursuant to Section 218(d)(6) of the Federal Social Security Act to enable employees hired before March 31, 1986, to elect “Medicare only” coverage.
WHEREAS, the Governing Board of the South Coast Air Quality Management District, State of California, hereinafter designated as “Public Agency,” in regular session assembled on May 5, 2006, wishes to establish a “deemed” retirement system pursuant to Section 218(d)(6) of the Federal Social Security Act composed of positions of members of the San Bernardino County Employees’ Retirement Association, hereinafter designated “Present Retirement System,” desiring “Medicare-Only” coverage, and to include services performed by individuals employed by the Public Agency in positions covered by said “deemed” retirement system, as members of a coverage group established by Section 218(d)(4) of said Act, in the California State Social Security Agreement of March 9, 1951, providing for the coverage of public employees under the Health Insurance system established by said Act as amended; and
WHEREAS, State and Federal law and regulations require, as a condition of such coverage, that a division be authorized by the Board of Administration, California Public Employees’ Retirement System; and
WHEREAS, it is necessary that the Public Agency now designate any services which it desires to exclude from coverage with respect to such coverage group under said Health Insurance system; and
WHEREAS, it is necessary for the Public Agency to set forth the modification, if any, of the benefits and contributions under the Present Retirement System that may result from coverage under the said insurance system with respect to such coverage group.
THEREFORE, BE IT RESOLVED, that the Board of Administration, California Public Employees’ Retirement System, be and hereby is requested to authorize the foregoing division; and
BE IT FURTHER RESOLVED, that upon receipt of authorization from the Board of Administration, a division shall be conducted in accordance with the requirements of Section 218(d) of the Social Security Act and applicable State and Federal laws and regulations; that each eligible member of the Present Retirement System at the time of the division shall be furnished a form to permit the member to elect whether or not his services should be excluded from or included under the said California State Social Security Agreement as hereinbefore provided; with such “Medicare-Only” coverage effective as to services performed on or after April 9, 2007; and
BE IT FURTHER RESOLVED that the following services with respect to said coverage group of the Public Agency shall be excluded from coverage under said agreement:
- All services excluded from coverage under the agreement by Section 218 of the Social Security Act; and
- Services excluded by option of the SCAQMD:
x a. No optional exclusions desired. o b. Service performed.
BE IT FURTHER RESOLVED, that with respect to the said coverage group, the benefits and contributions of the Present Retirement System shall not be modified in any way; and
BE IT FURTHER RESOLVED that notice of the division shall be given to members of the Present Retirement System not less than ninety (90) days prior to the date of the division; provided, however, that notice shall be given to employees becoming members of the Present Retirement System after the date of such notice up to and including the date of the division on the date on which they attain membership in the system, and that Human Resources Manager Ronald Portnoy is hereby designated and appointed to conduct such division on behalf of the Public Agency in accordance with law, regulations, and this resolution, including the fixing of the date and the giving of proper notice thereof to members of the Present Retirement System and to all such eligible employees; and
BE IT FURTHER RESOLVED that the SCAQMD will pay and reimburse the State at such time and in such amounts as may be determined by the State the approximate cost of any and all work and services relating to such division.
_________________________ _____________________________________
Date Clerk of the Board
South Coast Air Quality Management District