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TITLE:
Adopt Resolutions Authorizing and Reconfirming Pretax Payroll Deduction for AQMD Employees
SYNOPSIS:
The Board, in 1998 and 1999, adopted Resolutions 98-15, 99-29 and 99-33 authorizing employee retirement contributions and employee service credit purchases in the San Bernardino County Employees’ Retirement Association (SBCERA) to be on a pretax basis. The IRS has recently issued a new ruling, Rev. Ruling 2006-43 regarding “tax pickups” of member contributions to retirement funds which requires the adoption of two new Resolutions reconfirming the Board’s actions in 1998 and 1999, and providing additional authorization for elective contributions not previously covered.
COMMITTEE
Administrative, October 12, 2007, Recommended for Approval
RECOMMENDED ACTION:
Adopt attached Resolutions, (1) reconfirming the Board’s actions in 1998 and 1999 and, (2) authorizing elective contributions not previously adopted, including redeposit and the purchase of additional retirement credit.
Barry R. Wallerstein, D.Env.
Executive Officer
Background
The Board, on June 12, 1998, October 8, 1999 and December 10, 1999, adopted Resolutions 98-15, 99-29 and 99-33 authorizing employee retirement contributions and employee service credit purchases in the San Bernardino County Employees’ Retirement Association (SBCERA) to be on a pretax basis.
The IRS recently issued guidance on 414(h)(2) “tax pickups” that directly impacts both public employers and public pension plans. The new ruling, Rev. Ruling 2006-43, repeats previous guidance but in the opinion of outside tax counsel was clearly issued as a stern reminder for those that are out of compliance. Non-compliance would expose both the employee and employer to tax on their contributions to the pension plan.
Except for public retirement systems, member contributions to defined benefit retirement plans are always made on an after tax basis. The tax laws have a special exception to the rule for “tax pickups” made to public systems. Internal Revenue Code sec. 414(h)(2). A tax pickup is the term used to describe a situation where the member makes the contribution out of his/her own salary, the employer specifies in a resolution that it will “pickup” these contributions for tax purposes, and the IRS agrees that no tax is then due on these contributions. This contrasts to “real pickups” where the employer agrees to actually pay the member contributions.
Proposals
To ensure compliance with Rev. Ruling 2006-43, AQMD’s pension plan, SBCERA, has requested that the Board reconfirm its earlier adopted Resolutions 98-15, 99-29 and 99-33 and adopt a new resolution covering elective contributions not previously covered.
Resource Impacts
None
Attachments (EXE
51kb)
Resolution to Reconfirm 44(h)(2) Pick-ups
Resolution Regarding 414(h)(2) Pick-ups not previously covered
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