HomeMy WebLinkAboutReso 76-1994RESOLUTION NO. 76-94
CITY COUNCIL, CITY OF SOUTH SAN FRANCISCO, STATE OF CALIFORNIA
A RESOLUTION IMPLEMENTING A TAX BENEFIT
OFFERED BY SECTION 414(h)(2) OF THE INTERNAL
REVENUE CODE (IRC) FOR MANAGEMENT AND
CONFIDENTIAL EMPLOYEES
WHEREAS, the City of South San Francisco has the authority to
implement the provisions of Section 414(h) (2) of the Internal
Revenue Code (IRC); and
WHEREAS, the Board of Administration of the Public Employees'
Retirement System adopted its resolution regarding Section
414(h) (2) IRC on September 18, 1985; and
WHEREAS, the Internal Revenue Service has stated on December
6, 1985, that the implementation of the provisions of Section
414(h)(2) IRC pursuant to the Resolution of the Board of
Administration would satisfy the legal requirements of Section
414(h) (2) IRC; and
WHEREAS, the City of South San Francisco and the Management
and Confidential Group have agreed in the Compensation Program
dated July 1, 1993 to adopt the tax benefit afforded by Internal
Revenue Code Section 414(h) (2) (hereinafter referred to as "the
Section 414(h) (2))".
WHEREAS, the City of South San Francisco has determined that
even though the implementation of the provisions of Section
414(h) (2) IRC is not required by law, the tax benefit offered by
Section 414(h) (2) IRC should be provided to its Management and
Confidential Group employees who are members of the Public
Employees' Retirement System.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City
of South San Francisco that:
1. The Section 414(h) (2) tax exemption as outlined in the
Compensation Program between the City of South San Francisco and
the Management and Confidential Group is hereby adopted and
approved. The implementation of this is as stated in Exhibit A.
I hereby certify that the foregoing Resolution was regularly
introduced and adopte~ by the City Council of the City of South San
Francisco at a re§u/ar meeting held on the 22nd day of
June , 1994 by the following vote.
AYES:
NOES:
ABSTAIN:
ABSENT:
Councilmembers Jack Draqo, John R. Penna, Roberta Cerri Teglia,
Robert Yee and Mayor Joseph A. Fernekes
None
None
None
Ci y Clerk
Pcra.Mgt
RESOLUTION NO. 76-94
EXHIBIT A
Examples of the Application of IRC 414(h)
To explain how the 414(h) (2) will work the following are two (2)
different examples.
Management and Confidential Employee:
A management employee makes $3,000 per month base salary. Under
the prior contract, the City was responsible for paying 7% or
$210.00 which was in addition to the $3,000 base salary.
Under the 414(h) (2), the manager's base salary will now be $3,210.
Of this, $210.00 (7%) will be paid to PERS from the $3,210. The
full 7% will be tax exempt and this means the manager will pay
taxes on $3,000, just like before.
The tax exemption applies to all state and federal taxes except
FiCA/Social Security. Under this scenario, the manager would pay
an additional $1.34 per month for FICA/Social Security.
Management and Confidential Personnel Who Have Converted
A manager has converted his/her salary and is making $3,210 per
month. The manager is currently paying state and federal taxes on
$3,210 and is paying 7% or $210.00 towards PERS. Under 414(h) (2),
the 7% or $210.00 is exempt from state and federal taxes and this
means that the manager's tax is reduced by $210.00. The manager
would now pay taxes on $3,000.
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