HomeMy WebLinkAboutReso 80-1994RESOLUTION NO. 80-94
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 INTERNATIONAL
ASSOCIATION OF OPERATING ENGINEERS, LOCAL 39,
AFL-CIO
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 International
Association of Operating Engineers have agreed 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 City has agreed to
provide it to the International Association of Operating Engineers
and, therefore, the tax benefit offered by Section 414(h) (2) IRC
should be provided to its International Association of Operating
Engineer 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
Memorandum of Understanding between the City of South San Francisco
and the International Association of Operating Engineers 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 adopted by the City Council of the City of South San
Francisco at a regular meeting held on the 22nd day of
June , 1994 by the following vote.
AYES:
NOES:
ABSTAIN:
ABSENT:
Councilmembers Jack Drago, John R. Penna, Roberta Cerri TeQlia,
Robert Yee and Mayor Joseph A. Fernekes
None
None
None
City Clerk
Pcrs. Eng
RESOLUTION NO. 80-94
EXH'rB'rT A
Examples of the Application of IRC 414(h) (2)
To explain how the 414(h) (2) will work the following are two (2)
different examples.
International Association of Operating Engineers:
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.
International Association of Operating Engineers:
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.
PROPOSAL FOR AMENDED MEMORANDUM OF UNDERSTANDING
BETWEEN
CITY OF SOUTH SAN FRANCISCO
INTERNATIONAL ASSOCIATION OF OPERATING ENGINEERS
The memorandum of understanding covering the period of January 1,
1994 through December 31, 1994 is to be amended without change
except for the following:
Article 6. Section C and D of the current MOU are
eliminated. Inserted in its place:
C. IRS Tax ExemDtion: The City shall obtain a
414(h) (2) Tax Exemption from the Internal Revenue
Service granting a deferral from federal withholding
taxes of that portion of the employees contribution to
PERS being paid by the City prior to the adoption of
this MOU. The exemption will be obtained for all full-
time employees in the bargaining unit. The percentage
of the employees PERS contribution previously paid by
the City, shall be paid to the bargaining unit
employees who shall then pay that amount to PERS. For
the purposes of calculating base salary at retirement,
employees shall have an increased base salary that will
include the total seven percent (7%) contribution to
PERS. Attached hereto as Exhibit A and incorporated
herein is a listing of examples of the application of
IRC 414 (h) (2) .
FOR THE CITY
FOR THE UNION