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10/28/2008 CC Rpt 19 COUNCIL AGENDA STAFF REPORT CITY CLERK USE ONLY REO [ f ; C ,.,. .. :. Meeting Date: October 28. 2008 Zu08 OC? ?.r^.- 2 I Pii 2� 32 �{..V .i ,, Public Hearing: 0 'i` CLERK iggrbool Discussion Item: t7/ CNIr0 i{ILLS Consent Item October 21, 2008 TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS FROM: CITY MANAGER SUBJECT: RETIREMENT PRE-TAX PAYROLL DEDUCTION PLAN RECOMMENDATION: That the City Council: 1. Adopt a resolution entitled: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHINO HILLS IMPLEMENTING A PRE-TAX PAYROLL DEDUCTION PLAN UNDER INTERNAL REVENUE CODE SECTION 414(h)(2) 2. Authorize the City Clerk to forward a signed and certified copy of the resolution to the San Bernardino County Employee's Retirement Association. BACKGROUND/ANALYSIS: The City was notified by the San Bernardino County Employees' Retirement Association (SBCERA) that the Internal Revenue Service (IRS) issued a ruling, Rev. Ruling 2006-43, regarding "tax pickups" of member contributions to retirement funds. In this case, "tax pickup" is the term to describe a situation where the employee 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 the contributions. This ruling gave very clear instructions to public employers regarding the documentation that is required in order to allow for a pre-tax payroll deduction for retirement contributions. In order to allow employers to comply with the requirements, the IRS granted a grace period of January 1 , 2009 for compliance. SBCERA has requested that all member agencies either adopt or readopt a resolution 40, before January 1, 2009. Member agencies that do not adopt a resolution will not be allowed to submit any further pre-tax contributions on behalf of their employees. To ensure the City's compliance, it is recommended that City Council formally adopt a new /9/ 9 AGENDA DATE: OCTOBER 28, 2008 PAGE TWO SUBJECT: RETIREMENT PRE-TAX PAYROLL DEDUCTION PLAN 41, City resolution as the pre-tax employee contributions made prior to adoption of this resolution were picked up (for tax purposes), pursuant to provisions of the Local Agency Formation Commission (LAFCO) Resolution No. 2320. FISCAL IMPACT: Adoption of this resolution will not cause any fiscal impact. Respectfully submitted, Recommended by: r CZCZ.lev Daugifis N. La Belle, City Manager Kathy Gotch, Assistant City Manager