05-37 Resolution No. 05-37
RESOLUTION
TO INCLUDE COMPENSATION PAID UNDER AN INTERNAL REVENUE CODE
SECTION 125 PLAN AS IMRF EARNINGS
WHEREAS,standard member earnings reportable to the Illinois Municipal Retirement Fund
do not include compensation paid under an Internal Revenue Code section 125 plan or compensation
directed into a premium conversion plan or flexible spending account; and
WHEREAS, an IMRF participating unit of government may elect to include in IMRF
earnings compensation paid under an I.R.C. section 125 plan or compensation directed into a
premium conversion plan or flexible spending account by action of the governing body; and
WHEREAS,the City Council of the City of Elgin is a authorized to include section 125 plan
and premium conversion and flexible spending account compensation as earnings reportable to
IMRF and it is desirable that it do so .
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Elgin does
hereby elect to include as earnings reportable to IMRF compensation paid under an I.R.C. section
125 plan and/or compensation directed into a premium conversion plan or flexible spending account
effective March 1, 2005.
BE IT FURTHER RESOLVED that the City Clerk is authorized and directed to file a duly
certified copy of this resolution with the Illinois Municipal Retirement Fund.
s/Ed Schock
Ed Schock,Mayor
Presented: February 9, 2005
Adopted: February 9, 2005
Vote: Yeas: 6 Nays: 0
Attest:
s/Dolonna Mecum
Dolonna Mecum, City Clerk
, y OF foci
Agenda Item No
City of Elgin
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February 4, 20051
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TO: Mayor and Members of the City Council FINANCIALLY STABLE CITY GOVERNMENT EF FICIENT SERVICES,
AND O VAUTY INFRASTRUCTURE
FROM: Olufemi Folarin, Acting City Manager
Gail Cohen, Human Resources and Pur acing Director
SUBJECT: Flexible Benefit Spending Plan Ordinance
PURPOSE
The purpose of this memorandum is to provide the Mayor and members of the City Council with
information to consider passing an ordinance that would permit IMRF employees nearing
retirement to participate in the Flexible Benefit Spending plan without decreasing their IMRF
contributions.
RECOMMENDATION
It is recommended that the City Council approve passage of an ordinance that will permit IMRF
employees to participate in the Flexible Benefit Spending plan without decreasing their IMRF
contributions.
BACKGROUND
This year, City of Elgin employees may participate in a Flexible Benefit Spending (FBS) plan,
which will allow them to set aside, pre-tax, up to $2,000 for qualified medical expenses and up to
$5,000 for dependent care expenses. Also, insurance premiums may be paid on a pre-tax basis
through payroll deductions. These plans benefit the employee as they have less taxable income
and pay less in federal, state and social security taxes. The City, as the employer, benefits as our
contribution for social security taxes is also decreased.
The City has the option whether or not to report FBS amounts as compensation to IMRF.
Without passing a resolution, the FBS pre-taxable amounts in those plans are not reported as
earnings to IMRF. Therefore, for IMRF purposes, an employee who makes $50,000 a year, but
places $2,000 in the flexible benefit spending account, is only making $48,000 a year as far as
IMRF is concerned. The lower reported earnings will lower the pension of an IMRF employee
who is retiring in the next 48 months.
•
rFlexible Spending Plan Ordinance
February 4,2005
Page 2
If the City passes the attached resolution, those dollars set aside in the flexible spending account
will be reported as compensation to IMRF and therefore will not lower employees' earnings for
retirement purposes.
Staff spoke to IMRF regarding which other municipalities have passed this ordinance. IMRF
indicated that larger municipalities generally have this ordinance and confirmed that many cities
comparable to Elgin (e.g., Naperville, Aurora, Evanston, Arlington Heights, Schaumburg and
Waukegan)have passed the ordinance.
GROUPS/INTERESTED PERSONS CONTACTED
None.
EtkuFINANCIAL IMPACT
The Flexible Spending Plan will save the City's portion of the contribution to Social Security for
each employee who participates in the Plan. At this point, since open enrollment is in process,
r this amount cannot be calculated. IMRF actuaries have indicated that while the City would forgo
the short term savings resulting from calculating the City's IMRF contribution on a lower
earnings amount, that would be offset by an increased IMRF rate to compensate for a artificially
lower earnings base for all but the final four years of employment.
AL IMPACT
None.
ALTERNATIVES
1. Pass the ordinance as proposed.
2. Do not pass the ordinance.
Respectfully submitted for Council consideration.
GAC
Attachment
r
•
E Resolution No. 05-
RESOLUTION
TO INCLUDE COMPENSATION PAID UNDER AN INTERNAL REVENUE CODE
SECTION 125 PLAN AS IMRF EARNINGS
WHEREAS,standard member earnings reportable to the Illinois Municipal Retirement Fund
do not include compensation paid under an Internal Revenue Code section 125 plan or compensation
directed into a premium conversion plan or flexible spending account; and
WHEREAS, an IMRF participating unit of government may elect to include in IMRF
earnings compensation paid under an I.R.C. section 125 plan or compensation directed into a
premium conversion plan or flexible spending account by action of the governing body; and
WHEREAS,the City Council of the City of Elgin is a authorized to include section 125 plan
and premium conversion and flexible spending account compensation as earnings reportable to
IMRF and it is desirable that it do so .
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Elgin does
hereby elect to include as earnings reportable to IMRF compensation paid under an I.R.C. section
125 plan and/or compensation directed into a premium conversion plan or flexible spending account
rib' effective March 1, 2005.
BE IT FURTHER RESOLVED that the City Clerk is authorized and directed to file a duly
certified copy of this resolution with the Illinois Municipal Retirement Fund.
Ed Schock, Mayor
Presented:
Adopted:
Vote: Yeas Nays:
Recorded:
Attest:
Dolonna Mecum, City Clerk
F:V,egal Dept\ResolutionsVMRF-Compensation Plan-GC.doc
Resolution No. 05-
RESOLUTION
TO INCLUDE COMPENSATION PAID UNDER AN INTERNAL REVENUE CODE
SECTION 125 PLAN AS IMRF EARNINGS
WHEREAS,standard member earnings reportable to the Illinois Municipal Retirement Fund
do not include compensation paid under an Internal Revenue Code section 125 plan or compensation
directed into a premium conversion plan or flexible spending account; and
WHEREAS, an IMRF participating unit of government may elect to include in IMRF
earnings compensation paid under an I.R.C. section 125 plan or compensation directed into a
premium conversion plan or flexible spending account by action of the governing body; and
WHEREAS,the City Council of the City of Elgin is a authorized to include section 125 plan
and premium conversion and flexible spending account compensation as earnings reportable to
IMRF and it is desirable that it do so .
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Elgin does
hereby elect to include as earnings reportable to IMRF compensation paid under an I.R.C. section
125 plan and/or compensation directed into a premium conversion plan or flexible spending account
effective March 1, 2005.
BE IT FURTHER RESOLVED that the City Clerk is authorized and directed to file a duly
certified copy of this resolution with the Illinois Municipal Retirement Fund.
Ed Schock, Mayor
Presented:
Adopted:
Vote: Yeas Nays:
Recorded:
Attest:
Dolonna Mecum, City Clerk
F:\Legal Dept\Resolutions\IMRF-Compensation Plan-GC.doc