C4E-Ref- FCWPC - Partial Payments Of Annual-Sick Leave For DROP Participants -WMIAMIBEACH
€ity of Miami Beoch, I zo0 convention center Drive, Miomi Beoch, Florido 33139,
COMMISSION
To: Mayor Philip Levine and of the City
From: Jimmy Morales, City Manager
Date: December 11 ,2014
www.miomibeochfl.gov
MEMORANDUM
subject: REFERRAL To rHE FINANC{AND ctrYWtDE pRoJEcrs coMMlrrEE - DtscusstoNREGARDING PARTIAL PAYMENTS OdANNUAL AND SICK LEAVE FOR PARTIcIPANTS oF THEDEFERRED RETTREMENT OpTtON PLAN (DROP).
ADltllN ISTRAT|ON RECOMMENpATTON
Refer an ordinance Amendment to the Mayor and City commission for consideration andrecommendation.
BACKGROUND
On January 28,2009, the City Commission adopted ordinance number 2009-3626 which establishedthe Deferred Retirement option Plan (DROP) foi members of the Miami Beach Employees RetirementPlan' The DROP is a program under which an employee who has reached the normal retirement datemay elect to retire for purposes of the pension plan'bui continue employment with the City forup to .ir,tv(60) months, and have his/h.er monthly retirement benefit paid into an account during the DROp period.The DROP period was initially established at thirty-six (36j months and on September 11,2013 the CityCommission subsequently amended the DROP period io sixy (60) month. *iih il"'o#il;;adoption of ordinance number 2013-3g06
As provided by the o.rdinance, employees may request a full or partial payment of their earned balanceof annual and sick leave as of the date of entry into the DRop, up io tne maximum allowed byapplicable City ordinances for employees who teiminate City employment. upon terri.rti"i'tj cit;employment, an employee who has participated in the DROp is'etiiiOte to id"eire il;;t'f"r;;earned balance of annual and sick leave as of the date of termination, up to the maximum allowed byapplicable City ordinanges fgl employees. who terminate City employment, but reduced bythe amount ofannual and sick leave for which payment was received upon entry-into the DRop.
when an employee requests a payment of annual and sick leave upon his/her entry into the DRop orupon termination of employment, he/she may request to defer a fuli or partial portion of the lump sumpayment into a deferred compensation plan as defined by the lnternai Revenue Code, section 4S7.Making this pre-tax contribution into the deferred compensation plan allows an employee to deferincome taxation on retirement savings into future years.
Employees who choose to make contributions into their deferred compensation plan may do so up tothe annual limits set forth by the lnternal Revenue Service. Those annual limits for calendar year 2014are:
a
a
a
$17,500 for 457 plan participants
$23,000 for 457 plan participants
$35,000 for 457 plan participants
below age 50.
above age 50.
utilizing the three-year catch-up provision.
Agenda kem CVE
Date /a-/V/q112
For those employees who currently maintain an accrued balance of annual and sick leave valued at anamount greater than the contribution limits se1 forth by the lnternal Revenue Service, their ability tomake lump sum pretax contributions into a deferred cohpensation plan are limited by City ordinancesin two instances:
1- Upon entry into the DROP.2- Upon termination of City employment.
ln an effort to offer City employees with more opportunities to prepare for retirement, the Administrationrecommends that employees not covered by a collective bargaining unit be provided the option torequest a partial payment of their annual and sick leave durinj erctiyer of their participation in tn"DRoP program up to the maximum allowed by applicable City oioin"n""" ioi emptoyees who terminateCity employment. For those employees covered'by a collective bargaining unit, it is recommended thatthe benefit be subject to collective bargaining. ln addition to piovidiig employees the benefit ofdeferring taxation on their earnings, this change could also provide a salary savings to the City. Thesesalary savings may be achieved by processing leave payments at lower pay rates during the earlieryears of an employee's participation in the DROP program.
CONCLUSION
The Administration is seeking direction from the Finance and Citywide projects Committee in relation toamending ordinance T09-3626 to provide for annual partial payments oi 1""u", up to the maximumallowed by applicable City ordinances, for employees who are pirticipating in the DROp.
lwifuJa
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