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HomeMy WebLinkAbout3.a. HR IssuesAGENDA ITEM: HR Issues AGENDA SECTION: u PDMIS AGENDA NO. PREPARED BY: Emmy Foster, Assistant City Administrator ATTACHMENTS: LMC Cities Bulletin PERA Referendum Procedures APPROVED BY: Vp- RECOMMENDED ACTION: Review and Staff direction given. 4 ROSEMOUNT CITY COUNCIL City Council Work Session: January 10, 2007 EXECUTIVE SUMMARY Four human resource issues will be discussed this evening: 1. Social Secunty Extended to Defined Contribution Plan (DCP) Covered Elected Officials 2. HIPAA Requirements 3. Pay Equity 4. VEBA Grant Administration 1. Social Security Extended to DCP Covered Elected Officials Issue. 2006 Minnesota Legislature amended Minnesota Statues, Chapter 355, governing Social Security and Medicare coverage for public employees and elected officials. The following two groups of elected officials have not been able to contribute to both the Defined Contribution Plan and Social Security on their elective service earrings. Officials elected to or assuming governing -body positions after June 30, 2002. Officials (governing body and non governing body) whose earnings have never exceeded $425 in a calendar month.) Both groups are excluded from joining the PERA Coordinated Plan, and have had a choice of either contributing to the DCP or paying Social Security Under new legislation, they can contribute to both. City council members now need to decide if they want to offer both options: 1 Contribute to Social Secunty (SS) 2 Contribute to DCP (Defined Contribution Plan) under PERA Under the new law, out council members can contnbute to both Social Security PERA DCP. City Council needs to be aware of this law change and the council will have to adopt a resolution if they want to offer Social Security to elected officials m positions covered by the DCP. If council adopts this, each councilmember would choose individually. The resolution would not have an end date. If the resolution is passed, new city council members would automatically have social security. City council members in Rosemount currently participate in PERA as DCP- covered elected officials. PERA participants and the City both contribute 5% of their income into the DCP plan. Council should be aware of the additional costs that would occur if the choice is made to also contribute to Social Security. There would be an additional 6.2% contribution made by both the participants and the City. Summary If the Council so indicates, staff will bring forward a resolution indicating council's desire to provide Social Security coverage and the effective date for participation for eligible elected officials. *Attachments: LAIC Cites Bulletin d.9° PERA Referendum Procedures 2. HIPAA Requirements Issue HIPAA (Health Insurance Portability and Accountability Act of 1996) requirements have been developed and now have to be implemented by the City This federally mandated, unfunded program requires covered entities (Health Plans) to implement policies and procedures with respect to protected health information (PHI) effective April 14, 2004. Health plans include major medical, dental, medical reimbursement, and EAP (Employee Assistance Program). The City is a covered entity because we have a health reimbursement plan. PHI is individually identifiable mformanon which is created, modified, received or maintained by a covered entity that relates to an individuals past, present or future physical or mental condition, treatment or payment for care. This information is protected if transmitted m electronic, written, or oral form. The msurance companies and insurance broker that we work with are considered Business Associates of the City have also implemented the HIPAA regulations. The League of Minnesota Cities had a pohcies and procedures template developed for it's member cities. This material was created by Darcy Hitesman of Haynes Hitesman law firm for the League of Minnesota Cities. It is intended to be a template for each city to use in developing their own individual HIPAA policies and procedures. Both our health insurance broker (CBIZ) and a League of MN Cities representative (Erin Rian) have reviewed our information. Our City Attorney is in the process of reviewing it This template has been used to prepare the attached HIPAA pohcy for Rosemount. I have also prepared the attached resolution adopting a HIPAA policy and appointing a privacy official. Once the resolution has been approved by the Council. A Notice of Privacy Pracnce will be sent via regular mail to each individual subject to our Health Plan(s) and will be mailed out every three years afterward. A ]ink will be added to our website under the admuustration department webpage so that the policy is readily accessible in electromc format. Staff members with official business duties who must handle the confidential information will be given wntten documentation on how to handle Private Health Information (PHI) Separate PHI files will be maintained on each employee and stored m a locked cabinet. The City of Rosemount has been in the practice of following these policies and procedures over the last few years, however it officially needs to be approved by Council, a resolution adopted, and a privacy officer designated Summary: If the Council so indicates, direct Staff to bring this item to the next City Council meeting on January 16, 2007 for approval of the HIPAA policy, the attached resolution, and the designation of the Assistant City Administrator position as the Privacy Officer. 3. 2007 Pay Equity Implementation Report for 2006 Compliance Issue: The Department of Employee Relations requires us to report our Pay Egwty Report every few years. The latest schedule is a result of legislation passed m the 2005 special legislative session that changed the reporting cycle back to once every three years instead of once every five years. The attached report will be submitted to the Department of Employee Relations upon Council 2 approval. Our report is due to be submitted by January 31, 2007. This report shows data in place as of December 31, 2006. The report indicates that the Department of Employee relations should find the City "m compliance" We assigned our lob classification points using the "Hay Management Consultant" job evaluation system. Job classifications are assigned points based on benchmarked lob values under this system. City Council is required to approve the Pay Equity Report and the Mayor is to sign it. The report is required by the Local Government Pay Equity Act, M.S 471.991 -471 999 and Minnesota Rules, Chapter 3920 The City's next compliance report will be due in three years. The previous Pay Equity Report was submitted m January 2002 and the City was found "in compliance Summary: If the Council so indicates, direct Staff to bring this item to the next City Council meeting on January 16, 2007 for approval of the 2007 Pay Equity Implementation Report for 2006 Compliance. 4. VEBA Grant Administration Issue: Staff is still working with Appletree and CBIZ to understand the terms of the grant to determine which employees will be eligible to receive the VEBA grant from Appletree. Currently, it appears that employees covered by our VEBA plan in 2004 and employees who will be hired in 2007 are eligible for a grant of $275 for single health insurance participants and $675 for family health insurance participants. However, that leaves full -tune employees hired m 2005 and 2006 without of the benefit of receiving grant dollars m 2007. In order for all full-time employees to experience the same out -of- pocket risk for medical expenses, we would like the Council to consider authorizing a one -tune grant match to the full- tune employees hired in 2005 and 2006. This would cost the City an additional $5450 in 2007 for the four family contracts and ten single contracts mvolved. The affected employees are evenly distributed across departments, so actual line item impact to departmental budgets will be minimal. Summary: If the Council so indicates, direct Staff to bang this item to the next City Council meeting on January 16, 2007 for approval of the grant match 3 Social Security extended to DCP- covered elected officials Page 1 of 3 C ities Bllti ONLINE EDITION Social Security extended to DCP- covered elected officials Issue 29 Published: November 1, 2006 Social Security extended to DCP- covered elected officials The 2006 Minnesota Legislature amended Minnesota Statutes, Chapter 355, which governs Social Security and Medicare coverage for public employees and elected officials. Among other things, the new law allows each local governmental subdivision to offer Social Security participation to its current elected officials who hold positions that are covered by the PERA Defined Contribution Plan (DCP) and excluded from the PERA Coordinated Plan. This option applies to Minnesota cities, counties, school districts, townships, and special authorities such as soil and water conservation districts. Background The following two groups of elected officials have not been able to contribute to both the DCP and Social Security on their elective service eamings: Officials elected to or assuming governing -body positions after June 30, 2002. Officials (governing body and non governing body) whose eamings have never exceeded $425 in a calendar month. While these two groups are excluded from joining the Coordinated Plan, they have had a choice of either contributing to the DCP or paying Social Security, however, they have not been able to contribute to both. These elected officials have had to choose between the DCP and Social Security because their positions are not covered by a "section 218 Agreement" with the Social Security Administration (SSA). Under federal laws, the only way that Social Security coverage can be provided to employees or elected officials who are members of, or have the option for membership in, a governmental retirement plan is through a section 218 Agreement. This "voluntary" federal -state agreement establishes the classifications of government positions that shall participate in Social Security. Until now, state law did not authorize a modification to Minnesota's 218 Agreement for the DCP elected officials retirement group.* Extending coverage to eligible elected officials Under the amended state law, a governmental subdivision may provide Social Security to current and future elected officials covered by the DCP through a modification to Minnesota's 218 Agreement. The law authorizes PERA to modify Minnesota's Agreement on a subdivision by subdivision basis. This means that we can execute a change in Social Security participation for elected officials of one PERA- covered entity and it will not affect any other entity. Nothing in the law requires a governmental subdivision to offer Social Security to its elected officials and no deadlines were established. A subdivision may, therefore, request a section 218 modification at any date in the future or never. If your subdivision wants to offer Social Security to elected officials in positions covered by the DCP, the first step is to have your governing body adopt a resolution indicating its desire to provide such httpi// www .lmnc.org/bulletin/story.cfm ?id= 1264 &title_id =1 12/27/2006 Social Security extended to DCP- covered elected officials Page 2 of 3 coverage and the effective date for participation. The Social Security participation may be established retroactively, but may not, under Section 218(e)(1) of federal law, be earlier than the fifth year preceding the year in which your subdivision's 218 modification is mailed to the SSA. If and when your governing body extends Social Security to elected officials, the second step in the process is to schedule a referendum to give each eligible person the opportunity to individually accept or reject Social Security under the 218 modification that will cover the DCP positions of your subdivision. Eligible elected officials will indicate their Social Security choice by written ballot after they have been given at least 90 day's notice of the referendum. Under state law, you will be responsible for conducting the referendum and paying any associated costs. As the state Social Security administrator, PERA will supervise the referendum and establish the necessary forms and notices. The table below describes the elected officials who can participate in the referendum. Once Minnesota's 218 Agreement is modified After the SSA approves a modification to Minnesota's 218 Agreement for your subdivision, you must withhold Social Security (6.2 percent) and Medicare taxes (1.45 percent) from the salary of each elected official who voted in favor of Social Security coverage. Your subdivision must match the contributions and report wages and payment to the Internal Revenue Service (IRS) using Form 941. You must also withhold Social Security and Medicare taxes from the salary of all newly elected officials of your subdivision. If your 218 modification called for retroactive Social Security participation, you must submit to the IRS the applicable past employer and employee amounts using their process for reporting retroactive contributions. For each official who voted in favor of retroactive Social Security, contributions must be paid back to the effective date of the 218 amendment or the date the particular elected official took office, whichever is later. The payment of these employee and employer contributions must be equal to the taxes which would have been imposed by the Federal Insurance Contributions Act (FICA) had the elective service been covered by Social Security on the dates the service was performed. Additional resources You may view and download examples of the governing- body resolution and referendum documents from the PERA web site. To learn more about the referendum process, please review the online "Referendum Procedures If you have questions about the new law or would like to initiate the referendum process within your city or special authority, call PERA's Employer Line at (651) 296- 3636 or 1- 888 892 -7372 and select menu option 3 Social Security referendum participation Laws enacted in 2006 allow certain elected officials of a governmental subdivision to participate in a Social Security referendum if the governing body extends Social Security to its DCP- covered positions. The table below denotes who could participate in a referendum and the impacts of the two options available to each person. Category of Officials Eligible to Participate in the Referendum Impact of an Elected Official's Vote "in favor of Social Security Impact of an Elected Official's Vote "against" Social Security Active DCP members This category refers to elected officials who are currently having DCP deductions (5.0 percent) withheld from their salary, Active DCP members voting in favor of Social Security are indicating that they want to pay the 6 2 percent tax on their prospective earnings in addition to their DCP contributions. They also are agreeing to pay any http /www.lmnc.org/bulletin/story cfm ?id= 1264 &title_id =1 Active DCP members who reject Social Security coverage are indicating that they do no want the Social Security tax (6.2 percent) withheld from their prospective earnings. 12/27/2006 Social Security extended to DCP- covered elected officials DCP eligible officials This category refers to elected officials who have Social Security tax (6.2 percent) withheld from their salary, but do not have DCP deductions (5.0 percent) withheld DCP eligible officials voting in favor of Social Security are indicating that, if they subsequently join the DCP, they want the Social Security deductions (6 2 percent) to continue to be withheld from their salary These officials could eventually obtain concurrent Social Security and DCP coverage on their elective earnings on a prospective basis. DCP eligible officials rejecting Social Security are indicating that, if they subsequently join the DCP, they want Social Security withholdings (6.2 percent) to stop as a result of the DCP membership. These officials could not obtain both Social Security and DCP coverage on future elective earnings These officials must be excluded from participating in the Coordinated Plan. Further, to obtain Social Security coverage, the official must be in office on the date the referendum is conducted and the effective date of the 218 modification for the subdivision. but are not having Social retroactive Social Security Security taxes (6.2 percent) contributions that may have been withheld. established by the governmental subdivision in its resolution and its section 218 Agreement modification. A 218 Agreement has been in place for the Coordinated Plan since 1968. Under that agreement, any person who becomes a Coordinated Plan member —or has the option to join —must pay Social Security taxes For elected officials, Coordinated Plan membership is currently available only to individuals elected to non- goveming -body positions that earn a salary of $425 or more in a single month Persons elected to governing -body positions have been excluded from joining the Coordinated Plan since July 1, 2002. Reprinted with permission from the June 2006, edition of the PERAphrase newsletter. Return to Home LMC Board of Directors Editor Definer Erica Norris Perlman Stephanie Thoe Copyright 2006 League o/ Mumesola Cities 145 University Ave West, St. Paul, MN 55103 Phone 651 281 -12001 Toll Free 1- 800 -925 -1122 Fax. 651-281-12991 TDD 651 -281 -1290 http://www.lmnc.orgibulletinistory.cfm Executive Director Jim Miller Page 3 of 3 12/27/2006 Public Employees Retirement Association (PERA) 60 Empire Dr., Suite 200, St. Paul MN 55103 Employer Fax: 651 296 -2493; Employer Lines: 651 296 -3636 or 1- 888 892 -737 Referendum Procedures Offering Social Security Coverage to Eligible Local Elected Officials in Minnesota The following procedures are based on Minnesota Statutes Section 355 (as amended by Act 271 of 2006) and Section 218 of the Social Secunty Act These procedures describe the activities that must be completed to provide Social Security coverage to eligible local elected officials currently holding positions covered by the Defined Contribution Plan 1 The goveming body of the local governmental subdivision adopts a resolution to a) Request a divided vote referendum be conducted for their subdivision, b) Authorize the appropriate individual within the subdivision to conduct the referendum, c) Establish the effective date of coverage for current eligible officials, Coverage may be prospective or retroactive within limits set by Section 218(e) (1) of federal law If retroactive coverage is requested, it must be restricted to five calendar years prior to the year in which the subdivision's 218 agreement modification is mailed by the PERA staff to the Social Security Administration. Both the employer and elected official will be required to pay the applicable Social Security tax (6 2 and, if applicable. Medicare tax (1 45 %1 retroactive to the effective date of coverage established by the governing body d) Request a modification to Minnesota's section 218 agreement to provide full Social Security coverage to local elected positions covered by the Defined Contribution Plan, and e) Acknowledge the applicable state and federal laws and regulations regarding employee tax withholdings, employer contributions and record keeping Note A sample referendum resolution is online at www mnpera orq 2. The authorized representative of the governmental subdivision (employer) will. a) Prepare a listing with the names and Social Security Numbers of elected officials who are eligible to participate in the referendum Those eligible are elected officials excluded from Joining the Coordinated Plan, who fall into these two categories. Active DCP members who pay 5 0% of their earnings into the DCP instead of paying 6 2% to Social Security, DCP eligible officials who pay 6 2% to Social Security on their earnings, instead of paying 5 0% into the DCP Additionally, the elected officials must be in office on two specific dates I) The date of the referendum and II) the date that the section 218 modification is effective for the subdivision. Note A sample List of Referendum Participants is online at www.mnpera orq b) Submit the resolution adopted by the governing body of the entity, along with the list of potential referendum participants, by postal mail to: Attn State Social Security Administrator Public Employees Retirement Association 60 Empire Drive, Ste 200 Saint Paul, MN 55103 -2088 3. Upon receipt of the resolution and list of eligible DCP members, staff of PERA will. a) Work with the employer to establish the date(s) upon which the referendum will be conducted Under federal requirements, all eligible individuals must be given no less than 90 days' notice regarding the referendum An additional 10 days notice is required for absentee voting The notice period may not be shortened The purpose of the 90 -day period is to allow each voter a sufficient period in which to obtain information about the Social Security program to determine whether it would be advantageous to July 20, 2006 Page 1 Conducting a Referendum PERA DCP Elected Officials obtain such coverage for his or her elective services PERA staff cannot provide counseling on Social Security benefits, therefore, employers should refer elected officials with questions to the Social Security office (1 -800- 772 -1213) Medicare information is available at 1-800-633-4227 b) Provide a sample Notice of Referendum, Ballot, and DCP /Social Security handout to the employer The sample Notice and Ballot must be finalized by the employer The Notice will explain the purpose of the referendum, identify the applicable tax rates, and include the coverage effective date established by the governing body. The Ballot will provide for the written election by the individual The handout contains basic information about the DCP and Social Security Old Age Survivors and Disability Insurance (OASDI) program 4 The employer will conduct the Referendum, which includes: a) Updating, if necessary, the list of elected officials eligible to participate in the referendum. b) Distributing the final Notice, Ballot, and DCP /Social Security handout to each eligible elected official by personal delivery, e-mail, or first class mail on the date established (If any doubt arises as to a person's eligibility to vote in the referendum, the employer should provide the Notice and Ballot to the person and resolve the eligibility question with help from PERA later c) Collecting the signed Ballot(s) by first class mail or personal delivery and ensure that each Ballot is postmarked or personally received on the designated due date(s) 5. At the close of the referendum process, the employer must certify the results: a) Prepare a Certification of Referendum (paper or electronic format) stating the choice of each eligible official The Certification will consist of the eligible elected officials' names, Social Security numbers, DCP status (active or eligible) and the person's Social Security election The election made by each eligible elected official will be indicated as follows: YES individual desires Social Security coverage under the section 218 Agreement; NO individual desires not to be covered under the section 218 Agreement N/R the person did not execute and return the ballot A "no response" is treated as if the person chose not to be covered under the section 218 Agreement b) Send the Certification to PERA and retain a copy, along with the signed Ballots Do not send the Ballots to PERA To avoid misunderstandings, the employer should also notify each elected official on the list what his or her choice was for Social Secunty coverage 6 Upon receipt of the Certification, PERA will a) Execute the required modification to Minnesota's section 218 Agreement, and b) Upon receipt of a fully executed 218 modification from the Social Security Administration (SSA), notify the employer of the date that coverage has been accepted by SSA and send a copy of the 218 modification to the employer 7. Once the 218 modification has been executed, the employer is responsible for the applicable taxes as required by the Internal Revenue Service a) For each active DCP member who voted FOR Social Security, the employer must withhold FICA taxes (7 65 from the elected official's earnings, match the contribution amounts, and report the earnings and taxes to the IRS on Form 941, b) If retroactive coverage had been requested and approved, the employer must submit the applicable taxes to the IRS for each applicable elected official In this situation, the retroactive employer and employee amounts due will be equal to the FICA taxes which would have been imposed had the elective service been covered when the services were performed The effective date of Social Security participation for an elected official will be the effective date established in the section 218 modification or the date the particular individual took office, whichever is later Report the retroactive taxes on Form 941C. In addition, if the Social Security coverage period is more than three calendar years before the current year, attach a letter to the 941 C requesting an exception to the general "three -year limitation' in the Internal Revenue Code July 20, 2006 Page 2