HomeMy WebLinkAbout84th Special Meeting vw11170384th SPECIAL MEETING OF THE CIVIL SERVICE COMMISSION
The 84th Special Meeting of the Civil Service Commission was held on Thursday, November 6,
2003. The meeting was called to order at 8:35 a.m.
Members Present: Ronald E. Campau, Chairperson
Charlotte S. Mahoney
Harry C. Tatigian
Also Present:
Thomas Ambers, Treasurer, LLSA Richard Morton, Chairman, AFSCME Union
James Andres, Chief Accountant Local 1917
James Corcoran, Fire Marshal Mark Wheeler, Senior Police Officer
Brian Dewar, Secretary, LPDA Greg Winn, Secretary, LLSA
Yvonne Lillibridge, President, AFSCME Mary E. Rutan, Human Resources Director
Union Local 192 Gretchen Guisbert, Secretary III
The Civil Service Commission reviewed the letter of October 30, 2003, from Michael T. Slater,
Director of Finance, regarding payment of lump -sum benefits at retirement. Mary E. Rutan, Human
Resources Director, was contacted by the Accounting Division regarding the Internal Revenue
Service (IRS) Section 457 (Deferred Compensation) regulation changes which would restrict
deferral of lump -sum payouts, as specified in collective bargaining agreements to be issued at time
of retirement or termination. Mr. Andres, Chief Accountant, provided a packet that discussed the
457 Plan regulatory changes. In order to accommodate employees, Mr. Slater requests Civil
Service Commission approval to change past termination pay practices and permit early release of
employee accrued sick leave and vacation leave payouts. It is proposed that 75% of an estimated
payout to be issued on the last regular payroll date prior to the employee's retirement, which may be
used for deferral to the 457 Plan. This will permit 457 deferral while the individual is still employed
as required by the new IRS cede.
Mr. Campau inquired why only 75% could be paid out. Mr. Andres replied that the Finance
Department is proposing 75% because, for most employees, this percentage is well over the
amount they will need to meet the current maximum of $24,000 allowed if eligible for "catch-up"
under the tax deferred 457 Plan. The balance of 25% would cover any payroll reconciliation for
advance payments for dental, uniform allowances, etc., which require repayment to the City. This
proposal will leave the City protected. Mr. Campau stated that upon retirement a person could take
quite a hit in taxes with large payouts for accrued leave. Mark Wheeler, Senior Police Officer,
stated that his objective was to prevent this large taxation and to bring down his adjusted gross
income upon retirement. It is, he stated, just a simple matter of the date on the check.
Mr. Campau inquired if most employees will have a considerable amount of taxes withheld. Mr.
Andres replied, "yes,' that while not all employees have accrued the maximum sick and vacation
leave payouts, most leave with large sums. Ms. Lillibridge clarified that not all of the employees
voluntarily defer money into the 457 Plan. They, however, want to have the choice. Ms. Mahoney
replied that a lot would be losing it to taxes.
Mr. Campau asked what was the average amount needed to cover an employee's wage and benefit
reconciliation. Ms. Lillibridge responded that Payroll required from $200 to $2000 maximum for
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payout adjustment. Mr. Campau suggested that 95% might be better for those people who have a
lower amount of payout. Ms. Lillibridge stated that 95% might be too high because if something
happened in the last two weeks of employment, the City must make sure that there is enough for
the applicable payment of taxes and used vacation or sick leave time, which could present a
problem.
Mr. Campau asked if "up to" 75% could be paid out for 457 Plan deferral. Mr. Andres responded
that 75% was set to permit a fixed calculation for all employee payouts and relieve Payroll from
having to calculate various amounts needed for individual deferrals. Ms. Mahoney concurred that a
uniform payout would facilitate proper state and federal tax deductions as well as 457 Plan
payments.
Police Sergeant Thomas Ambers inquired if the primary concern was bookkeeping or with the final
payout. Mr. Andres stated that with regard to handling, the Accounting Division would like to have
the changes in the last payroll run before the employee retires. Mr. Andres continued that this was
not mandatory. Ms. Mahoney asked, if a person had never deferred money into the 457 Plan
before, and it was suggested to them that they defer their payout into the Plan, was that possible.
Mr. Andres replied that it was possible, but the paperwork had to be completed in the month before
retirement and/or termination.
Mr. Tatigian inquired if anyone had checked with other communities with regard to how they are
handling this and suggested doing a survey. Ms. Rutan reported that she inquired with pension
Attorney Michael Van Overbeke. He advised one city was placing employees on an unpaid leave
prior to retirement/termination to comply. This is not feasible here. Mark Wheeler staled he had
spoken with the administrators at Nationwide and some cities were issuing the checks dated on the
last day of work not the first day of retirement. Mr. Andres responded that this practice may result in
audit problems.
Mr. Andres stated that the proposal submitted to the Commission was taken from the ICMA 457
Plan recommendations and that none of the other proposals would work in the City of Livonia. He
further stated that dating the check on the Iasi day of employment was fine. He continued that the
reason for the Commission meeting here was to obtain the authority to do that. The check could be
lined up with the last payroll date. Ms. Mahoney clarified that this wasn't just a bookkeeping issue;
that the process or procedure implemented could cost the City a lot of money. Ms. Mahoney
continued that by moving the money before the last day worked could in fact save the City money.
Mr. Tatigian stated he understood that something had to be done, but he doesn't want to be a
"trailblazer' and requested that Mr. Andres conduct a survey to see what other comparable cities
are doing.
Mark Wheeler stated that the 457 Plan is an optional plan and someone could contact the 457 plan
administrators for guidance. Mr. Andres replied that when he called one of the 457 Plan
representatives, the representative needed to check with the Plan's law department before they
would say anything. They didn't want to jeopardize information that the IRS wouldn't stand behind.
Mr. Andres further stated that there are three (3) employees scheduled to retire that need help with
regard to this matter this month and the Accounting Division and Payroll staff are attempting to find
a way to accommodate these people within the limited time period.
Ms. Mahoney stated that once the Commission acts, an employee will have a 45 -day window to
take action. Ms. Mahoney stated she liked Mr. Tatigian's suggestion to check other Cities and
revisit this matter atter reviewing the survey results. Ms. Mahoney suggested a compromise of an
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85% payout and reiterated that if there was a better method then the Civil Service Commission will
be right back to revisit this issue.
Upon a motion by Ms. Mahoney, seconded by Mr. Tatigian and unanimously adopted, it was
RESOLVED, That having reviewed the letter received November 3, 2003, from
Michael T. Slater, Director of Finance, regarding Internal Revenue Service (IRS)
Section 457 (Deferred Compensation), regulation changes requiring that the "catch up
payments" from accrued vacation and sick leave payouts be issued prior to
retirementttermination and after having had discussion with James Andres, Chief
Accountant; Mark Wheeler, Senior Police Officer; Yvonne Lillibridge, President,
AFSCME Union Local 192; Mary E. Rutan, Human Resources Director; and Thomas
Ambers, Treasurer, Livonia Lieutenants and Sergeants Association (LLSA), the Civil
Service Commission does hereby amend the practice to issue vacation and sick leave
payouts at the time of retirement/termination and approves the recommendation for
advance payment of 85% of the estimated accumulated vacation and sick leave
payout to be issued upon employee's written request prior to the last regular payroll
date preceding the employee's retirement/termination date;
AND BE IT FURTHER RESOLVED, that Mr. Andres conduct a formal survey of other
comparable Cities to determine if this recommended approach is appropriate or if
other methods or modifications are necessary to permit the Civil Service Commission
to revisit this matter as soon as possible.
Upon a motion by Ms. Mahoney, seconded by Mr. Tatigian and unanimously adopted, it was
RESOLVED, That the meeting be adjourned at 9:15 a.m.
Gretchen Guisbert, Secretary III
Ronald E. Campau, Chairperson
Harry C. Tatigian, Commissioner
Charlotte S. Mahoney, Commissioner