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Table of Contents
APPENDIX B
IRS AGREEMENT BETWEEN STATE OF CALIFORNIA AND
PROFESSIONAL ENGINEERS IN
CALIFORNIA GOVERNMENT
COVERING ALL EMPLOYEES IN BARGAINING UNIT 9
EMPLOYER-PAID EMPLOYEE RETIREMENT CONTRIBUTIONS
The purpose of this Article is to implement the provisions contained in Section
414(h)(2) of the Internal Revenue Code and IRS Ruling
2006-43 concerning the tax treatment of employee retirement contributions
paid by the State of California on behalf of the employees in the bargaining
unit. Pursuant to Section 414(h)(2) contributions to a
pension plan, although designated under the plan as employee contributions, when
paid by the employer in lieu of contributions by the employee, under
circumstances in which the employee does not have the option of choosing to
receive the contributed amounts directly instead of having them paid by the
employer, may be excluded from the gross income of the employee until these
amounts are distributed or made available to the employee.
Implementation of Section 414(h)(2) is accomplished
through a reduction in wages pursuant to the provisions of this Article.
1. DEFINITIONS
Unless the context otherwise requires, the definitions in this Article
govern the construction of this Article.
A. “Employees.” The term “employees” shall mean those
employees of the State of California in Bargaining Unit 9 who make employee
contributions to the PERS retirement system.
B. “Employee Contributions.” The term “employee
contributions” shall mean those contributions to the PERS retirement system
which are deducted from the salary of employees and credited to individual
employees’ accounts.
C. “Employer.” The term “employer” shall mean the
State of California.
D. “Gross Income.” The term “gross income” shall mean the
total compensation paid to employees in Bargaining Unit 9 by the State of
California as defined in the Internal Revenue Code and rules and regulations
established by the Internal Revenue Code and rules and regulations established
by the Internal Revenue Service.
E. “Retirement System.” The term “retirement system”
shall mean the PERS retirement system as made applicable to the State of
California under the provisions of the Public Employees’ Retirement Law
(California Government Code Section 20000, et seq.).
F. “Wages.” The term “wages” shall mean the
compensation prescribed in this Agreement.
2.
PICK UP OF EMPLOYEE CONTRIBUTIONS
A.
Pursuant to the provisions of this Agreement, the employer shall make employee
contributions on behalf of employees, and such contributions shall be treated as
employer contributions in determining tax treatment under the Internal Revenue
Code of the United States. Such contributions are being made by the employer in
lieu of employee contributions.
B.
Employee contributions made under Paragraph A of this Article shall be paid from
the same source of funds as used in paying the wages to affected employees.
C.
Employee contributions made by the employer under Paragraph A of this Article
shall be treated for all purposes other than taxation in the same manner and to
the same extent as employee contributions made prior to the effective date of
this Agreement.
D.
“The employee does not have the option to receive the employer contributed
amounts paid pursuant to this Agreement directly instead of having them paid to
the retirement system.”
3.
WAGE ADJUSTMENT
Notwithstanding any provision in this Agreement on the contrary, the wages of
employees shall be reduced by the amount of employee contributions made by the
employer pursuant to the provisions hereof.
4.
LIMITATIONS TO OPERABILITY
This Article shall be operative only as long as the State of California pick up
of employee retirement contributions continues to be excludable from gross
income of the employee under the provisions of the Internal Revenue Code.
5.
NON-ARBITRABILITY
The parties agree that no provisions of this Article shall be deemed to be
arbitrable under the grievance and arbitration procedure contained in this
Agreement.
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