City to enable its employees to defer portion of taxes

City employees will now be able to defer until their retirement income taxes on salary deductions for contributions to their pension funds.

Under the terms of a resolution approved Tuesday by the City Council, employees would pay their contribution to the city, essentially reimbursing the city’s outlay to the California Public Employees’ Retirement System (CalPERS), City Manager John Pietig said.

The Internal Revenue Code considers pension deductions from salaries to be employer contributions, but only for tax-reporting purposes.

“This was discussed during contract negotiations with the firefighters; this is just a little housekeeping,” said Gavin Curran, director of the finance and ITT for the city. “But the [deferment] would apply to all city employees.”

Laguna’s firefighters recently negotiated a new contract, which increased employee contributions to 4.5% of the city’s contribution to their retirement fund. New hires will contribute the full 9%, with their retirement age raised from 50 to 55. The contract included no raises.

The City Council passed an urgency ordinance Oct. 11 that amended the city’s contract with CalPERS to establish the retirement formula for new hires, which is expected to save the city about $400,000 over the next two years.

City officials justified the urgency ordinance as needed to hire new firefighters in time for the upcoming fire and flood seasons. It took effect Monday, the earliest date allowed by CalPERS.

Meanwhile, the Laguna Beach Police Employees’ Assn. is still in contract negotiations with the city.

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