HomeMy WebLinkAbout06. Adopt Management Group Memorandum of Understanding Constructive Receipt Amendment Page 1 of 7
Item 6.
CENTRAL SAN BOARD OF DIRECTORS
POSITION PAPER
MEETING DATE: AUGUST 19, 2021
SUBJECT: ADOPT THE CONSTRUCTIVE RECEI PTAMENDMENT TO MANAGEMENT
GROUP MEMORANDUM OF UNDERSTANDING
SUBMITTED BY: INITIATING DEPARTMENT:
TEJI O'MALLEY, HUMAN RESOURCES AND OFFICE OF THE GENERAL MANAGER -
ORGANIZATIONAL DEVELOPMENT HUMAN RESOURCES
MANAGER
Roger S. Bailey
General Manager
ISSUE
Board approval is required to adopt any changes to a Memorandum of Understanding (MOU).
BACKGROUND
The District has completed the meet and confer process with representatives of the three bargaining units
to discuss the current accrued leave cash-out practices being subject to the constructive receipt
doctrine pursuant to the Internal Revenue Code (I RC), which could result in tax implications
and/or penalties for both the employees and the District.
Currently, the District taxes employees on the amount of leave they have cashed out, not the total amount
they have available to cash out. This manner in which the leave cash-out provision is currently structured
may lead the Internal Revenue Service (IRS)to determine that:
1. All accrued leave that an employee has the option to convert into cash each year is constructively
received and, therefore, taxable in the year made available.
2. The cash-outs could be considered an ineligible deferred compensation arrangement and, therefore,
taxable in the year made available (I RC Section 457(f)).
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1 n order to update the current practices so they are no longer subject to the constructive receipt doctrine
pursuant to the I RC, and after consulting with legal counsel, the District presented the bargaining units and
unrepresented employees with five options summarized below:
1. Require Emplo-yees to Irrevocably Elect an Accrued Leave Cash-Out in Advance:The District
could require that employees irrevocably elect a cash-out of all or a portion of their accrued leave
prior to the taxable year in which any leave that is subject to the cash-out is earned.
2. Make a Certain Level ofAccrued Leave Cash-Outs Mandatory: The District could require that
accrued leave over a designated maximum accrual would be automatically cashed out each year for
all District employees.
3. Aaal-y a "Haircut"to Accrued Leave Cash-Out Pa-yments:The District could reduce the value of
the amount received for the accrued leave when the employee receives the payment.
4. Provide Cash-Out Option through a Code Section 125 Cafeteria Plan:The District could amend
its cafeteria plan to allow District employees to cash-out accrued leave through the cafeteria plan.
5. Eliminate the Option to Cash-OutAccrued Leave:The District could eliminate the option to cash-
out accrued leave.
Consensus with all three bargaining units has been reached on how to resolve the issue. The Management
Group, Management Support/Confidential Group and Public Employees Union, Local #1 have all agreed
to implement Option#1 as detailed above. This change to the current MOU provision will require
employees to irrevocably elect a cash-out of all or a portion of their accrued leave prior to the taxable year
in which any leave that is subject to the cash-out is earned.
The attached proposed MOU provision (Attachment 1) has been reviewed and approved by the
Management Group. The amendment of this provision is reflected in the attached MOU (Attachment 2),
which has been marked to show tracked changes.
ALTERNATIVES/CONSIDERATIONS
Do not approve the amendment to the MOU and leave the current accrued leave cash-out practice as-is
for the Management Group. This is not recommended as the current practice is subject to the constructive
receipt doctrine pursuant to the I RC. If this change does not occur, the employees and the District could
be subject to tax implications and/or penalties.
FINANCIAL IMPACTS
None by this action. The proposed revisions only change the timing of the election to receive a payment of
accrued leave time and limit it to the amount that has already been earned and accrued.
COMMITTEE RECOMMENDATION
The Administration Committee reviewed this matter at its August 3, 2021 meeting and recommended
approval.
RECOMMENDED BOARD ACTION
Adopt the proposed Constructive Receipt Amendment to the Memorandum of Understanding with
Management Group.
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Strategic Plan re-In
GOAL THREE: Fiscal Responsibility
Strategy 2—Ensure integrity and transparency in financial management
ATTACHMENTS:
1. Proposed Amended Section of Management Group MOU
2. Red-line of proposed change to Management Group MOU
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Attachment 1
V VACATION
Hired prior to Hired after Annual Maximum
May 1, 1985 May 1,1985 Allowance Accrual
Years Employed Years Employed
0 -3 Years 10 Days 20 Days
0 -5 Years 3-5 15 30
5 -10 5 -10 16 32
10 -15 10-15 17 34
15-20 15-20 20 40
20-25 20-25 25 50
25-30 25+ 30 60
30+ 35 70
The extra days accrued due to service of over five (5) years are credited to
each employee's account on his /her anniversary date.
If an employee leaves the District for any reason he /she will be paid for any
earned vacation time not used.
An employee may request a payment of the cash equivalent of vacation accruals
subject to the following:
1. Employee must make an irrevocable election before the end of each calendar
year to either (a) receive payment in the following calendar year of the cash
equivalent of all or a portion of the vacation hours that will accrue during the
following calendar year, or (b) to accrue those vacation hours as paid
vacation during the following calendar year. Elections must be made every
year and will not carry over from one calendar year to the next. If an
employee fails to make an election, the employee will be deemed to have
irrevocably elected to accrue all of the vacation hours that will accrue in the
following calendar year as paid time off.
2. The election must designate the number of vacation hours being requested
for payment. The payment cannot exceed the value of the maximum vacation
accruals based on the employee's years of service in the year of payment up
to a maximum of one hundred sixty (160) hours. An employee may request
cash payment of the value of vacation hours the employee elected to convert
to cash compensation before the end of the previous calendar year at any
time during the current calendar year; provided, however, that no cash
payment for the value of vacation hours will be made unless and until the
vacation hours have been earned and accrued as detailed in the above
accrual schedule.
3. Vacation hours an employee elects to convert to cash compensation in the
following calendar year as described above will be converted to cash
compensation based on the employee's hourly rate of pay in effect at the time
of the payment request.
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Note the following exception to the above: payment of accumulated vacation time
above the maximum annual accrual shall occur automatically on the anniversary
date on which the time would be lost.
VI SICK LEAVE
Employees hired prior to May 1, 1985, earn fifteen (15) days of sick leave per
year. Employees hired after May 1, 1985, earn twelve (12) days of sick leave per
year. Sick leave may be used up to ten (10) days annually to attend to the health
needs of an immediate family member. Also, in the event of a death in the
employee's immediate family, the employee may be absent up to a maximum of
ten (10) days and have the time off charged to his /her sick leave account.
Unused sick leave accumulates from one year to the next. There is no maximum
limitation. The balance of unused accumulated sick leave is credited as longevity
upon retirement.
For employees hired prior to May 1, 1985, the District shall augment the above
sick leave policy with an incentive benefit using a formula crediting eighty-five
(85%)of the employee's yearly unused sick leave to an accumulating account for
that employee. For employees hired after May 1, 1985, the following schedule
shall apply:
Years of Service Pay-Off Credit Pay-Off Credit
at Termination at Retirement
0 -5 0% 0%
5 -10 25 25
10 -25 25 35
25+ 25 40
Employees hired or promoted into the Management Group effective on or after
December 18, 2017, shall be subject to the following provision:
Any cash out of sick leave accruals shall be deducted from an employee's sick
leave accrual bank at time of retirement. Any remaining balance shall be reported
to Contra Costa County Employees' Retirement Association (CCCERA) as
retirement service credit.
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Attachment 2
V VACATION
Hired prior to Hired after Annual Maximum
May 1, 1985 May 1,1985 Allowance Accrual
Years Employed Years Employed
0 -3 Years 10 Days 20 Days
0 -5 Years 3-5 15 30
5 -10 5 -10 16 32
10 -15 10-15 17 34
15-20 15-20 20 40
20-25 20-25 25 50
25-30 25+ 30 60
30+ 35 70
The extra days accrued due to service of over five (5) years are credited to
each employee's account on his /her anniversary date.
If an employee leaves the District for any reason he /she will be paid for any
earned vacation time not used. Payment of aGGUmrrrulateeyaGatien time shall
OGGUr upon written request of the employee provided that the employee has
either used at least ton (10) yaGation days during the last twelve (12
days Of vacation time Off within the Galenrdar year of appliGation
An employee may request a payment of the cash equivalent of vacation accruals
subject to the following:
1. Employee must make an irrevocable election before the end of each calendar
year to either (a) receive payment in the following calendar year of the cash
equivalent of all or a portion of the vacation hours that will accrue during the
following calendar year, or (b) to accrue those vacation hours as paid
vacation during the following calendar year. Elections must be made every
year and will not carry over from one calendar year to the next. If an
employee fails to make an election, the employee will be deemed to have
irrevocably elected to accrue all of the vacation hours that will accrue in the
following calendar year as paid time off.
2. The election must designate the number of vacation hours being requested
for payment. The payment cannot exceed the value of the maximum vacation
accruals based on the employee's years of service in the year of payment up
to a maximum of one hundred sixty (160) hours. An employee may request
cash payment of the value of vacation hours the employee elected to convert
to cash compensation before the end of the previous calendar year at any
time during the current calendar year; provided, however, that no cash
payment for the value of vacation hours will be made unless and until the
August 19, 2021 Special Board Meeting Agenda Packet- Page 34 of 77
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vacation hours have been earned and accrued as detailed in the above
accrual schedule.
3. Vacation hours an employee elects to convert to cash compensation in the
following calendar year as described above will be converted to cash
compensation based on the employee's hourly rate of pay in effect at the time
of the payment request.
Note the following exception to the above: payment of accumulated vacation time
above the maximum annual accrual shall occur automatically on the anniversary
date on which the time would be lost_. provided that on employee has used of
least ton (10) yaGatien days during the last twelve (12) menthe
VI SICK LEAVE
Employees hired prior to May 1, 1985, earn fifteen (15) days of sick leave per
year. Employees hired after May 1, 1985, earn twelve (12) days of sick leave per
year. Sick leave may be used up to ten (10) days annually to attend to the health
needs of an immediate family member. Also, in the event of a death in the
employee's immediate family, the employee may be absent up to a maximum of
ten (10) days and have the time off charged to his /her sick leave account.
Unused sick leave accumulates from one year to the next. There is no maximum
limitation. The balance of unused accumulated sick leave is credited as longevity
upon retirement.
For employees hired prior to May 1, 1985, the District shall augment the above
sick leave policy with an incentive benefit using a formula crediting eighty-five
(85%)of the employee's yearly unused sick leave to an accumulating account for
that employee. For employees hired after May 1, 1985, the following schedule
shall apply:
August 19, 2021 Special Board Meeting Agenda Packet- Page 35 of 77