E-Help 11/22/2006

1.  IMTA Certification & Recertification
2.  Regionalization
3.  1099R Duty Disability Recipient (Institute)
4.  DUI Fees (Institute)
5.  Sample Policies (Institute)
6.  Special Tax Levy for Local Taxing Bodies- Public Act 94-976
7.  Taxability of public safety officer’s workers compensation by IRS
8.  FDIC coverage for Defined Benefit Plans (Institute)
9.  Special Census update (Highland)
10. DUNS Number
11. Response Village Clerk Stipend
12. Response Commercial Sweep Account

“Thanks again to everyone that has contributed information in the past.  If you have questions, please feel free to send me your request.  If you are responding to a request, please send your response to the requester and include me as a “cc”.  Thanks again!”
Michael Peterson
mpeterson@villageofgrayslake.com

www.imtausa.org
www.aptusc.org

CERTIFICATION & RECERTIFICATION

Applications are due January 31, 2007.  For more information or to see if you qualify this year, visit the IMTA website at www.imtausa.org/cert.htm

Penny Toppel, Certification Co-Chair
p.toppel@foxrivergrove.org

Marlene Blocker, Certification Co-Chair
marlene@villageofgilberts.com

REGIONALIZATION

Northern Region: Cathy Hojek                 chojek@lwfd.org
Central Region: Bonnie Drew                   bonnie.drew@cwlp.com
Southern Region: Jennifer Menz              zctreas02@yahoo.com

1099R Duty Disability Recipient

It is the recommended practice that a Duty Disability recipient NOT receive a 1099-R at year end for the exempt benefits, provided that there was no income tax withheld (by way of participant election, since withholding is not required from a tax exempt source) or other reason for issuing the 1099-R to the beneficiary.

During institute a few members asked that we verify the accuracy of the above statement.  It has been confirmed and is accurate.

DUI Fees

“The $100 for first offense and $200 for second offense has been changed from dui equipment only to a broader range of dui related expenses including salaries.  I found this article on the net.  I don't know the exact statute, but I did read it when my police chief told about the change.”

Julie Miller, Mt. Zion 

New Illinois DUI Funding Law Creates Incentive for Police Departments to Up Conviction Rates

Under Illinois law, police agencies have long been awarded a "bounty" for each DUI conviction obtained: $100 for a first conviction and $200 for a second conviction. Until recently, though, use of those funds was limited to the purchase of alcohol-enforcement related equipment.

As of late June, departments can now use those DUI-generated funds for a much wider range of purposes, including "enforcement and prevention of impaired driving, including training, education, salaries, checkpoints, saturation patrols and sting operations." The law change isn't expected to make a significant difference to small police agencies that see fairly low volumes of DUI arrests and convictions each year. For instance, the St. Louis Post Dispatch reported that the East Alton police department logged 63 DUI arrests in 2005. Even if each of those drivers was a second offender and each was convicted, the department would net only $12,600-an unlikely outcome, and yet one that wouldn't fund even a single officer's salary.

The Post Dispatch also reported that the St. Claire County Sheriff's Department typically sees about $2500 annually from DUI convictions, and anticipates that those funds will continue to be used for dash-mounted cameras and portable breathalyzer machines.

For large police agencies, though, the impact of this newfound freedom to spend DUI funds may be significant. The Illinois State Police, for instance, currently collect more than half a million dollars in DUI fines annually. While these funds may be put to good use in training and education-areas that weren't previously eligible for such expenditures-the new flexibility also increases the incentive of large police agencies to focus on DUI enforcement over other areas where enforcement will not generate revenues.

SAMPLE POLICIES

Did you know that IMTA’s website includes many helpful documents and sample policies?

This includes: RFP for Banking Services, Bounced Check Policy, Purchasing Policy, Email Policy,  Fund Balance, RFP Audit Services, RFP Investment Services, Travel Policy and much more.

http://www.imtausa.org/policies.htm

SPECIAL TAX LEVY FOR LOCAL TAXING BODIES

Public Act 94-976

http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=094-0976&GA=094

This act made two significant changes to the Tax Cap Law.  First, for taxing bodies subject to the tax cap, it eliminated all referenda to increase fund specific tax rates in favor of only limiting rate and extension limitation referenda.  Second, as a consequence of the first change, the amendments automatically move all fund-specific tax ceilings to their maximum statutory limit.

We recommend you consult your attorney to discuss the impact of this legislation.

FDIC COVERAGE FOR DEFINED PENSION PLANS

FDIC: Federal Deposit Insurance Corporation
1.877.275.3342
www.fdic.gov/deposit

At the IMTA Treasurer’s Institute we discussed the FDIC coverage for defined pension plans such as the downstate police pension.  I was asked to confirm the coverage.  I spoke with Mrs Tucker, FDIC representative (1.877.275.3342) for clarification.  She confirmed with her supervisor and reports that “The maximum amount of insurance coverage a plan can deposit at one bank and still be fully insured is determined by ensuring that the employee with the largest percentage interest in the plan deposits does not exceed $100,000.” 

In brief, the pension funds have more than $100,000 FDIC coverage.

To verify your coverage on any given day the calculation is as follows:

$82,367.72        Officer Smith’s contributions (Largest participant)
Divided by
$1,349,990        Total participant contributions
Equals
6.1%                 Officer Smith’s percentage of the plan’s total contributions

$100,000           FDIC coverage
Divided by
6.1%                 Officer Smith’s percentage of the plan’s total contributions
Equals
$1,639,344        FDIC pension plan coverage

Taken from the FDIC website: http://www.fdic.gov/deposit/deposits/insured/yid.pdf

How to Calculate the Maximum Insurance Amount for an Employee Benefit Plan that Qualifies for "pass-through" Coverage
Coverage for an employee benefit plan's deposits is based on each participant's share of the plan. Because plan participants normally have different interests in the plan, insurance coverage cannot be determined by multiplying the number of participants' times $100,000.

The following examples illustrate how to determine the maximum amount of insurance coverage for an employee benefit plan, assuming that all of the requirements for "pass-through" coverage have been met for all participants.

Explanation:The maximum amount of insurance coverage a plan can deposit at one bank and still be fully insured is determined by ensuring that the employee with the largest percentage interest in the plan deposits does not exceed $100,000.

In this example, the employee benefit plan has deposited $285,000 in one bank. The $285,000 deposit results in Dr. Todd's interest (the largest participant) being insured for $ 99,750 (35% of $285,000). When Dr. Todd's interest is fully insured, the rest of the deposit will be insured, since the other interests are smaller.

Explanation: "Pass-through" coverage is based on each participant's interest in the plan. Most plans participants have different interests in the plan. If any employee's interest in the plan's deposits exceeds $100,000, the amount over the limit will be uninsured.

In the above example, the most that this plan can have on deposit and still be fully insured is $250,000. With a deposit of $250,000, Dr. Moore, who has the largest interest in the plan of 40%, will be insured for $100,000 ($250,000 multiplied by 40% equals $100,000).

Question to Joyce Reinsma, IRS Local Gov’t Specialist

Joyce,
When a police officer is injured in the line of duty, we are required to pay them 100% of their pay and benefits as if they are still working.  Workers comp begins to pay after the third day.  Are the first three days which are paid by the Village and not reimbursed by workers comp, taxable?  Workers comp pays the 66% while the employee is off work, non-taxable.  We continue to pay the remaining 1/3 to the injured officer, is that taxable?

ANSWER:

Based on my research into this area and my conversation with David Ford in Washington D.C. (who is the person who wrote Treasury Decision 9233), we concurred that none of this amount should be taxable (to the degree it is mandated by statute).  This would not be the case for anyone other than a public safety officers.  A typical IMRF employee, for instance, is not taxed up to the 66% paid by workers compensation.

However, because the Public Employees Disability Act is an Act that is “in the nature of a workers compensation law”, it becomes the statute “in the nature of a workers compensation law” that governs the taxability of the payment.  See an example quoted from the Treasury Decision below:   If I understand the Act correctly, municipalities in Illinois have no choice in this matter and must pay the entire wages for a period of one year to officers injured in the line of duty.  At such point as this is no longer a requirement, than the entity would fall back on the normal workers compensation percentage limits.  The allowance is really based on the fact that there is a statute in the nature of a workers compensation act that requires this full payment.

Treasury Decision 9233 discusses the fact that the salary received by the employee is excluded from wages for purposes of social security and Medicare tax.  Section 104(a) of the Internal Revenue Code allows payments made in the nature of a workers compensation law to be excluded form taxable income (see second quote below).

e) Examples. The following examples illustrate the principles of paragraph (d) of this section:

Example 1. A local government employee is injured while performing work-related activities. The employee is not covered by the State workers’ compensation law, but is covered by a local government ordinance that requires the local government to pay the employee’s full salary when the employee is out of work as a result of an injury incurred while performing services for the local government. The ordinance does not limit or otherwise affect the local government’s liability to the employee for the work-related injury. The local ordinance is not a workers’ compensation law, but it is in the nature of a workers’ compensation act. Therefore, the salary the employee receives while out of work as a result of the work-related injury is excluded from wages under section 3121(a)(2)(A).

IRC, 2006-CODE-VOL, SEC. 104. COMPENSATION FOR INJURIES OR SICKNESS.

SEC. 104. COMPENSATION FOR INJURIES OR SICKNESS.

104(a) In General. —Except in the case of amounts attributable to (and not in excess of) deductions allowed under Link section 213(relating to medical, etc., expenses) for any prior taxable year, gross income does not include —

104(a)(1) amounts received under workmen's compensation acts as compensation for personal injuries or sickness;

As long as the payment is not based on age, length of service, or prior contributions, it is workers compensation.  Pay that is based on age, length of service, or prior contributions is in the nature of a pension.  A disability pension is taxable.  However, payments of salary because of line of duty injury are not.  See the 2006 revised Publication 15-A (page 13) which also discusses this.

I hope this answer is helpful to you.

Joyce Reinsma
FSLG Field Specialist
Phone: (312) 566-3879

SPECIAL CENSUS

I overheard some talk about special census planning at the Institute.

Today I received a letter from the Census Bureau that the Special Census program is suspended for 2008. All requests prior to the suspension must meet the following:

• Cost Estimate Request Packets must be received by the Census Bureau by November 30th, 2007.
• The signed Memorandum of Understanding and a check must be received by the Census Bureau by February 28th, 2008.

Scott E. Borror, CIMT
sborror@ci.highland.il.us

IRS STANDARD MILEAGE
The IRS set the standard mileage reimbursement rate for 2007 at 48.5 cents, as noted in IRS Revenue Procedure 2006-49.

DUNS NUMBER

DUNS number is a number assigned by Dunn & Bradstreet.  For non-governmental businesses D&B has provided this credit rating service for some time.  Subscribers to their service can obtain financial and other information about a business as part of assessing their credit worthiness, ability to pay, etc.  Governments are treated like any other business as part of this service, and in many cases, a DUNS number may already be assigned without any action by the local government personnel (this was true in our case).

You can also have D&B provide you alerts on any change in the report for a certain number of businesses.  If you then want more information, you can order or view the report depending on your subscription level for the service.  This can be useful for key businesses the municipality does business with, have economic incentives with, or are major businesses in the community (major taxpayer, employer, etc).

VILLAGE CLERK STIPEND

Our village currently gives our appointed Village Clerk a yearly amount as compensation for her official role as Village Clerk. This "stipend" is in addition to her salary. The current amount has been in place since at least 1987. I am just wondering if there are any other communities that provide a yearly stipend for the clerk and if so, how much? Also, how often does the amount get changed?

 Thanks!
Billie Robinson
Assistant Finance Director
Village of Oswego
brobinson@oswegoil.org

RESPONSE:

It is not uncommon for a Clerk to also serve in the capacity of Collector, and thus receive an additional stipend for the Collector duties above and beyond the Clerk duties.  In the case of a person that is hired as an appointed Clerk, it seems a contradiction to provide an additional stipend for Clerk duties, since this is the job the person was hired to fill.  Consult your municipal attorney. 

COMMERCIAL SWEEP BANK ACCOUNT

            Does anyone currently use a Commercial sweep bank account? I have been talking with two different banks and are getting mixed information. One Bank said, "they can sweep the bank account everyday if needed." Bank two said, "they are limited to six sweeps on the bank account in a months time according to Federal regulations."

            If anyone who could enlighten me on regulations, pro's or con's of a commercial sweep bank accounts I would appreciate the information!!!!!

Rhonda L. Stewart
Forsyth Village Treasurer
Forsyth, IL. 62535
rstewart@forsythvillage.us

RESPONSE:

It sounds like apples and oranges are being compared.  Typically a Money Market account will have a limit on the number of transactions in a month, but I believe that number is established more by individual bank policy than regulations (although there may be a set of minimum requirements to call an account a Money Market versus other types of savings).

We have a similar set up that Bob Mullins described for our primary accounts.  Our primary accounts (central depository, disbursement, and payroll) are all established as “Zero Balance” accounts meaning that they should not carry a bank balance.  Any deposit to the accounts is swept into an overnight investment account, and monies are “swept back” into the appropriate accounts to cover checks or other debits presented for payment.

I concur with Bob’s other comments.  The bank statements will have more activity due to the sweeps in and out.  To address this, and other issues, we do a double four column bank reconciliation (Opening, Deposits, Disbursements, Closing times 2 – one side beginning with the Bank balance, the other beginning with the Book balance) to eliminate out the activity that occurs on the bank side but not recorded in the books (e.g. the sweeps, and NSF re-deposits), as well as transactions that may only occur on the book side and not appear on the bank statement.  At the bottom of the two sets of columns, the opening, deposit, disbursement, and ending totals should agree.  The double four column approach helps to identify where any reconciling “problem” may exist – a bank transaction that did not get recorded on the books, a booked transaction that did not clear the bank (maybe got deposited to a different account, etc) – including isolating whether the problem is in a deposit/receipt or disbursement/check portion of transactions.  It maybe sounds more difficult, but it really works and helps immensely in isolating a problem when they occur.

We have also designated one account to be the depository account for all incoming wires and similar receipts (ACH).  This helps to facilitate tracking of incoming payments and keeps them from further complicating the sweep account activities.

Bob’s comments regarding compensating balances has merit, as a sweep arrangement usually is tied to a compensating balance where a certain balance of funds are not swept to essentially pay for the costs of maintaining the account and sweep activity.  This is not unique to a sweep arrangement though, and may also apply to any regular interest bearing account as well.

However, neither of these issues, compensating balances, or extra bank activity, should discourage investigating a sweep arrangement.  They can be very beneficial to a community and their overall investment earnings.  If your accounts are structured in this way, or similar, it is very easy to have funds effectively being invested as soon as they are deposited.

Brad L. Bettenhausen
Treasurer/Finance Director
Village of Tinley Park
bbettenhausen@tinleypark.org