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HomeMy WebLinkAboutCS 06-07 REPORT TO 2'25 EXECUTIVE COMMITTEE Report Number: CS 06-07 Date: January 8, 2007 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: City Contribution to Elected Officials Registered Retirement Savings Plan (RRSP) Recommendation: 1. That Report CS 06-07 from the Director, Corporate Services & Treasurer be received; 2. That Council approve the amendments to the Council Compensation and Communications Policy, Section 12 as indicated in this report, effective January 1, 2006; and, 3. That the appropriate City of Pickering officials be authorized to take the necessary actions to give effect thereto. Executive Summary: The current Council policy providing for an annual contribution to an elected officials RRSP contains a potential inequity that should be corrected. The Recommendations above will make the policy equally applicable in dollar amount to all Members of Council, regardless of their personal employment situation. Financial Implications: There are no financial implications in addition to those under the existing policy. Sustainability Implications: The Recommendations are reasonable and will ensure equitability in the treatment of this matter. Background: The existing Council Compensation Policy provides, under Section 12, for the City to match a member's RRSP contribution up to a maximum of 13% of the member's earned salary. At the time of approving this provision Council did not foresee a potential conflict with the Income Tax Act in regards to the maximum contribution one can make. As explained below there is an inequity that needs to be corrected. Report CS 06-07 v.._"...,_."......"__._...,....._____~_____.>. January 8, 2007 Page 2 228 Subject: City Contribution to Elected Officials Registered Retirement Savings Plan (RRSP) The Income Tax Act sets a contribution limit of 18 percent of earned income up to a maximum ojf $16,500 for RRSP contribution purposes. If an elected official's only source of income is the City's compensation then for example, with a total salary and per diem of $30,197 (2006), the 13 percent maximum equates to a City matching contribution of $3,925 which would require a total member contribution to his/her RRSP of $7,850. However, under the 18 percent rule the maximum the member can contribute is $5,435 ($30,197 x 18%). This rule, by default, becomes the governing factor thereby limiting the City's matching contribution to $2,718 and preventing the elected official from receiving the City's maximum matching contribution of $3,718. In this instance the City's contribution is only 9 percent of earned salary to the member's RRSP not 113% as is allowed under the Policy. Removal of the City's matching requirement then makes the contribution a straight 13 percent of earned salary with no matching provision. It is also recommended that the City's contribution will be directly deposited into the member's RRSP. All of the foregoing assumes the member has sufficient contribution room. The member must provide the Treasurer with such confi rmation. The current Section of the policy with amendments noted can be found below. Deletions arE! crossed out and additions are in bold: "12.a) b) A Member may contribute maintain a Registered Retirement Savings Plan (RRSP), either own or spousal, under Federal legislation to which the Corporation shall match to contribute a maximum of 13% of the Member's earned salary each year. i) Written confirmation that a member has sufficient contribution room, as provided by the Canada Revenue Agency on their notice of assessment, to accommodate the City's contribution evidence of a contribution by a Momber towards an RRSP as set out in Section 12(a) shall be provided made to the Treasurer no later than December 31 st in any given year and the City's contribution shall be made directly to that RRSP no later than January 31st of the next calendar year. ii) A Member of Council must give evidence to the Treasurer that a contribution includes both the Membor's portion of the RRSP and the City's portion. The Member shall then be reimbursed for the City's portion. For the 2006/2007 transition only, if the member has already made the contribution to the RRSP reimbursement may be made to that member. ii) Report CS 06-07 January 8, 2007 Subject: City Contribution to Elected Officials Registered Retirement Savings Plan (RRSP) Page 3 227 c) The word "salary" shall mean the annual base salary, prorated for a Member not holding office for an entire calendar year, of the Mayor and Councillors and it excludes all taxable benefits with the exception that for Councillors only, salary shall include the per diem paid under Section 2 of this policy. The contribution to an RRSP is a taxable benefit regardless of whether it is paid to the Member of Councilor the financial institution. d) The City shall make its contribution only in the month of January of the next calendar year regardless of '.vhen tho Member of Council mado a contribution, except when a Member of Council ceases to hold office during the year in which case the contribution may be made earlier." This change will put all elected officials on the same basis in dollar terms, in regards to the City's amount of contribution to their individual RRSPs. Attachments: Not applicable Approved I Endorsed By: <-~p~--" Gillis A. Paterson Director, Corporate Services & Treasurer GAP:vw Copy: Chief Administrative Officer Recommended for the consideration of Pickering City Council 1/ -'/ 6