Federal Update: Mandatory Social Security
By JAMES McCURDY, Research Associate, Illinois Municipal League
In the April, 1991 issue of the Review, we reported
on the changes in the OBRA of 1990 that require all
municipal employees (including part-time, seasonal
and elected employees) to be covered either by social
security or by a "retirement system" after July 1, 1991.
There are a couple of clarifications and additions to be
made to the article we wrote in April, as further information has been made available on this nebulous new
federal regulation.
First, elected officials who make under $100 annually are not exempt from social security/retirement system coverage as was reported in April. This rule applies
only to election campaign workers who make less than
$100 annually.
Second, any part-time, seasonal or temporary (PST)
municipal employee must be 100% vested in benefits
under any retirement plan established by the municipality. According to the National League of Cities
(NLC) it appears that municipalities may cover PST
employees with a Section 457 plan that has 100% immediate vesting and that has any match of employee/employer contributions equal to 7.5% of annual employee
income. This would satisfy the new law for PST employees, and avoid mandatory social security.
Third, as you will see in Dave Zahller's article, the new law will allow for options other than social security
for compliance. Section 457 and 401 (a) plans may be
viable alternatives to social security coverage for some
municipalities.
Finally, there has been clarification as to the six
month "grace period" being offered by the IRS on
establishing new retirement plans, or providing social
security. It appears that the six month "transition" period will allow municipalities to treat an employee "as a
member of a retirement system if he or she will become
a member of the system by the end of the plan year."
This is not a free grace period, however. This period
appears to be retroactive, and requires that in 1992, the
municipality pay all the contributions to the retirement
plan for the period of July 1 through December 31, 1991
for the employee that was brought into the plan in July
of 1991.
As usual, you must consult your municipal attorney
for advice and consent when making any new changes
in pensions or adopting any new plans for compliance
with the federal regulations. Requests for more materials regarding this law change may be directed to Jim
McCurdy at the IML staff offices at 217/525-1220. •
FROM THE EDITOR'S DESK . . .
(Continued from page 3)
Wendellyn J. Briggs, Deputy Clerk, Town of Normal, Illinois, has been awarded the designation of "Certified Municipal Clerk" (CMC) from the International
Institute of Municipal Clerks (IIMC) for achieving its
high educational, experience, and service requirements.
Ms. Briggs has been Deputy Clerk of Normal, Illinois, since 1986. Worked part-time in City Clerk's office
and City Managers office from 1973-1976. . .
Ruth A. Donahue, Village Clerk, Village of Evergreen Park, Illinois, has been awarded the designation
of "Certified Municipal Clerk" (CMC) from the International Institute of Municipal Clerks (IIMC) for
achieving its high educational, experience, and service
requirements.
Ms. Donahue has been Village Clerk of Evergreen
Park, Illinois, since 1985. She began her career with the
Village in 1983, as Village Trustee and Youth Commissioner. •
June 1991 / Illinois Municipal Review / Page 5