Federal Immigration Reform Framework Released; Contains Employment Proposals

In a bipartisan effort to reform the federal immigration process, Senators Charles Schumer (D-NY), John McCain (R-AZ), Dick Durbin (D-IL), Lindsay Graham (R-SC), Robert Menendez (D-NJ), Marco Rubio (R-FL), Michael Bennet (D-CO), and Jeffrey Flake (R-AZ) released a framework for comprehensive reform they say will streamline and modernize the system. The group stated its intention to introduce actual legislation in the next couple of weeks. Among the “Four Basic Legislative Pillars,” which include creating a fair path to citizenship that is contingent upon securing United States borders and tracking whether legal immigrants have left the country when required, the reform calls for:

• Stronger employment verification, including fines and criminal penalties for employers that knowingly hire illegal immigrants and the creation of an effective employment verification system, and
• The protection of workers’ rights by ensuring strong labor protections and providing employers with the ability to hire lower-skilled workers in a timely manner.

CSAC will keep counties apprised of the introduction of legislation when it occurs.

CSAC Makes IRS Ruling Regarding Employee Pension Contributions a Federal Advocacy Priority

Last week in The CSAC Bulletin, we highlighted the re-introduction of legislation by United States Congresswoman Loretta Sanchez (CA-46) that would revise an Internal Revenue Service (IRS) Ruling and thereby allow the implementation of Orange County’s hybrid pension plan. That plan, first adopted in 2010, allows new hires to choose between its current pension formula and a lower benefit formula that is combined with a 401K-style defined contribution plan, with the county matching those contributions up to six percent. Existing employees are currently unable to opt-in to the hybrid plan due to IRS Ruling 2006-43.

Under IRS ruling 2006-43,Orange County’s optional defined benefit plan tier for current employees could be seen as a cash or deferred arrangement (prohibited under IRC 414(h)(2)) as it changes the amount of the contribution picked up by the employer. As a result, allowing their current employees to elect the lower pension benefit formula may force all of Orange County’s employees to pay taxes on their retirement deductions. 
The rising cost of public employee pension plans remains a concern for all of California’s counties. A number of counties have proposed their own local solutions, such as allowing current employees to elect lower pension benefits with lower retirement contributions, but Internal Revenue Service (IRS) rules are an obstacle to these reforms. As such, CSAC deemed it necessary to actively advocate at the federal level for passage of legislation that would revise the IRS ruling so that local governments can propose and implement their own local plans, without severe consequences. We would like to hear from counties that desire to weigh in on issues related to the IRS ruling and/or are interested in individually supporting the legislation.