HomeMy WebLinkAboutIR 7043 t. �. IN� RMAL REPORT TO CITY COUNCIL MEMBERS No. 7043
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`�fi0R1,o To the Mayor and Members of the City Council August 13, 1985
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>EXPC,s Subject: FEDERAL PROPOSALS RELATING TO CITY PARTICIPATION IN
073 MEDICARE AND SOCIAL SECURITY
As the Mayor and City Council members may be aware, the Congressional revenue
committees, the House Ways and Means Committee and the Senate Finance Commit-
tee, have been presented a reconciliation resolution for consideration and
appropriate action by September 27, 1985. This resolution proposes two
changes in the Social Security regulations:
(a) that Medicare coverage be extended to all present State and Municipal
employees which, essentially, represents a 1.45% tax on employee
earnings and requires the City match the amount paid by the
employees; and,
(b) that after January 1, 1986, all newly hired state and local employees
be required to participate in the Social Security Program, which
represents a proposed 7.15% tax on employee earnings and requires the
City to match the amount paid by employees.
The purpose of this resolution is to provide a mechanism to gain additional
revenues to offset increasing financial demands and replenish the diminishing
funds of the Medicare and Social Security programs.
While it is realized that the funds of these programs are in jeopardy and
that it is difficult to address a problem of this magnitude, it is believed
that this financing alternative is neither in the citizens' best interest nor
a responsible approach to resolution of this particular problem. The City of
Fort Worth currently does not participate in either of these programs, and
for some time has had health and retirement programs which are well estab-
lished and financially solvent. Therefore, if adopted, it is believed these
requirements would negatively impact the City of Fort Worth.
Both of these programs represent added costs which are not currently paid by
the citizens of Fort Worth and would have to be passed on to them indirectly
through a tax increase. Based on current year salaries, it is estimated that
the Medicare tax would be approximately $41,572,014 and the projected Social
Security tax for newly hired employees in 1986 would be approximately
$480,650. Further, since the employee must pay 50% of the Medicare tax and
must contribute 7.15% of income to Social Security, it also represents a tax
increase to all State and local employees, thereby reducing employee take-
home pay. Moreover, unless some adjustments were made to our present health
and retirement systems, this would represent double payment by the citizens
of Fort Worth for both of these benefits.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS —
r -IhrORMAL REPORT TO CITY COUNCIL MEMBERS No. 7043 - P•2
�'p""`� August 13, 1985
~�f fORT�A To the Mayor and Members of the City Council
�rEX3 Subject: FEDERAL PROPOSALS RELATING TO CITY PARTICIPATION IN
°" MEDICARE AND SOCIAL SECURITY
The Congressional proposal would make it necessary to maintain and administer
the current health insurance system and also collect for the Medicare pro-
gram. In addition, several alternatives regarding adjustments of the current
benefit plan would have to be considered to maintain benefits at the current
level .
In terms of the Social Security proposal , it would be necessary to maintain
and administer two separate retirement systems; the current program for the
present employees and the Social Security System for the employees hired af-
ter January 1, 1986. Further, it would be necessary to consider an alternate
retirement system in conjunction with the Social Security System to insure
that benefits are consistent for all employees.
If passed, these taxes would become effective during the fiscal year and af-
ter adoption of the budget, thereby eliminating the opportunity to develop
alternate plans and budget these expenses appropriately.
Furthermore, this proposal represents an infringement on local autonomy and
voids the option of voluntary participation previously granted by Congress.
The City previously exercised the option not to participate in Social Securi-
ty through an election of the employees. Moreover, this proposal only repre-
sents a short-term solution, as collection of these taxes would produce a
significant windfall in revenues immediately, but also would increase the
long-term demands and indebtedness on a fund already in jeopardy.
At the present time, the National League of Cities is polling municipalities
to determine the financial and other negative impacts of this proposal , and
it is anticipated that a coalition will be formed to address the Senate
Finance Committee regarding these problems and to express strong opposition
to this proposal .
Council direction on this matter is requested. An appropriate resolution can
be prepared and placed on the agenda next week for your consideration.
;-.nouglas Harman
City Manager
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ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS