By Roger Smith

ivilian employees will get more vacation days sooner. Under the enhanced vacation plan, civilian employees will begin to accumulate an added week of vacation beginning with their fifth year of service.

The mayor and City Council approved the enhanced vacation benefit Oct. 1, along with a new 401(a) qualified savings plan. The 401(a) plan will affect certain employees’ compensation for their unused vacation and sick leave days when they retire.

New enhanced vacation schedule
During employees’ fifth year, they will receive 15 vacation days instead of 10. The new schedule also adds three days to the maximum number of days they can accrue. For other features of the new vacation plan, see the schedule on the right.

The accrual rate changed Nov. 1. The first increase in the vacation accrual rate appeared on November paychecks.

The maximum amount of vacation leave some municipal employees can accrue also changed. If you began working for the city before Jan. 1, 2000, you can still accrue a maximum of 720 hours. If you began working for the city Jan. 1, 2000, or later, you can accrue a maximum of 45 days per year or a total of 360 hours.

Vacation schedule

401(a) qualified savings plan
Instead of receiving a check for their unused vacation days and sick leave, some retiring employees will be compensated with the city’s contribution into a tax-deferred 401(a) qualified savings plan. This plan was created by the federal government.

You can roll your 401(a) funds into an IRA, 457 or similar plan, or use them to “buy back” your pension plan, leave them in the fund to draw interest, or withdraw the funds.

The 401(a) plan lets you set aside money for retirement while avoiding certain taxes on that money, said Lonnie Vara, human resources director.

“It saves employees payroll tax withholding such as federal taxes, FICA and Medicare, sometimes as much as 32.5 percent from their termination pay,” Vara said. “And it saves the employer the trouble of handling the withholding.”

The plan applies to all civilian employees who have accumulated at least $5,000 in sick and vacation benefits. The Internal Revenue Service allows the city to place no more than $40,000 into the employee’s account. If the employee has accrued more than $40,000, the remainder is paid to him or her in a check, minus applicable tax withholding.

Compensation for unused vacation days is based on the highest pay an employee received for a 60-day period during his or her city employment.

The city will select a third-party administrator and determine the final plan design, which can take several months. The 401(a) plan should be ready in early 2004. For updates, visit the Benefits Alert Page.

Fire and police employees are not part of the plan, because they don’t pay FICA taxes.

The 401(a) program will not change anyone’s base salary.