San Marcos, TX Adopts the PARS FICA Alternative PlanCategories: Hot Sheets,Texas Developments
In the heart of Texas, midway between Austin and San Antonio, lies the City of San Marcos, one of the fastest growing and most exciting cities in America. San Marcos’ diverse community has enjoyed a recent population boom, thanks in part to hometown Texas State University’s expansion, as well as an assertive city and county drive to improve infrastructure.
With its community growing, the City of San Marcos began expanding its municipal workforce to keep up. As more and more new hires were made, many of which would be part-time/seasonal employees, City officials searched for ways to add much needed personnel to meet demands on service in a way that would also help support the City’s financial health.
During this time, San Marcos officials learned about the PARS FICA Alternative to Social Security Plan. The PARS Plan, developed in the wake of the 1990 Omnibus Budget Reconciliation Act (OBRA 90), provides public agencies an appealing and cost-effective way to offer part-time, seasonal and temporary workers nice retirement benefits with advantages that Social Security does not currently provide.
The PARS FICA Alternative to Social Security Plan
Under the OBRA 90-compliant PARS Plan, the combined total required contribution between employer and employee is 7.5% of salary — with the City determining the split (i.e., the City as the employer, can choose their portion of the required contribution). The most common split has been 6.2% employee / 1.3% employer which represents a 79% savings in payroll costs.
Within the PARS Plan, employee contributions are made on a pre-tax basis, versus Social Security which is post-tax. Employees participating in the PARS Plan therefore benefit from more of their dollars going toward earning interest in the plan, as well as more take-home pay due to the decrease in taxable income.
Other advantages of the PARS plan over Social Security include:
|PARS Plan||Social Security|
|Participants are immediately 100% vested||Need 40 credits (10 full years of work) before becoming eligible|
|Participants receive their full earned amount upon separation**||Contributions over 40 credits do not necessarily result in a higher benefit|
|Money can be rolled over into an IRA||No control of or access to money earned|
**Part-time employees who are converted to full-time status during service must complete a 24-month waiting period before accessing their monies.
San Marcos Moves to Adopt the PARS Plan
Impressed with the PARS Plan design and the choices it provides both employer and employee, San Marcos City officials requested further analysis from PARS, which showed a first year projected savings of approximately $29,000. These savings would continue annually depending on the number of employees in the Plan and their hours worked.
With savings like these going back to the City and improved benefits going to their eligible part-time employees, the City of San Marcos moved to adopt the PARS FICA Alternative to Social Security Plan.