Reedsinith lyl 4 sj &1 1.111 I From: Jeffrey R. Rioger Direct Phone: +14156594883 Email: jriegerreedsmfth.com Reed Smith LIP 101 Second Street, 18 " Floor San Francisco, CA 94104 To: FCERA Board of Retirement Date: February 10, 2012 Subject: Travel Reimbursements You have asked for our advice concerning the U.S. federal income tax consequences with respect to reimbursement of expenses incurred during the course of approved business travel. In particular, a recent County of Fresno Inter Office Memorandum caused you to question whether any amendments should be made to the FCERA Trustee Travel Policy ("Policy") and whether FCERA needs to report any amounts to the IRS as income to the person being reimbursed under the Policy. The Policy provides guidelines under which FCERA Trustees, FCERA Administrators and/or a designee of an FCERA Administrator may be reimbursed for approved travel expenditures. The Policy provides for reimbursement of expenses reasonably and necessarily incurred in connection with participation in educational programs or other activities on behalf of the retirement system and in connection with conducting due diligence. If the travel expense falls within the guidelines of the Policy, then a Trustee may request reimbursement for expenses by submitting a FCERA Expense Reimbursement Form along with any required receipts. All claims for reimbursement (except by the Board Chair) are to be approved by the Board Chair and claims for reimbursement by the Board Chair must be approved by the Vice Chair. The table below provides for the specific reimbursement under the Policy. pe of Expense AirI n Travel Hotels Meals Porterage Automobile Mileage Actual and reasonable expenses of air travel are reimbursed The Policy does not expressly require submission of a receipt, but FCERA s practice has always been to require submission of a receipt. Actual expenses for lodging are reimbursed. Original receipts must be" submitted along with the Expense Reimbursement Form. A per diem flat rate as provided in IRS Publication 1542 is used to reimburse the cost of meals and incidental expenses. Receipts are not required for per diem reimbursement. A maximum of $10 per day is reimbursed. Receipts are not required for porterage. ReimburethFis made at the per-mile rate allowed by the IRS. Such miles must be reported on the Expense Reimbursement Form. NEW YORK LONDON HONG KONG CHICAGO WASHINGTON. D.C. BEIJING PARIS LOS ANGELES. SAN FRANCISCO PHILADELPHIA. SHANGHAI PITTSBURGH MUNICH. ABU DHABI. PRINCETON NORTHERN VIRGINIA, WILMINGTON. SILICON VALLEY DUSAI CENTURY CITY RICHMOND GREECE. OAKLAND
February 10, 2012 Page 2 Parking and Tolls Public Transportation Car Rentals Other Incidental Business Expenses Actual expenses for tolls are reimbursed. A receipt is required to be submitted along with the Expense Reimbursement Form. AEEiii&jies for transportation are reimbursed. A receipt is required to be submitted along with the Expense Reimbursement Form, Actual expenses for rental cars are reimbursed. The Policy does not expressly require submission of a receipt, but FCERA s practice has always been to require submission of a receipt. Actual expenses for other incidental expenses are reimbursed. A receipt is required to be submitted along with the Expense Reimbursement Form. Discussion Under the terms of an accountable plan, a reimbursement or other expense allowance arrangement may be excluded from income and wages. An expense allowance arrangement qualifies as an accountable plan if: (i) the expenses covered under the plan have a business connection, (ii) the planrequires the covered expenses to be substantiated, and (iii) any amounts in excess of expenses are returned. If an arrangement does not meet one or more of these requirements, then all amounts paid under the arrangement are treated as paid under a nonaccountable plan and should be included in the recipient s gross income and may be subject to withholding and employment taxes, The substantiation requirement may be satisfied by adequate records, including the keeping of receipts, sales slips, invoices, cancelled checks, or other evidence showing payment. The following is a summary of records required to provide an adequate accounting with respect to travel expenses: 2 Amount - Cost of each separate expense for travel, lodging, and meals. Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. Time - Dates of departure and arrival for each trip and number of days spent on business. Place - Destination or area (name of city, town, or other designation). Business Purpose to be gained. Business purpose for the expense or the business benefit gained or expected Alternatively, a plan may meet the requirement of substantiation through the IRS prescribed per diem allowances. There are three types of travel per diem allowances: (i) an allowance for meals and Treas. Reg. 1.62-2(c). 2 See IRS Publication 463. Treas. Reg, 1.62-2(e)(2) provides that the amount of a business expense substantiated under Treas. Reg. 1.274-5(g) is treated as substantiated for purposes of Treas. Reg. 1.62-2 (allowing reimbursement of business expenses under certain conditions to be excluded from the recipient s gross income). Treas. Reg. 1.274-5(g) authorizes the Commissioner to prescribe rules under which reimbursement arrangements or per diem allowances are regarded (I) as equivalent to
February 10, 2012 Page 3 incidental expenses, (ii) an allowance for lodging, meals, and incidental expenses, and (iii) an allowance for incidental expenses only. Incidental expenses are defined to include tips given to bellhops, hotel maids, and other service providers. 4 The per diem allowances eliminate the requirement that the actual costs be substantiated. 5 Any amounts received in excess of the per diem allowances, however, should be reported to the IRS as wages or other compensation, 6 Under FCERA s existing Policy (as implemented), FCFRA requires receipts for all travel expenses except meals and porterage. For meals, the Policy follows the IRS prescribed per diem allowance for meals and incidental expenses. For porterage, the policy separately allows for up to $10 per day, without requiring submission of receipts. We recommend that the Policy be updated to eliminate the separate per diem for porterage, since porterage is already accounted for in the meals and incidental expenses per diem allowance. See IRS Publication 463 (describing the "incidentals" as including "fees and tips given to porters, baggage carriers, bellhops, hotel maids, stewards or stewardesses and others on ships, and hotel servants in foreign countries.") Alternatively, the Policy need not be amended as to porterage, but any porterage reimbursements would need to be reported as income to the person receiving the porterage reimbursement. Additionally, we recommend that the Policy be updated to make clear that airline costs and car rental costs must be supported by a receipt., as is already required under FCERA s existing practices. Otherwise, the Policy is appropriate, and Trustees and staff who are receiving reimbursements under the Policy need not have any income reported as a result of their reimbursements from FCERA provided appropriate documentation is provided. The analysis of the County program that resulted in the Inter Office Memorandum was materially different from the analysis of the FCERA Policy because the County uses a different model than FCERA for its travel reimbursements. substantiation, by adequate records or other sufficient evidence, of the amount of travel expense, and (ii) as satisfying the requirements of an adequate accounting to the employer of the amount of travel expenses. IRS Publication 463, $ Rev. Proc. 2011-47. 6 Treas. Keg. I.62-2(c)(5)
FCERA TRUSTEE TRAVEL POLICY Policy The Board of FCERA recognizes the need to reimburse Trustees for travel and other expenses reasonably and necessarily incurred while participating in educational programs and conducting due diligence and other activities on behalf of the retirement system. These expenses are legitimate expenses of the retirement system. The Board adopts this Travel Policy and the accompanying Education and Travel Expense Reimbursement Schedule to facilitate the appropriate reimbursement of activities subject to the Board s Education and Due Diligence Policies. This Policy shall also apply to business-related travel of the FCERA Administrator and his designees. Purpose This Travel Policy sets forth the guidelines by which FCERA will reimburse Trustees for approved expenditures. These guidelines are intended to assure that travel expenditures incurred are prudent and cost effective and mitigate the risk of improprieties arising from such travel. These guidelines are intended to complement the Board s Education and Due Diligence Policies. Guidelines Genera! Provisions Anpj Reimbursement of travel and related expenses for a Trustee to attend an educational program or conduct a due diligence examination or other business for FCERA requires the prior approval of the Board, except under exigent circumstances when Board approval cannot be obtained in advance. Travel where overnight accommodations are not required need not be approved in advance, provided the expense reimbursement request otherwise complies with this Travel Policy. 2. Costs of Administration, Investment. Travel expenses related to educational programs and other business of FCERA where the principal focus is not related to investments shall be included in FCERA s annual budget as expenses of administration. Travel expenses for educational programs and due diligence evaluations relating to the system s investment portfolio shall be included in FCERA s investment budget as investment expenses.
3. Limitation on Attendance. A Trustee is authorized to attend up to three approved educational programs that require overnight lodging each calendar year, without further Board approval. Attendance at SACRS conferences, NCPRS Annual Meeting and Legislative Workshop and CALAPRS general assemblies and trustee roundtables are not subject to this limitation and do not count towards the three trip limit. 4. Authorized Expenses. The Board shall determine authorized expenses for travel, educational and other reasonable and necessary expenses by majority vote. The attached schedule is pre-approved. Reimbursement rates will be adjusted from time to time to reflect changes in rates prescribed by the Internal Revenue Service. 5. Claims for Reimbursement. Reimbursement for travel by a Trustee shall be submitted on FCERA s Expense Reimbursement Forms. All expense claim forms will be reviewed and approved (or disapproved) in accordance with the provisions of this policy. The Board Chair shall approve expense claims for other Trustees and the Administrator and his designees. The Vice Chair will approve expense claims for the Chair. All approvals are subject to review and approval by the Board of Retirement on the consent agenda for the next board meeting. All claims must be submitted within thirty days following return to Fresno. In no event will a claim for reimbursement be approved if submitted 90 days after the end of the calendar year in which the expense was incurred. Reimbursements or advances in excess of allowable expenses must be returned to FCERA within thirty days. 6. Cash Advances. Cash advances will not be allowed unless specifically approved by the Board of Retirement. 7. Expenses for Traveling Companions. Expenses of family members and/or traveling companions are not reimbursable by FCERA. 8. Limitations on Expense Allowance. Reimbursement for expenses shall not exceed that which is reasonable and necessary for travel to the precise destination and date of the covered occurrence, whether by private automobile or common carrier. Expense costs for extra days prior to or after a conference will be reimbursed only if such extension results in lower overall trip costs. 9. Travel and Lodging Cancellations. Trustees are responsible for the timely cancellation of registration fees, as well as travel and lodging reservations made on their behalf that will not be used, so that FCERA will incur no unnecessary expense. Trustees will be personally responsible for paying any fees caused by their failure to timely cancel any registrations or reservations, unless otherwise determined by the Administrator.
10.Travel Reports. The Administrator shall submit a quarterly report on all travel by Trustees. Such reports shall identify the individual Trustee, and the location, purpose and cost of travel. The report shall be agendized and reviewed by the Board of Retirement at the second regular meetings in January, April, July and October of each calendar year. The report also shall include anticipated travel for the ensuing quarter- 11.Gifts. When traveling on FCERA s official business, neither FCERA nor its trustees, officers or employees shall accept payment of travel, lodging, meal or other related expenses (or free travel) from any person or entity. 12.Travel Arrangements. All travel arrangements for which reimbursement is or will be sought shall be made through the office of the Administrator. Policy Review The Board shall review this Travel Policy at least every three years to assure its efficiency and relevance. This Policy may be amended from time to time by majority vote of the Board. Policy History The Board of Retirement last amended and restated this Policy on f _ ebruary 15, Deleted: August 2O12 Deleted~ _, 20091 Secretary s Certificate I,,the duly appointed Secretary of the Fresno County JDetROOLPena fl Employees Retirement Association, hereby certify the adoption of this Policy. Dated:,Secretary. tp the Board f:robertolpena 1
EDUCATION AND TRAVEL EXPENSE REIMBURSEMENT SCHEDULE 1 Airline Travel. Trustees will be reimbursed for actual and reasonable expenses of air travel for approved travel on FCERA business. A fully refundable coach class ticket must be purchased at competitive prices unless otherwise approved by the Board.A receipt is required. If savings can be realized on the airline fare by having a Trustee extend his or her stay, the Trustee, at his or her option, may extend his or her stay in order to realize such savings. FCERA will reimburse the additional lodging and meal costs resulting from an extended itinerary, not to exceed the savings in airline fare. Similarly, if overall travel expenses can be reduced by booking a flight out of an airport other than Fresno Airport, the Trustee may, at his or her option, travel from such other airport and FCERA will reimburse consequential mileage, parking, airport shuttle and/or other similar expenditures, not to exceed the savings in airline fare. 2. Hotels. Actual expenses for lodging will be reimbursed. Reimbursement will be limited to a single occupancy room considered to be in a standard class. Whenever possible, a request for a government or conference rate should be made. Meals consumed at the hotel, or one of its restaurants, and charged to the hotel bill will be reimbursed in accordance with this Schedule. The following expenses will not be reimbursed: Alcoholic beverages, tobacco, in-room movies, barber shop, beauty shop, gifts, magazines, personal telephone calls and minibar charges. In the case of an extended trip or an emergency situation, laundry and dry cleaning expenses may be reimbursed. If, at the conclusion of a business-related trip, it would be impractical for a Trustee to return home the same day and arrive prior to 10:00 p.m. California time (due to the distance that must be traveled, or the unavailability of a return flight), the Trustee will be entitled to be reimbursed for one additional night s lodging.,original hotel receipts showing azero balance due must be submitted along with a completed FCERA Business Expense report to obtain reimbursement. ED.1 aximum reimbursement
3. Meats. Trustees will be reimbursed for the cost of meals at a flat rate in accordance with Federal Publication 1542 Federal Per Diem Rates, which is updated annually. Receipts shall not be required for per diem reimbursement. Reimbursement for less than three meals per day will be at a fiat rate, in accordance with the Per Diem Rate shown in the table below. Portion of Per Diem Travel Begins Travel Ends Traveler is Entitled Meal On or Before On or After to Receive Breakfast 6:00 a.m. 8:00 a.m. 20% Lunch 11:00a.m. 1:00 P.M. 25% Dinner 5:00 p.m. 7:00 p.m. 55% MAXIMUM TOTAL DAILY 100% When a specific meal is included in the cost of a conference registration fee, mode of travel (e.g. airfare), or other FCERA-paid activity, Trustees and employees will not be entitled to reimbursement for that meal. 4. Automobile Mileage. A Trustee who uses his or her personal automobile for transportation on FCERA business will keep records of the actual mileage driven on business, and will report such mileage on A FCERA Expense Report Form. Reimbursement will be made at the per-mile rate allowed by the Internal Revenue Service. A Trustee who elects to use his or her personal automobile for travel will be reimbursed for mileage to the point that does not exceed the cost of a fully refundable round-trip coach class ticket between Fresno and the destination city. 5. Parking and Tolls. Parking and tolls will be reimbursed at current rates. A receipt is required. 6. Public Transportation. Use of taxis, hired cars and public transportation for FCERA business will be reimbursed at current rates. A receipt is required. 7. Car Rentals. The use of a rental car by a Trustee will be reimbursed when it is economically reasonable to rent a vehicle rather than use taxis, hired cars or
public transportation. Reimbursement may include premiums for collision and personal property insurance. Rental car discounts must be used whenever possible and appropriate. If available, a compact vehicle should be requested, unless several Trustees and FCERA staff will be using the vehicle together. A receipt is required. 8. -Other Business Expenses. --fpeleted:incidental I Other business expenses reasonably incurred in connection with FCERA - - business, such as telephone, fax, Internet access, and similar business expenses, will be reimbursed. Receipts are required. 9. Time for Filing Expense Reimbursement Claims. Fully documented claims for reimbursement pursuant to this Policy must be submitted within thirty (30) days following return to Fresno. In no event will a claim for reimbursement be approved if submitted 90 days after the end of the calendar year in which the expense was incurred.
FCERA TRUSTEE TRAVEL POLICY FQllc The Board of FCERA recognizes the need to reimburse Trustees for travel and other expenses reasonably and necessarily incurred while participating in educational programs and conducting due diligence and other activities on behalf of the retirement system. These expenses are legitimate expenses of the retirement system. The Board adopts this Travel Policy and the accompanying Education and Travel Expense Reimbursement Schedule to facilitate the appropriate reimbursement of activities subject to the Board s Education and Due Diligence Policies. This Policy shall also apply to business-related travel of the FCERA Administrator and his designees. Purpose This Travel Policy sets forth the guidelines by which FCERA will reimburse Trustees for approved expenditures. These guidelines are intended to assure that travel expenditures incurred are prudent and cost effective and mitigate the risk of improprieties arising from such travel. These guidelines are intended to complement the Board s Education and Due Diligence Policies, Guidelines General Provisions 1. Approval. Reimbursement of travel and related expenses for a Trustee to attend an educational program or conduct a due diligence examination or other business for FCERA requires the prior approval of the Board, except under exigent circumstances when Board approval cannot be obtained in advance. Travel where overnight accommodations are not required need not be approved in advance, provided the expense reimbursement request otherwise complies with this Travel Policy. 2. Costs of Administration. Investment. Travel expenses related to educational programs and other business of FCERA where the principal focus is not related to investments shall be included in FCERA s annual budget as expenses of administration. Travel expenses for educational programs and due diligence evaluations relating to the system s investment portfolio shall be included in FCERA s investment budget as investment expenses.
3. Limitation on Attendance. A Trustee is authorized to attend up to three approved educational programs that require overnight lodging each calendar year, without further Board approval. Attendance at SACRS conferences, NCPRS Annual Meeting and Legislative Workshop and CALAPRS general assemblies and trustee roundtables are not subject to this limitation and do not count towards the three trip limit. 4. Authorized Expenses. The Board shall determine authorized expenses for travel, educational and other reasonable and necessary expenses by majority vote. The attached schedule is pre-approved. Reimbursement rates will be adjusted from time to time to reflect changes in rates prescribed by the Internal Revenue Service. 5. Claims for Reimbursement. Reimbursement for travel by a Trustee shall be submitted on FCERA s Expense Reimbursement Forms. All expense claim forms will be reviewed and approved (or disapproved) in accordance with the provisions of this policy. The Board Chair shall approve expense claims for other Trustees and the Administrator and his designees. The Vice Chair will approve expense claims for the Chair. All approvals are subject to review and approval by the Board of Retirement on the consent agenda for the next board meeting. All claims must be submitted within thirty days following return to Fresno. In no event will a claim for reimbursement be approved if submitted 90 days after the end of the calendar year in which the expense was incurred. Reimbursements or advances in excess of allowable expenses must be returned to FCERA within thirty days. 6. Cash Advances. Cash advances will not be allowed unless specifically approved by the Board of Retirement. 7. Expenses for Traveling Companions. Expenses of family members and/or traveling companions are not reimbursable by FCERA. 8. Limitations on Expense Allowance. Reimbursement for expenses shall not exceed that which is reasonable and necessary for travel to the precise destination and date of the covered occurrence, whether by private automobile or common carrier. Expense costs for extra days prior to or after a conference will be reimbursed only if such extension results in lower overall trip costs. 9. Travel and Lodging Cancellations. Trustees are responsible for the timely cancellation of registration fees, as well as travel and lodging reservations made on their behalf that will not be used, so that FCERA will incur no unnecessary expense. Trustees will be personally responsible for paying any fees caused by their failure to timely cancel any registrations or reservations, unless otherwise determined by the Administrator. 2
10.Travel Reports. The Administrator shall submit a quarterly report on all travel by Trustees. Such reports shall identify the individual Trustee, and the location, purpose and cost of travel. The report shall be agendized and reviewed by the Board of Retirement at the second regular meetings in January, April, July and October of each calendar year. The report also shall include anticipated travel for the ensuing quarter. 11.Gifts. When traveling on FCERA s official business, neither FCERA nor its trustees, officers or employees shall accept payment of travel, lodging, meal or other related expenses (or free travel) from any person or entity. 12.Travel Arrangements. All travel arrangements for which reimbursement is or will be sought shall be made through the office of the Administrator. Policy Review The Board shall review this Travel Policy at least every three years to assure its efficiency and relevance. This Policy may be amended from time to time by majority vote of the Board. Policy History The Board of Retirement last amended and restated this Policy on February 15, 2012. Secretary s Certificate I,, the duly appointed Secretary of the Fresno County Employees Retirement Association, hereby certify the adoption of this Policy. Dated: Secretary to the Board
EDUCATION AND TRAVEL EXPENSE REIMBURSEMENT SCHEDULE 1. Airline Travel. Trustees will be reimbursed for actual and reasonable expenses of air travel for approved travel on FCERA business. A fully refundable coach class ticket must be purchased at competitive prices unless otherwise approved by the Board. A receipt is required. If savings can be realized on the airline fare by having a Trustee extend his or her stay, the Trustee, at his or her option, may extend his or her stay in order to realize such savings. FCERA will reimburse the additional lodging and meal costs resulting from an extended itinerary, not to exceed the savings in airline fare. Similarly, if overall travel expenses can be reduced by booking a flight out of an airport other than Fresno Airport, the Trustee may, at his or her option, travel from such other airport and FCERA will reimburse consequential mileage, parking, airport shuffle and/or other similar expenditures, not to exceed the savings in airline fare. 2. Hotels. Actual expenses for lodging will be reimbursed. Reimbursement will be limited to a single occupancy room considered to be in a standard class. Whenever possible, a request for a government or conference rate should be made. Meals consumed at the hotel, or one of its restaurants, and charged to the hotel bill will be reimbursed in accordance with this Schedule. The following expenses will not be reimbursed: Alcoholic beverages, tobacco, in-room movies, barber shop, beauty shop, gifts, magazines, personal telephone calls and minibar charges. In the case of an extended trip or an emergency situation, laundry and dry cleaning expenses may be reimbursed. If, at the conclusion of a business-related trip, it would be impractical for a Trustee to return home the same day and arrive prior to 10:00 p.m. California time (due to the distance that must be traveled, or the unavailability of a return flight), the Trustee will be entitled to be reimbursed for one additional night s lodging. Original hotel receipts showing a zero balance due must be submitted along with a completed FCERA Business Expense report to obtain reimbursement. 4
3. Meals. Trustees will be reimbursed for the cost of meals at a flat rate in accordance with Federal Publication 1542 Federal Per Diem Rates, which is updated annually. Receipts shall not be required for per diem reimbursement. Reimbursement for less than three meals per day will be at a flat rate, in accordance with the Per Diem Rate shown in the table below. Portion of Per Diem Travel Begins Travel Ends Traveler is Entitled Meal On or Before On or After to Receive Breakfast 6:00 a.m. 8:00 a.m. 20% Lunch 11:00 am. 1:00 P.M. 25% Dinner 5:00 p.m. 7:00 p.m. 55% MAXIMUM TOTAL DAILY 100% When a specific meal is included in the cost of a conference registration fee, mode of travel (e.g. airfare), or other FCERA-paid activity, Trustees and employees will not be entitled to reimbursement for that meal. 4. Automobile Mileage. A Trustee who uses his or her personal automobile for transportation on FCERA business will keep records of the actual mileage driven on business, and will report such mileage on A FCERA Expense Report Form. Reimbursement will be made at the per-mile rate allowed by the Internal Revenue Service. A Trustee who elects to use his or her personal automobile for travel will be reimbursed for mileage to the point that does not exceed the cost of a fully refundable round-trip coach class ticket between Fresno and the destination city. 5. Parking and Tolls. Parking and tolls will be reimbursed at current rates. A receipt is required. 6. Public Transportation. Use of taxis, hired cars and public transportation for FCERA business will be reimbursed at current rates. A receipt is required. 7. Car Rentals. The use of a rental car by a Trustee will be reimbursed when it is economically reasonable to rent a vehicle rather than use taxis, hired cars or 5
public transportation. Reimbursement may include premiums for collision and personal property insurance. Rental car discounts must be used whenever possible and appropriate. If available, a compact vehicle should be requested, unless several Trustees and FCERA staff will be using the vehicle together. A receipt is required. 8. Other Business Expenses. Other business expenses reasonably incurred in connection with FCERA business, such as telephone, fax, Internet access, and similar business expenses, will be reimbursed. Receipts are required. 9. Time for Filing Expense Reimbursement Claims. Fully documented claims for reimbursement pursuant to this Policy must be submitted within thirty (30) days following return to Fresno. In no event will a claim for reimbursement be approved if submitted 90 days after the end of the calendar year in which the expense was incurred.