OSA Weekly Update - 8/18/2023

1. Message from Auditor Blaha

2. Meeting: Fire Relief Association Working Group

3. Released: OPEB Trust Investment Reporting Form

4. Avoiding Pitfall: Uniform/Clothing Allowances

1. Message from Auditor Blaha

How to find and keep local financial staff is keeping a lot of you up at night. I just finished a tour visiting county and city financial officers in southwest Minnesota to hear how the public finance professionals shortage is affecting them. Those conversations confirmed the need to take action. The OSA plans to put forward legislation next year to take some pressure off the industry. Do you have ideas to take things off local finance staff’s plates, while not adding undue risk? Send them to us: outreach@osa.state.mn.us.

2. Meeting: Fire Relief Association Working Group

The Fire Relief Association Working Group met on August 16 to continue its review of pending legislative proposals. Working Group members also discussed investment allocations for relief associations with a defined contribution plan, and benefit and reporting requirements that should apply when a relief association is involuntarily dissolved. Working Group meeting agendas and materials, and links to watch recordings of previous meetings, are provided on the Working Group page of the OSA website.

3. Released: OPEB Trust Investment Reporting Form

The investment reporting form for OPEB trusts has been released and is available for completion through the State Auditor’s Form Entry System (SAFES). An email containing SAFES login information and instructions for accessing and completing the reporting form has been sent to each trust administrator. If you have any questions regarding the reporting requirement, or if you did not receive an email with your login information, please contact us at OPEB@osa.state.mn.us.

Other Postemployment Benefits (OPEB) include all benefits, other than pensions, promised to retirees. Minnesota law permits local government entities to create trusts to set aside money to pay future OPEB obligations. Administrators for these trusts are to annually report and certify certain investment information by October 25 to the Office of the State Auditor.

4. Avoiding Pitfall: Uniform/Clothing Allowances

Some local government employees may be eligible for the reimbursement of expenses under a uniform or clothing allowance authorized by an employment contract or a personnel policy.

Federal law has long distinguished between non-deductible personal clothing and deductible work clothing. For employees who wear uniforms, the cost of the uniform is deductible only if the uniform is (1) specifically required as a condition of employment, and (2) not of a type adaptable to general usage as ordinary clothing. If an employee receives a periodic “uniform” allowance for non-deductible clothing, the amount of this allowance is income, and must be included on the employee's W-2 (Wage and Tax Statement).

Local units of government should have a system in place to ensure those items that are taxable according to federal regulations are clearly identified so proper taxes can be withheld and reported.

The IRS has posted information regarding uniform/clothing allowances online. The IRS "Taxable Fringe Benefit Guide" is available for download from the IRS website at: http://www.irs.gov/pub/irs-pdf/p5137.pdf; the IRS “Quick Reference Guide for Public Employers” is available at: http://www.irs.gov/file_source/pub/irs-pdf/p5138.pdf.

The full Avoiding Pitfall is available on the OSA website.