Over three weeks ago, Mariposa County Auditor Chris Ebie informed the board of supervisors that the auditor's office had seriously erred in a basic accounting task. Ebie told the board that for approximately the past 16 years, the County had not made the proper deductions for Social Security and Medicare from County employees' deferred compensation contributions or from the County's portion.

Last June, the board voted to take $385,000 from the Tobacco Tax Settlement Fund to pay the County's portion, thereby avoiding a substantial IRS penalty. In fact, the County dodged a huge bullet. IRS code's statute of limitation only extends back three years, so that's where the County's and employees' liability ends.

That left the balance to be paid by the individual employees, some 240 current employees according to the auditor. During that board meeting, almost every board member urged Ebie to arrange extended repayment plans with each employee that requested relief. District 3 Supervisor Janet Bibby said, "The employees are going to suffer. This is a terrible time."

District 5 Supervisor Jim Allen echoed, "Our people are going to take this hit, and you need to minimize it as much as possible."

At that time, Ebie nodded in agreement and said he would work out repayment plans of one year or even two years if an employee's amount was substantial. Some employees said they believed the County should stand good for the repayment, but County Administrative Officer Rick Benson and County Counsel Steve Dahlem explained that would constitute an illegal gift of pubic funds. Benson also cautioned that the county's tax attorney needed to be consulted on the extended repayment plans.

Originally, Ebie proposed a four-month repayment play that would make deductions from each effected employee's pay this September through December. The board still insisted on an extended arrangements. Board Chairman Kevin Can said, "Go to the maximum degree to make this as minimal as possible to everyone effected."

After checking with the County's tax attorney, those promises dissolved. Ebie told the GAZETTE Monday, "After further research and consultation with the tax attorney, it was determined that the FICA tax is required to be paid back within the calendar year to avoid tax consequences to the employee.”

Last week, County employees finally received their notices. The repayment statement included a new W-2 form which effects only the employee's Social Security and Medicare contributions, not their income. The notice offers three repayment options: "1. Four monthly installments for the months of September, October, November, and December 2010, as a payroll deduction; or 2. One lump sum payment either through a payroll deduction or you may write a check to the County." There is also one option offered that will allow employees not to take a hit to their take-home pay during the holiday season. Each employee can choose to have their deferred compensation contribution reduced by an amount equal to their repayment amounts, which of course effects their retirement benefits based on the amount of their debt.

Ebie said there are very few employees who couldn't cover their repayment amounts through deductions to their deferred compensation contributions, but some may have to come out of pocket.

The auditor's notice includes a deadline of Sept. 10 for each employee to contact the auditor's office to exercise their option.

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