STA fixes Social Security slip

The Spokane Transit Authority has paid $1.07 million and will update tax records going back for more than 20 years as part of a settlement with the IRS over unpaid Social Security taxes.

The settlement covers 114 employees who were mistakenly not included in the Social Security program for years. The employees were absorbed into the STA from the previous transit agency in Spokane, and officials thought that the workers could be omitted from Social Security and covered by state and local government pensions.

The rest of the STA’s 519 workers have been included in Social Security all along.

“It’s not going to affect any transit operations,” said Laura McAloon, the agency’s attorney. “The STA’s position all along has been that it asked the appropriate agencies for advice at the time (the agency was formed) as to how to set up its retirement plans, and they followed that advice.”

The agency entered negotiations with the IRS in 2004, after a review found that it was inappropriately excluding the workers from Social Security payments.

Under the settlement, STA will pay both the employer and employee contributions for tax years 2004 and 2005, plus interest on the 2004 contributions. It will also update federal tax records dating back to 1982 to show that those workers should be included in the Social Security system.

The IRS did not assess penalties, nor did it require that STA pay any unpaid taxes for 2002 and 2003, which it could have done under the statute of limitations.

The mistake was characterized in November as an honest misunderstanding of complicated rules, by both the STA and an official with the Social Security Administration.

“I felt the IRS was very understanding. They recognized that we thought we were doing the right thing,” said Rich Munson, STA board member.

Munson said he didn’t know where the payments to the IRS would come from, but it would not affect bus service or other STA operations. The agency has a budgeted reserve of more than $6 million for 2006.

“We should have paid this, we didn’t, and we made it good,” Munson said.

CEO Susan Meyer wouldn’t speak to a reporter Friday, but was quoted in a written statement as saying she thought it was “a fair and appropriate resolution.”

Attempts to reach the union representative for the affected workers were unsuccessful Friday. STA officials have said in the past that they would consider reducing the mandatory contributions of the affected workers to the company’s pension plan, to offset the addition of Social Security withdrawals.

STA pays between 9 percent and 14 percent of employees’ salaries into its own retirement system. Starting next week, STA will also pay 7.65 percent into Social Security and Medicare.

McAloon said STA will pay about $270,000 to Social Security in 2006, an amount that’s already in the budget.

The agency’s 2006 budget includes $18.1 million in salaries and wages and $11.3 million in benefits.