Request By:
Mr. Laurence J. Zielke
Director of Law
Department of Law
Louisville, Kentucky 40202
Opinion
Opinion By: William S. Riley, Assistant Attorney General
In your recent letter to the Attorney General, a method is proposed to conserve municipal finances and avoid FICA contributions on sick leave payments to city employees.
In an opinion written in 1974, OAG 74-226 it was stated that sick leave payments were subject to federal social security taxes primarily because the law made no provision for payments of sick leave benefits. That opinion was based in large part on KRS 61.420(3)(5) which defines employees and political subdivisions.
The City of Detroit, Michigan does not pay FICA taxes on sick leave payments to their beneficiaries because of an opinion of the Michigan Attorney General which states among other things the home rule provisions of the Michigan Constitution, sick leave payments are authorized by state law. There is no such provision in the Kentucky Constitution.
The City of Louisville has home rule authority under KRS 83.520. The City proposes to enact an ordinance authorizing payment for sick leave by providing that such payments will not be a continuation of wages but a separate account because of personal sickness or accident.
The question is whether the adoption of an ordinance under the home rule statute providing for the establishment of a separate sick leave account would exclude sick leave payments from FICA taxes.
It is true that KRS 83.520 gives the City of Louisville home rule authority. It should be noted, however, that the last sentence of the statute states that any restrictions set forth shall not be considered abridging in any manner the home rule set forth in this grant of power except no rights heretofore vested by operation of statute shall in any way be affected. The definitions for social security for public employees are found in KRS 61.420. This statute defines political subdivision to include municipal corporations.
Until such time that KRS 61.420 is amended by the General Assembly, the City of Louisville has no authority under KRS 83.520 to provide for any treatment of sick leave benefits in any other way than that which is set out in KRS 61.410 to KRS 61.500.