On
August 17, 2006, the President signed the Pension Protection Act (PPA)
of 2006 into law. Much of this new law focuses on private sector pensions.
However, several provisions affect IMRF members (effective dates of the
provisions differ from immediately to January 1, 2008):
Members
eligible to upgrade existing service can pay
for the upgrade using rollovers from 457 and 403(b) deferred compensation
plans and from traditional IRA accounts.
Former police
officers, firefighters, and emergency medical personnel are not subject
to the additional 10% tax on member contribution
refunds if the member was age 50 or older when the member stopped working
for his or her IMRF employer.
A beneficiary who
is not the member’s spouse can avoid federal
income tax withholding on a lump sum death benefit by rolling over the
taxable portion into a traditional IRA.
A member or member’s
beneficiary will be allowed to roll over the taxable portion of a refund
or lump sum death benefit into a Roth IRA.
If you have any questions regarding the PPA of 2006 and its impact on IMRF
members, please contact us by email or call
an IMRF Member Services Representative at 1-800-ASK-IMRF (1-800-275-4673),
Monday through Friday, 7:30 a.m. to 5:30 p.m.
Using
a rollover to pay the cost of upgrading existing service credit
Effective immediately,
if a member is eligible to upgrade existing service, e.g., from Regular
to SLEP or from Regular to ECO, he or she can pay for the upgrade using
rollovers from 457 and 403(b) deferred compensation plans and from traditional
IRA accounts. Previously, a member could not use a rollover to upgrade
existing service.
If a member previously
entered into a Tax-deferred Payroll Deduction agreement (TPDP) to pay
for the service upgrade, that agreement remains in effect. The member
may NOT stop the TPDP payments. However, if the member stops working
for the IMRF employer, the TPDP agreement ends. The member can then
use funds from a rollover to convert any remaining months of service.
Elimination
of additional 10% tax for early withdrawal penalty for certain public safety
employees
Effective August
18, 2006, former police officers, firefigheters and emergency medical
personnel are not subject to an additional 10% tax on member contribution
refunds if the member was age 50 or older when the member stopped working
for his or her IMRF employer.
Retired or disabled public safety employees may
have health and long term care insurance premiums deducted from their
benefit payments on a pre-tax basis
Effective January
1, 2007, a retired or disabled public
safety employee may a tax deduction of up to $3,000 on their federal
income tax return for health insurance or long term care insurance premiums.
The health insurance or long-term care insurance coverage can include
the member, spouse and dependents.
The amount deducted
must be paid to the insurance provider, either directly or through the
former employer or directly to an IMRF-endorsed plan administrator.
The member would complete
IMRF Form
7.12D, "Election For Pre-Tax Deductions for Health or Long
Term Care Insurance Premiums Paid Directly to Insurer" if he
or she is paying premiums directly to the insurance company
or
IMRF
Form 7.12E,
"Election For Pre-Tax Deductions Health or Long Term Care Premiums
Paid through Employer or Endorsed Plan Administrator" if he or
she is paying premiums through
His or her
former employer because the member is continuing insurance through
the employer, or
Doyle Rowe
Ltd. because the member is enrolled in an IMRF-endorsed plan.
In order to take
advantage of this provision of the PPA, the member must have held a
public safety position when he or she:
Terminated IMRF
participation for retirement or
Became totally
and permanently disabled and is receiving IMRF disability benefits.
Public
safety employees include the following:
An individual
involved in crime and juvenile delinquency control or reduction, or
enforcement of the criminal laws (including juvenile delinquency),
including, but not limited to police, corrections, probation, parole,
truant officers, and judicial officers;
Professional
firefighters
Officially recognized
or designated public employee members of a rescue squad or ambulance
crew
Officially recognized
or designated members of a legally organized volunteer fire department
Officially recognized
or designated chaplains of volunteer fire departments, fire departments,
and police departments
A maximum of $3,000
annually can be deducted on a pre-tax basis. Once the $3,000 maximum
is reached in a calendar year, IMRF will then deduct the remaining premiums
for that year on an after-tax basis.
The health insurance
or long-term care insurance coverage can include the member, spouse,
and dependents. However, this pre-tax deduction is available only to
the member. It is not available to surviving spouses.
Rollovers allowed for a beneficiary who is not
a spouse
Effective January
1, 2007, a beneficiary who is not the member’s spouse can avoid federal
income tax withholding on a lump sum death benefit by rolling over the
taxable portion of the benefit into a traditional IRA (special rules
apply to the IRA that accepts the rollover). Previously, this rollover
provision was available only to a member’s spouse.
Rollovers to Roth IRAs
Effective January
1, 2008, a member or member’s beneficiary will be allowed to roll over
the taxable portion of a benefit into a Roth IRA. Currently, the taxable
portion of a member contribution refund or a lump sum death benefit
cannot be rolled over into a Roth IRA. (A rollover into a Roth IRA is
taxable to the member or beneficiary in the year the rollover is made.)
If you have questions regarding IMRF benefits,
contact us by email or call 1-800-ASK-IMRF
(1-800-275-4673)
IMRF Online provides
a brief summary of IMRF benefits and the administration of those benefits.
IMRF members' and employers' rights and obligations are governed by Article
7 of the Illinois Pension Code.