Division of pension benefits in divorce

If you are a member IMRF, the following information may be of interest to you and to your attorney when you are dissolving your marriage.

The IMRF plan

Illinois Municipal Retirement Fund benefits are provided for and regulated by the Illinois Pension Code (40 ILCS 5/1-101 et seq.). IMRF's plan provisions may be found in Article 7. IMRF is a contributory defined benefit pension plan.

• Regular Plan Members pay 4-1/2% of their salaries toward their pensions. IMRF provides retirement, disability, and death benefits to members. A member is eligible for a retirement pension at age 60 with at least eight years of service credit. A reduced pension is payable at age 55 with at least eight years of service credit. A complete explanation of the plan benefits, with the pension formula, can be found at Regular IMRF Benefits.
  
• SLEP members pay 7-1/2% of their salaries toward their pensions. IMRF provides retirement, disability, and death benefits to members. A SLEP member is eligible for a retirement pension at age 50 with at least 20 years of SLEP service credit. SLEP members who do not have 20 years of SLEP service may take a regular IMRF pension at age 55 with at least eight years of service credit. A complete explanation of the plan benefits, with the pension formula, can be found at SLEP Benefits.
  
• ECO members pay 7-1/2% of their salaries toward their pensions. IMRF provides retirement, disability, and death benefits to members. An ECO member is eligible for a retirement pension at age 55 with at least eight years of service credit. A complete explanation of the plan benefits, with the pension formula, can be found at Elected County Offical (ECO) Benefits.

The employer contribution

IMRF employers fund a large portion of the IMRF pensions. However, employer contributions are not credited to individual member accounts. It is not possible for IMRF to tell you what your employer has paid to fund your pension. Your employer will fund that part of your pension which exceeds your own contributions and the interest earned by those contributions. These numbers are not determined until you actually retire. Employer contributions are never payable to a member in a lump sum when the member takes a refund or retires. IMRF benefits are marital property

The IMRF retirement pension is considered to be marital property, based on relevant judicial interpretations of Illinois law. The Illinois statute dealing with the division of marital property (750 ILCS 5/503) defines marital property as "all property acquired by either spouse subsequent to the marriage, except the following, which is known as non-marital property..." The statutory list of non-marital property does not include retirement benefits. In 1979, the First District Illinois Appellate Court ruled that retirement benefits accumulated during the marriage are marital property (In re Marriage of Hunt, 397 N.E.2d 511). Since then, courts have routinely applied the ruling of In re Hunt to retirement benefits provided under the Illinois Pension Code, including IMRF benefits under Article 7 of the Pension Code.

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Current value of pension benefits

IMRF does not actuarially value future pension rights on an individual basis. We provide you with an estimate of the pension you have earned to date, whether vested or not, and with a statement of your total contributions made to date. You and your attorney may use this information to estimate a present value for your interest in IMRF. How this value is determined is up to you, your spouse and, ultimately, the judge hearing your divorce case.

Splitting IMRF benefits

Qualified Domestic Relations Orders (QDRO) are court orders obligating a retirement plan to split retirement benefits between a member and the member's former spouse. QDROs are provided for under the terms of the Employee Retirement Income Security Act of 1974 (ERISA), which is a federal law regulating private sector pension plans. Government plans, such as IMRF, are exempt from the provisions of ERISA (29 U.S.C. 1003(b)).

IMRF is regulated by the Illinois Pension Code which does not allow IMRF to honor a QDRO. Instead, section 1-119 of the Pension Code provides for the split of IMRF pensions and refunds with a Qualified Illinois Domestic Relations Order (QILDRO).

A QILDRO requires IMRF to split the benefit at the time it is actually paid. The benefit is paid when the member satisfies the eligibility requirements of the Pension Code and applies for a retirement pension or a refund of contributions. IMRF cannot pay the ex-spouse's share of the refund or pension before the member applies for and receives the benefit.

A QILDRO booklet together with a detailed explanation of the rules regarding QILDROs is available. Also, a QILDRO Consent form is required for members who joined IMRF before July 1, 1999.

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Other considerations when negotiating the division of your IMRF benefits

1. You cannot take a refund of your IMRF contributions unless you terminate employment with your IMRF participating employer or employers. You are not eligible for a refund of your contributions after you reach age 55 if you have eight or more years of service. If you take a refund of contributions before age 55, you forfeit your right to a pension or to any other IMRF benefits.
2. You cannot take a partial refund.
3. Refunds of all contributions made after June 30, 1984, are taxable income to you and reported as such on an IRS Form 1099. Refunds taken before age 59-1/2 are subject to a federal income tax penalty of 10%, which is in addition to your regular tax rate. Federal law also requires that any taxable refund not directly rolled over into an IRA or other qualifying plan will be subject to a 20% withholding. If a QILDRO directs IMRF to pay a portion of the refund to an ex-spouse, the tax liability will be split proportionately between you and your ex-spouse.
4. Your monthly pension is reported as taxable income to you. If a QILDRO directs IMRF to split your pension with your ex-spouse, the tax liability will be split proportionately between you and your ex-spouse.

Death and survivor benefits

IMRF pays a survivor pension to a qualified surviving spouse on the death of an IMRF member with at least eight years of service. If a member does not have a qualified surviving spouse, no survivor pension is payable.

Divorce after retirement does not change the status of the ex-spouse as the qualified surviving spouse. However, divorce before retirement precludes that ex-spouse from attaining qualified survivor status. The parties cannot change this feature of the IMRF plan in their divorce settlement.

The alternate payee may receive a share of any lump sum death benefit that would be payable upon the member's death.

More information

For more information about your IMRF participation and benefits for purposes of divorce, or to request a pension estimate prepared for a divorcing member, call IMRF at (630) 368-1010 and ask for the legal department. You may also call us at 1-800-ASK-IMRF (1-800-275-4673), 7:30 a.m. to 5:30 p.m., Monday through Friday.

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