Voluntary Additional Contributions

Designed to help members save for additional retirement income

• What are Voluntary Additional Contributions?
• Example of Interest Calculation
• Participating in the VA program
• Withdrawals
• Retiring with Voluntary Additional Contributions
• Print Voluntary Additional Fact Sheet

You may contribute up to an additional 10% of your earnings to the Voluntary Additional Contribution (VAC) program. At retirement, VAC may be taken as a lump sum or as an additional monthly pension.

VAC are after tax—they are not tax-deferred like usual IMRF member contributions. Some members may be better served by contributing a portion of their salary on a pre-tax (tax-deferred) basis to their employer’s deferred compensation plan, e.g., 457 or 403(b).

Unlike VAC, the interest credited to your VAC account is tax-deferred.The rate of interest paid is currently 7-1/2%. This interest rate can change in the future. If the interest rate changes, IMRF will not notify VAC participants of the change.

VAC interest is credited differently from a traditional savings account:

• A traditional savings account credits interest on the current amount in the account.
• IMRF credits interest at the end of the year on the beginning of the year amount Therefore, you will not earn any interest the first year you begin making VAC.

Although you can apply for a refund of your VAC at anytime, IMRF discourages such refunds. If you are seeking a short-term savings vehicle, VAC may not be the right choice.

Interest example (assumes 7.50% interest rate does not change)

Although VAC offers you an easy way to save for retirement, only you know if VAC is right for you. If you are uncertain about making VAC or the tax consequences of VAC refunds, you should contact your financial advisor.

Participating in the VA program

You choose to participate in the VAC program by completing IMRF Form 6.30, “Election to Make Voluntary Additional Contributions.”

If you choose to participate in VAC, your employer must allow for the participation by ensuring the after-tax contributions are withheld from your salary. The employer must also report and transmit your VAC to IMRF.

VAC are deposited in a separate account for each member. These accounts are not matched by the employer.

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Withdrawals

If you will continue to work for your IMRF employer—

If you currently make VAC and apply to have those contributions refunded to you, all VAC, plus interest if any, accumulated up to December 31 of the previous year will be refunded. Current year contributions may not be withdrawn if you will continue to make VAC.

If you are no longer making VAC and apply for a refund of those contributions, you will be paid all VAC on deposit, plus interest if any.

If you are less than age 59-1/2, the taxable portion of the refund (the interest earned) will be subject to income tax penalties. You can avoid these income tax penalties by rolling over the taxable portion into an IRA or other qualified retirement plan. Unless the taxable portion is directly rolled over, federal law requires IMRF to make a 20% tax withholding.

If you stop working for your IMRF employer and apply for a refund of your usual IMRF member contributions (a “separation refund”) —

The VA contributions (with interest) must be refunded at the same time.

If you are less than age 55 when you apply for a separation refund, the taxable portion of the refund (interest) will be subject to income tax penalties. You can avoid these income tax penalties by rolling over the taxable portion into an IRA or other qualified retirement plan. Unless the taxable portion is directly rolled over, federal law requires IMRF to make a 20% tax withholding.

Retiring with Voluntary Additional Contributions

If you apply for an IMRF pension, you can receive the VA contributions in a lump sum or as an additional monthly pension. At that time, IMRF will mail you a letter advising you of the amounts payable as a lump sum and as an additional monthly pension.

You can also view and print the Voluntary Additional Contribution Fact Sheet.