3.96 EE. Employer Pays Member Contributions

Normally, IMRF member contributions Members who participate in the Regular Plan contribute 4.50% of salary toward a future IMRF pension: 3.75% for the member and 0.75% for a surviving spouse pension. Members who participate in the SLEP plan contribute 7.50% of salary (on and after June 1, 2006) toward a future SLEP pension: 6.75% for the member and 0.75% for a surviving spouse pension. Before June 1, 2006, SLEP members contributed 6.50 percent of salary; 5.75 percent for the member and 0.75 percent for a surviving spouse pension. Members in the ECO plan contribute 7.50 of salary toward a future ECO pension: 6.75% for the member and 0.75% for a surviving spouse pension. are deducted from a member’s salary before taxes are deducted.

Some employers pay all or a part of all of the member’s IMRF contribution. In that case, those ”employer paid member contributions” are considered a salary increase, or a raise to the member. This raise is considered income for all payroll tax purposes, i.e. IMRF and Social Security.

If an employer chooses to pay all or part of the member contribution, the employer cannot use funds from the IMRF tax levy. This limitation is stated in the Illinois Pension Code [40 ILCS 5/7-171(h), 40 ILCS 5/7-173.2(b)].

Refer to 4.24 I. Employer Paid Member Contributions for information on determining a member's IMRF earnings if the employer pays all of the member's IMRF contribution.

Employer Pays Member Voluntary Additional Contributions

A member may contribute up to an additional 10% of his or her earnings (or up to the wage cap for Tier 2) to the Voluntary Additional Contribution (VAC) program. At retirement, the member can take the VAC as a lump sum or possibly as an additional monthly pension. VAC are after tax, they are not deferred like usual IMRF member contributions.

When an employer reimburses an employee for VAC contributions that were made, the amount of the reimbursement is considered IMRF earnings. An employer cannot use funds from the IMRF tax levy to reimburse an employee for VAC.

In order to calculate the member's reportable earnings resulting from an employer's payment of voluntary additional contributions, employers must us the grossed-up wages. In the below example, assume the member's wages are $10,000 and the employer is paying the member's 10% VAC and 4.5% regular member contributions.

Example:

10% employer paid member VAC + 4.5% REG contribution rate = 14.5% (.145) - 1 = .855 gross up factor

$10,000 (member wages) / .855 (gross up factor) = $11,695.91 grossed up wage

$11,695.91 x .045 (REG contribution rate) = $526.32

$11,695.91 x .10 (VAC election) = $1,169.59

*Please note that if the member has a different VAC election, such as a VAC election with a decimal, you MUST contact IMRF for the gross up factor*