Normally, IMRF member contributions 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.