Normally, IMRF member contributions are deducted from a member’s salary before taxes are deducted. Some employers pay all or a part 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), 173.2(b)].
To determine a member's IMRF earnings if the employer pays all of the member’s IMRF contribution, divide the base salary (the member's salary before the employer-paid contributions are added to it) by a factor:
Regular Plan Factor |
100% less 4.50% contribution = 95.5% |
SLEP Plan Factor |
100% less 7.50% contribution = 92.5% |
ECO Plan Factor |
100% less 7.50% contribution = 92.5% |
Base Salary |
Member’s salary before employer pays contributions |
IMRF Earnings |
Base salary plus employer paid member contributions |
Taxable Earnings |
Earnings reported on IRS Form W-2 |
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(see Appendix B-1 and B-2 for information on completing W-2) |
The example below assumes the member participates in the Regular plan.
|
Member pays |
Cafeteria Plan |
Cafeteria Plan |
Base Salary |
$10,000.00 |
$10,000.00 |
$10,000.00 |
Less Cafeteria Plan |
N/A |
N/A |
$1,000.00 |
Divide by Factor |
N/A |
÷ 0.955 |
÷ 0.955 |
IMRF Earnings |
$10,000.00 |
$10,471.20 |
$9,424.08 |
Multiply by |
x .045 |
x .045 |
x .045 |
Contribution |
$450.00 |
$471.20 |
$424.08 |
|
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IMRF Earnings |
$10,000.00 |
$10,471.20 |
$9,424.08 |
Less contributions |
450.00 |
471.20 |
424.08 |
Taxable Earnings |
$9,550.00 |
$10,000.00 |
$9,000.00 |
Alternatively, in order to calculate the member's reportable earnings resulting from an employer's payment of member contributions, employers can multiply the member's wages by a factor of 1.04712. As used in the above example, an employer who pays contributions for a member's wages of $10,000 would calculate $10,000 x 1.04712 = $10,471.20, which equals the member's IMRF reportable earnings.
The next example below assumes the member participates in the Regular plan with an employer who does not have the Section 125 cafeteria resolution on file. The employer is paying the member contributions on a $500 bonus, but is not paying the member contributions on the member’s regular wages of $1000. The member has $100 in Section 125 deductions.
|
Employer pays por |
||
Base Salary
Bonus Wages |
$1,000.00
$500/ .955 = $523.56 |
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Less Cafeteria Plan |
$100.00 |
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IMRF Earnings |
$1,423.56 |
||
Multiply by |
x .045 |
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Contribution |
$64.06 |
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|
|||
IMRF Earnings |
$1,423.56 |
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Less contributions |
64.06 |
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Taxable Earnings |
$1,359.50 |