4.24 I. Employer Paid 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 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 Social Security coverage for IMRF members is required, except for a limited number of firefighters and police officers, by an agreement between the State of Illinois and the Commissioner of Social Security under Section 218 of the Social Security Act. IMRF members pay Social Security taxes on wages up to the wage base, and IMRF employers pay an equal amount. IMRF employers remit these taxes to the Internal Revenue Service. Applications for benefits and questions about Social Security should be directed to the local Social Security district office or representative or call 1-800-772-1213..

If an employer A unit of government that joins IMRF. 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:

The example below assumes the member participates in the Regular plan.

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.

Another example assumes the member participates in the Regular plan with an employer who pays both the mandatory contribution along with the Voluntary Additional Contribution (“VAC”) on behalf of the member. This example utilizes whole percentage VAC elections (i.e., 10% - 1%). These contributions are considered income for all payroll tax purposes, i.e. IMRF and Social Security.

If an employee has a different VAC election that is not a whole number (i.e., 9.5% or 2.5%), please contact IMRF for the gross-up factor.

Sometimes, employers opt to pay an employee’s voluntary additional contributions ("VAC"). In order to calculate the member’s reportable earnings resulting from an employer’s payment of voluntary additional contributions, employers must use 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’s 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.

Related Topics