9.00 Introduction

This section contains guidelines on tax items that are unique to IMRF employers, such as the proper treatment of IMRF 414(h) Under Section 414(h) of the Internal Revenue Code, members make their contributions to IMRF on a tax-deferred basis. The member does not pay either federal or Illinois income tax on the money used to pay the contributions. A member’s contributions will be subject to federal income tax, but not to Illinois income tax, when he or she receives them as a refund or as a pension or when the member’s beneficiary(ies) receives them as a death benefit. This tax treatment is provided under the 414(h) tax deferral plan effective July 1, 1984, for all IMRF employers and adopted earlier by some employers. If a member made contributions before his or her employer adopted a 414(h) plan, those contributions were taxed at the time the member made them. They are not taxable when the member receives them as a refund or pension or when the member’s beneficiary(ies) receives them as a death benefit. tax deferred 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.. This section also contains information regarding 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. coverage for employees.

Topics discussed include:

1. Federal Income Tax Reporting

2. Social Security Coverage

3. Jurisdiction over Social Security Coverage

4. Persons Subject to Social Security

5. Covered Wages

6. Reporting

At the end of this Appendix, we provide Exhibits which illustrate the history of Social Security Wage bases, Medicare rates and Social Security rates as well as sample completed W-2 tax statements.