9.10 F. IRS Form W-2 for Employees

Each year employers report the income and tax withholding to their employees and to the IRS. To the employees you issue an IRS Form W-2, ”Wage and Tax Statement” (see samples of completed forms on Appendix B-1, B-2, and B-3). Some of the amounts are affected by IMRF contributions.

If you are issuing a W-2 for an elected official who is paid a stipend by the state, refer to 9.10 H. IRS Form W-2 for Elected Officials' State Stipends.

When preparing the W-2, watch for the following:

Box 1 and Box 16 - Taxable Wages

Reduce taxable wage amounts for IMRF members by the 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 IMRF contributions. This includes both the usual contributions to IMRF (under the Regular, SLEP IMRF’s Sheriff’s Law Enforcement Personnel plan is available to county sheriffs, deputy sheriffs, forest preserve rangers and airport police and certain police chiefs. IMRF’s Sheriff’s Law Enforcement Personnel plan was revised by P.A. 94-712, which resulted in the creation of two “tiers” as follows: SL01 SLEP Tier 1, members who terminated SLEP participation before July 1, 2004, and SL02 SLEP Tier 2. The contribution rate was increased to 7.50% effective on and after June 1, 2006. P.A. 94-712 also increased the SLEP formula to a flat 2.5%. The new formula applies to SLEP members who were actively participating on or after July 1, 2004. or ECO IMRF’s Elected County Official Plan provides for an alternative benefit plan for Elected County Officials. For an elected county official to participate in this plan, his or her county must first adopt the program. The original ECO plan was revised on January 26, 2000. County officials joining ECO on or after that date participate in the revised ECO program. plans). Also, reduce taxable wage amounts by deferred compensation and tax-deferred contributions to other qualified pension plans and cafeteria plans.

Report this reduced amount in Box 1 (Wages, Tips, Other Compensation) and Box 16 (State Wages, Tips, etc.) on the printed W-2 and corresponding positions on the magnetic reporting record.

NOTE: Amounts deducted from a member’s earnings and reported to IMRF as ”Voluntary Additional Contributions” are not tax-deferred earnings. These earnings are fully taxable in the year earned. These contributions do not reduce the taxable amount.

Many fringe benefits are taxable to the recipient and will increase the amount reported in Box 1 and Box 16. Examples of these are premiums for term life insurance above $50,000, the taxable portion of any tuition reimbursement, and personal use of a car provided by the employer. (See IRS Publication 15-B Employer's Tax Guide to Fringe Benefits for additional information.)

Some fringe benefits are includable as federal taxable wages but are not IMRF reportable wages. Please refer to Section 3, Part III.

Box 3 - Social Security Wages

Do not automatically use the same wage amount in Boxes 1 (Wages), 3 (Social Security Wages), 5 (Medicare Wages), and 16 (State Wages). Social Security wages are not reduced by IMRF member contributions or other deferred compensation plans. However, wage reductions for a qualified 125 (cafeteria) plan will reduce the Social Security wages. The amount reported in Box 3 will be ”$0” for employees in positions not covered by Social Security.

Refer to Appendix A in this Section for the maximum Social Security Retirement Wage. Wages over that amount are not subject to employee contributions nor to employer contributions. The amounts in Box 3 and Box 7 are both considered Social Security wages. Therefore, the total of Box 3 and Box 7 should not exceed the Social Security maximum wage.

Box 5 - Medicare Wages

There is no maximum wage for Medicare. For employees covered by Medicare, all wages are subject to Medicare tax and employer contributions (Refer to Appendix A for rates). The amount reported in this box may be different from the amount reported in Box 3.

Box 12 - Deferred Compensation

Tax-deferred 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 not deferred compensation. The tax deferral of IMRF member contributions is covered by Section 414(h) of the Internal Revenue Code. The W-2 instructions specify that required employee contributions (such as IMRF) are not elective deferrals and may be reported in Box 14, but not in Box 12.

The tax deferral of IMRF member contributions is covered by section 414(h) of the IRS code; it is not one of the retirement plans reported in Box 12 (plans under Section 401(k), 403(b), 408(k), 457, or 501(c)(18)(D) of the IRS Code). Therefore, you should not enter any IMRF contributions in Box 12.

Box 13 - Retirement Plan

This Box should be checked if the employee is participating in a qualified pension plan. Box 13 should be checked for any employee who is participating in or eligible to participate in IMRF.

”Eligible to participate” means that you should also check that Box for elected officials and city hospital workers who are eligible, but elect not to participate in IMRF, since the IRS considers them as being covered by a pension plan (refer to IRS Publication 590-A, ”Contributions to Individual Retirement Arrangements (IRAs),” see Index entry ”Employer plans, covered by”).

Box 14 - Other

An entry in this box is not required. However, it would be helpful to your employees if you show their usual IMRF contribution. For example: IMRF 444.78.

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