9.50 Covered Wages

Social Security wages include all remuneration (both cash and in kind) for employment, irrespective of what the remuneration is called. Remuneration which is subject to income tax is considered Social Security wages with limited additions such as Section 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. IMRF member An employee who works in a position not excluded from IMRF coverage and whose position meets the annual hourly standard for IMRF coverage. For the purposes of an Authorized Agent submitting a petition or casting a ballot in an executive trustee election, an active member also includes an employee receiving an IMRF pension and working in position that does not qualify for IMRF participation or one that provides the employee the option of participating in IMRF, e.g., elected office. contributions, Section 403(b) tax sheltered annuities (Paragraph 3.96L), Section 457 deferred compensation (Paragraph 3.96M), and Section 401(k) salary reduction plans (Paragraph 3.96O).

Questions regarding Social Security covered wages should be directed to the Internal Revenue Service.