General Memo 505

Paperwork

IMRF Definition of Earnings/Retirement Health Savings Plans

April 11, 2003

The IMRF Board of Trustees recently amended the IMRF definition of earnings to provide an employer option for reporting compensation directed into a Retirement Health Savings Plan. Contributions to a Retirement Health Savings Plan are not included as IMRF earnings, and therefore not reportable to IMRF, unless the employer’s governing body adopts a resolution making that compensation reportable.

Retirement Health Savings Plans are employer-sponsored health benefit savings vehicles that allow pre-tax savings for the cost of medical expenses (health insurance premiums, co-pays, prescription costs, etc.) after retirement. These plans are funded in a variety of ways. Rather than examine each individual funding method to determine whether it should be reported to IMRF, the IMRF Board decided to leave that decision to the employer.

Currently, IMRF employers sponsoring IRC section 125 plans or flexible spending accounts must determine whether the non-taxable compensation in those plans is reported to IMRF. They do this by governing body resolution. Without that resolution, the non-taxable compensation in those plans is not reported to IMRF. Now employers adopting Retirement Health Savings Plans will also decide whether compensation directed into these plans is reportable to IMRF. If the employer wants to report to IMRF the compensation directed into the Retirement Health Savings plan, its governing body must let IMRF know by adopting a resolution, IMRF Form 6.73, “Suggested Resolution to Include Compensation Directed into a Retirement Health Savings Plan as IMRF Earnings.” A suggested form of this resolution is enclosed.

If you have questions about the IMRF definition of earnings, please call an IMRF Member Services Representative at 1-800-ASK-IMRF (1-800-275-4673) Monday through Friday, 7:30 A.M. to 5:30 P.M.