TRS of Illinois http://trs.illinois.gov
TEACHERS' RETIREMENT SYSTEM OF THE STATE OF ILLINOIS


Payment of Member Receivable Balances

May an employer pay all or a portion of a member's ERO cost?

Yes, however the employer payment of a member's ERO cost is not reportable as creditable earnings.

For example:

  1. The employer may pay a member's ERO cost directly to the member. The amount is included in the member's gross taxable income. The employer payment is not reportable as creditable earnings.
  2. The employer may make a payment directly to TRS. An "Employer Payment Coupon for Member ERO Contribution" is enclosed with the member's ERO amount due letter. The member must forward the payment coupon to the employer. The payment coupon must accompany the employer payment by check. The employer indicates on the payment coupon whether the amount is included in the member's gross taxable income. The employer payment is not reportable as creditable earnings.

May an employer pay all or a portion of a member's upgrade cost?

There are two ways this can occur.

  1. The employer may pay the upgrade cost as a bonus directly to the member. The amount is included in the member's gross taxable income. The payment is reportable as creditable earnings if it is paid with or prior to the member's last regular paycheck.
  2. The employer may make up to five annual lump-sum payments directly to TRS. The member or employer must contact TRS to request an "Employer Payment Coupon" to accompany the check payment. The employer must indicate on the coupon whether the payment is a before-tax or after-tax payment. The payment is reportable as creditable earnings if it is paid with or prior to the member's last regular paycheck.

Since this authorization is not of a statutory nature, federal guidelines require that the pick up authorization be included in either a collective bargaining agreement, a contract or resolution. The authorization should read similar to the following: The contributions for the upgrade required under section 15-129.1 of the Pension Code (40 ILCS 5/16-129.1), although designated as employee contributions, are being paid by {name of employer} in lieu of contributions by the employees and are being picked up pursuant to the Internal Revenue Code of 1986, Section 414(h)(2), as amended. The employees covered by the {collective bargaining agreement, contract, resolution, etc.} shall not have the option of choosing to receive the contributed amounts directly instead of having them paid by the employer to TRS.

The above language should also indicate the employee or group of employees for whom the pick up will be made.

May an employer pay all or a portion of a member's optional service cost?

Yes. The same guidelines that apply to employer payments of member's 2.2 upgrade costs apply to employer's payment of a member's optional service balance, except that for 2, listed above, annual payments are not limited to five.