PEA
Bargaining Committee
2008
|
TRS Planned Termination of Payroll Deduction Program
For the past 10 years, TRS has had a statutory payroll deduction program (“PDP”), under which a full-time, employed member could, through an irrevocable payroll deduction agreement with their employer, have optional service credit payments, 2.2 upgrade payments or estimated ERO payments deducted on a pre-tax basis from the member’s paycheck and paid to TRS. Other retirement systems such as SERS, SURS and IMRF have also had such programs. At the time these PDPs were established, SERS and SURS secured IRS rulings approving their programs. In light of those rulings, it is our understanding that TRS decided it didn’t need to formally secure its own ruling. Last year, IMRF decided to approach IRS to secure a ruling on its program. It is our understanding that IRS told IMRF that if it requested an official ruling, IRS would not approve its PDP. Based upon this information, IMRF discontinued its PDP as of January 31, 2008.
In light of IMRF’s experience, and advice it has received from its attorneys (and possibly informal information from IRS), TRS, as many of you have already seen, has also decided to discontinue its PDP. Earlier this week, the following message was posted on the TRS Website and emailed to many TRS members:
In order to comply with recent IRS guidance, the TRS Payroll Deduction Program must be discontinued. Full-time, employed members will no longer be able to use the program to pay for optional service, 2.2 upgrades, and the Early Retirement Option through payroll deduction on a pretax basis. Other tax-deferred options still remain. Please consult your tax advisor for details.
TRS will phase out the program over the next two years. Payroll Deduction Agreement forms for new enrollments must be received no later than 4:30 p.m. on May 15, 2008 at the TRS Springfield office. The program will end in June 2010; affected members will be notified by TRS.
We have had initial conversations with TRS about this development, and hope to have more information to share with you about this over the next few weeks. It is our understanding that the TRS trustees will be discussing the discontinuation of the PDP at its meeting later next week.
|
President