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. Prior to May 15, 2008, a full-time member may participate in the Payroll Deduction Program (PDP) and obtain an irrevocable agreement for the month the ERO cost will be paid directly to the member. The PDP amount will be shown on the monthly Employer Bill and payment should be remitted electronically along with the other PDP deductions. By payroll deducting the ERO cost paid directly to the member, the ERO cost is not included in the member's gross taxable income. The employer payment is not reportable as creditable earnings.
3. 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 three 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. Prior to May 15, 2008, a full-time member may participate in the Payroll Deduction Program (PDP) and obtain the irrevocable agreement for the month a bonus will be paid. The PDP amount will be shown on the monthly Employer Bill and payment should be remitted electronically along with the other deductions. By payroll deducting the upgrade cost from a bonus, the upgrade cost is not included in the member's gross taxable income. The payment is reportable as creditable earnings because all PDP deductions are made prior to termination of employment.
3. The employer may make up to five annual lump-sum payments directly to TRS if the member does not have an irrevocable Payroll Deduction Program (PDP) agreement for the cost. 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.
   
   A member's PDP agreement becomes irrevocable when the first deduction is made. If the employer intends on paying a portion of the upgrade cost directly to TRS and the member intends to pay the remainder through the PDP, the employer must make its decision and issue its authorization to "pick up" the amount prior to the PDP agreement becoming irrevocable. If no PDP is involved, the "pick up" must occur before payment is made to TRS.
   
   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 16-129.1 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.

After the member enters into a payroll deduction agreement to pay the full upgrade contribution, the employer decides to pay all or part of the upgrade costs on behalf of the member. May the employer pay the upgrade contribution on behalf of the member directly to TRS after the payroll deduction agreement becomes irrevocable?

No. Federal regulations prohibit the employer or the employee from reducing the balance of the payroll deduction after the payroll deduction agreement has become irrevocable. However, the employer may increase the member's salary equal to the amount which the employer would have otherwise paid TRS directly.

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 3, listed above, annual payments are not limited to five.

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