Illinois Teacher Retirement System – Who actually pays the 9.4% retirement?
There are two schedules in the Rockford Education Association’s online collective bargaining agreement at rps205.com. Appendix A is entitled “Salary Schedule” and consists of 8 lanes and 20 steps representing the salary at various educational levels attained and years of service.
Appendix B is entitled Computation Schedule for Illinois Teacher Retirement Syetem Purposes and includes salary (A) from the Salary Schedule and the ITRS contribution (C), which is (A) multiplied by 9.4%. The teachers are paid the salary (A); the (C) contribution is sent directly to the state teacher’s retirement system by the district.
No income taxes are paid on the TRS (C) contribution. The TRS contribution is never given to the teachers to contribute to the state plan; it is paid directly to the state by the district. Some teachers say this contribution is part of their salary, and therefore, the teachers pay for their retirement not the district.
Let’s look at the contract and the law – you make up your own mind who is paying the 9.4% retirement. I know it’s the taxpayers, but lets go through the exercise, anyway.
First, look at your paycheck. Social Security and Medicare contributions (C) are taken out of your check as a percentage of your gross salary (A). The company pays half and you pay the other half of the contribution (C). In the school district, the state pays half and the district pays half. There is no contribution made directly from any check received by the teaching staff.
In Article 30 of the REA contract - Compensation – Section K:
The Board shall pick up and pay 9.4%, of the staff member’s Illinois Teacher Retirement System (“ITRS”) contribution in a non-taxable manner pursuant to Section 414 (h) of the Internal Revenue Code of 1986, as amended.
Effective beginning the 2007-2008 school year, staff members shall not be required to pay and shall be held harmless by the Board from any obligation to pay the .84% TRS health care contribution required to be paid pursuant to 5-ILCS-375/6.6.
This, in and of itself isn’t necessarily proof, even though state law is referred to, in the text of the contract, stating that the board would hold staff members harmless, meaning they should be paying it, not the district – I know this statement was negotiated into the contract.
Let’s look at the state law for further clarification. The definition of “salary” under state law: (40 ILCS 5/16-121)
The actual compensation received by a teacher during any school year and recognized by the system in accordance with rules of the board.
The school code doesn’t say anything about TRS contributions made by the district being a teacher’s salary.
Also, 40 ILCS 5/16-152,
The employee contribution required under this section of 1998 is the responsibility of the teacher and not the teacher’s employer, unless the employer agrees, through collective bargaining or otherwise, to make the contribution on behalf of the teacher.
This section along with 40 ILCS 5/16-158 covers the entire 9.4% of the TRS contribution. This phrase is used in at least three sections of the state code including 5 ILCS 375/6.6 Contributions to the teacher Health Insurance Fund, 40 ILCS 5/16-129.1 and 40 ILCS 5/16-158.
And finally, and most clearly stated is 40 ILCS 5/16-152.1 – Pickup of Contributions: in this section,
If an employer decides not to pick up the member’s contribution, the amount that would have been picked up shall continue to be deducted from salary. If contributions are picked up, they shall be treated as employer contributions in determining tax treatment under the United States Internal Revenue Code.
This 9.4% is being paid by the district due to the collective bargaining process, and is not salary. The contributions (C) could be renegotiated to be paid through payroll deductions from the actual salary (A) of the teachers through the collective bargaining process.