Section 40 ILCS 5/8-174.1 - Employer contributions on behalf of employees(a) The employer may make and may incur an obligation to make contributions on behalf of its employees in an amount not to exceed the employee contributions required by Sections 8-137, 8-161, 8-174, 8-182 and 8-182.1 for all salary earned after December 31, 1981. If such employee contributions are not made or an obligation to make such contributions is not incurred by the employer on behalf of its employees, the amount that could have been contributed shall continue to be deducted from salary. If employee contributions are made by the employer on behalf of its employees, they shall be treated as employer contributions in determining tax treatment under the United States Internal Revenue Code; however, each city shall continue to withhold Federal and State income taxes based upon these contributions until the Internal Revenue Service or the Federal courts rule that pursuant to Section 414(h) of the United States Internal Revenue Code, these contributions shall not be included as gross income of the employee until such time as they are distributed or made available. The employer may make these contributions on behalf of its employees by a reduction in the cash salary of the employee or by an offset against a future salary increase or by a combination of a reduction in salary and offset against a future salary increase. The employer shall pay these employee contributions from the same source of funds used in paying salary to the employee or, if the employer is a Board of Education, it may also or alternatively pay such contributions in whole or in part from the proceeds of the pension contribution liability tax authorized by Section 34-60.1 of the School Code, as amended. If such a tax is levied with respect to any fiscal year of a Board of Education, that portion of the contributions to be paid by the Board of Education on behalf of its employees for that fiscal year from the proceeds of such a tax shall not be due and payable into the Fund until the collection, in the calendar year following the calendar year in which such levy was made, of the actual tax bills extending the second installment of real estate taxes for the Board of Education for that calendar year, pursuant to Section 21-30 of the Property Tax Code, and such Board of Education shall not be required to pay those contributions to be paid from the proceeds of such a tax into the Fund except as collected from the extension of the actual tax bills. If employee contributions are made by the employer on behalf of its employees, they shall be treated for all purposes of this Article 8, including Section 8-173, in the same manner and to the same extent as employee contributions made by employees and deducted from salary; provided, however, that contributions which are made by a Board of Education on behalf of its employees shall not be treated as a pension or retirement obligation of the Board of Education for purposes of Section 12 of "An Act in relation to State revenue sharing with local governmental entities", approved July 31, 1969, as amended. For purposes of Section 8-173, contributions made by a Board of Education on behalf of its employees shall be treated as contributions made by or on behalf of employees to the Fund for the fiscal year for which the Board of Education incurred the obligation to make such contributions. (b) Subject to the requirements of federal law and the rules of the Board, the Fund may allow the employee to elect to have the employer make on behalf of the employee the optional contributions that the employee has elected to pay to the Fund, and the contributions so made on the employee's behalf shall be treated as employer contributions for the purpose of determining federal tax treatment. The employer shall make contributions on behalf of an employee by a reduction in the cash salary of the employee and shall pay contributions from the same source of funds that is used to pay earnings of the employee. The election to have the contributions made on the employee's behalf is irrevocable, and the optional contributions may not thereafter be prepaid, by direct payment or otherwise. If the provision authorizing the optional contribution requires payment by a stated date (rather than the date of withdrawal or retirement), the requirement will be deemed to have been satisfied if (i) on or before the stated date the employee executes a valid irrevocable election to have the contributions made on his or her behalf under this subsection, and (ii) the contributions made on his or her behalf are in fact paid to the Fund as provided in the election.
If employee contributions are made by the employer on the employee's behalf under this subsection, they shall be treated for all purposes of this Article 8, including Section 8-173, in the same manner and to the same extent as optional employee contributions made prior to the date made on the employee's behalf.
Amended by P.A. 093-0654, § 5, eff. 1/16/2004.P.A. 88-670, eff. 12-2-94.