Coalitions for Qualified Plan Status

In 2008, the Internal Revenue Service (“IRS”) raised concerns about whether Illinois Article 3 and Article 4 pension funds were in compliance with federal tax law and strongly encouraged the funds to obtain Qualified Plan Determination Letters.  It is recognition as a Qualified Plan that allows pension funds to maintain certain tax benefits such as

  • the tax-exempt status of duty disability pensions
  • the withholding of payroll contributions on a pre-tax basis (“employer pick-up option”)
  • the ability to transfer creditable service time between funds with no tax penalty
  • the ability to roll-over pre-tax contribution refunds into another qualified plansuch as an IRA or 457
  • the benefit of not having to pay tax on investment income
  • the eligibility for certain investment options available only to qualified plans

To be recognized as a Qualified Plan, the plan document (the Illinois Statutes and Department of Insurance Administrative Code) must incorporate federal tax law changes as they are adopted.  The plan document for Illinois Article 3 and Article 4 funds had not kept pace with changes in federal tax law.  As a result, a coalition of interested organizations was formed (including AFFI, IGFOA, ILFOP, IMTA, IPFA, IPPFA and MAP) to work with Scott Brandt of the Department of Insurance, Ice Miller LLP (a law firm that represents a number of governmental pension plans) and Lauterbach & Amen, LLP to address compliance issues for the plans as a group. In 2009 the Coalition recognized the success of its goal as the IRS granted a Determination Letter to both the Article 3 and Article 4 pension plans.

To view the Announcement from the Coalition, Click here.

To view the Determination Letters for the Article 3 and Article 4 pension funds, please go the Department of Insurance Reference Page .

Financial update as of February 28, 2019:

To view the Coalition “Success Memo” please click here.