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Remember
Sept. 11, 2001
DW's |
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Welcome to
The Policemen's Annuity & Benefit Fund of Chicago Online Information Center

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Policemen's Annuity and Benefit Fund |
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Impact of Pension Protection Act on your Taxable Retirement Annuity |
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Police Officer Jones (married) |
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Prior to 1/1/2007 |
Monthly |
Annually |
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Monthly Annuity |
$ 4,250 |
$ 51,000 |
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Less Non-Taxable Portion of Annuity* |
$ 50 |
$ 600 |
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Taxable Monthly Annuity |
$ 4,200 |
$ 50,400 |
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15% Tax bracket= tax liability of annuity |
$ 630 |
$ 7,560 |
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Police Officer Jones (married) |
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On or
AFTER 1/2007 |
Monthly |
Annually |
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Monthly Annuity |
$ 4,250.00 |
$ 51,000 |
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Less Non-Taxable Portion of Annuity* |
$ 50.00 |
$ 600 |
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Less Insurance Premium-Non-Medicare (retiree & spouse) |
$ 445.00 |
$ 3,000 |
maximum |
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Taxable Monthly Annuity |
$ 3,755.00 |
$ 47,400 |
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15% Tax bracket= tax liability of |
$ 563.25 |
$ 7,110 |
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tax savings in 15% tax bracket |
$ 66.75 |
$ 450.00 |
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Police Officer Jones (married) |
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On or
AFTER 1/1/2007 |
Monthly |
Annually |
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Monthly Annuity |
$ 4,250.00 |
$ 51,000.00 |
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Less Non-Taxable Portion of Annuity* |
$ 50.00 |
$ 600.00 |
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Less Insurance Premium- Medicare Premium (retiree & spouse) |
$ 158.00 |
$ 1,896.00 |
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Taxable Monthly Annuity |
$ 4,042.00 |
$ 48,504.00 |
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15% Tax bracket= tax liability of |
$ 606.30 |
$ 7,276.60 |
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tax savings in 15% tax bracket |
$ 23.70 |
$ 284.40 |
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*- the non-taxable portion of the annuity is the amount you can recover
for contributions |
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made prior to 1/1/1982, when your pension deductions became tax
sheltered |
January, 2007
Dear Annuitant:
On
January 1, 2007, a new law will take affect entitled the Pension Protection
Act of 2006. A provision of this law permits eligible retired public safety
employees to use up to $3,000.00 per year (based on the actual cost of
premiums) from their qualified government retirement plan, on a pre-tax
basis, to pay for health insurance or long-term care insurance premiums.
Retired married public safety employee couples are eligible to use up to
$6,000.00 in pre-tax monies to pay for health care premiums or long- term
care insurance premiums.
In
order for you to be eligible for this benefit, the money must be paid
directly from the Policemen's Annuity and Benefit Fund of Chicago to a
health or long-term care insurance company. The Policemen's Annuity and
Benefit Fund of Chicago, already withholds your health care premiums from
your annuity disbursements as a benefit to you which is forwarded to the
City of Chicago Annuitant Healthcare Plan. We will now, in compliance with
the new legislation, begin providing this service pre-tax up to a maximum of
$3,000.00 dollars. We ask that, in order to facilitate this administrative
change, you read and sign the enclosed Important Legal Notice and Waiver of
Claims related to our decision to administer this benefit on your behalf.
Upon receipt of these signed notices, we will be in a position of providing
you with this additional benefit.
At
the end of each calendar year, the Fund will report the total amount of the
tax sheltered dollars, up to $3,000.00, allocated to pay health care
premiums to the IRS using a form 1099 as required. Given that it is
doubtful that the IRS will be issuing any guidance toward the implementation
of this new law administratively until further into the year, you may
experience a delay in the tax-sheltering of your health care premiums that
will need to be corrected at tax time. Notwithstanding, we will need your
signed documents returned as soon as possible in order to insure that you
will see this benefit reflected as quickly as we are able after receiving
guidance from the IRS. Thank you in advance for your time and attention to
this matter.
Very truly yours,
John J. Gallagher, Jr.
Executive Director
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For more information about the Pension
Protection Act
> Click Here <
To read the FAQ file.
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To reprint the Waiver
> Click Here <
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To read more about the Pension Protection Act
visit

> Click Here <
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June, 2006
June 9, 2006
TO: ANNUITANTS
ENROLLED IN THE CITY OF CHICAGO ANNUITANT HEALTH CARE PLAN
Dear Retired and Widowed Participants
Over the past few months you probably have read newspaper articles and newsletters
addressing premium payments made by annuitants in the City of Chicago Annuity Health Care
Program The Health Care Program.
In 2003 the Court
approved, following a FAIRNESS HEARING, a settlement in the long standing lawsuit, City of
Chicago vs. Korshak, et al. In substance the
settlement agreement provided 1) a health care plan for City Annuitants through June 30,
2013 and 2) the costs of the annuitant healthcare plan was to be shared by the City, the
annuitants and by a fund subsidy.
This correspondence is intended to address those issues which relate to health care
premiums paid by annuitants during the period September, 2003 through December, 2004 and
thereafter.
The insurance coverage provided and the premiums to be charged to annuitants, as provided
for by the settlement agreement, were based on actuarial estimates and
projections made by an independent actuarial firm.
It is now apparent that the actuarial estimates and projections resulted in an over
payment of premiums by certain categories of annuitants. The City has acknowledged this
over payment.
A preliminary audit has confirmed
that certain categories of annuitants are entitled to a refund. However, 1) an annuitant
with single non-medicare coverage or 2) a
married annuitant with both the annuitant and
spouse in non-medicare status are not eligible for a refund, as no overpayments in
these categories were made.
As to the current status of this matter, please be informed as follows:
1. The
City has acknowledged that there has been an over payment of the premiums to fund The
Health Care Program and that certain categories of annuitants are entitled to receive a
refund for the period September 2003 through December 2004.
2. This
Fund and the other City Funds, have retained an independent firm to audit the Citys
current analysis which reflects that all city retirement fund annuitants over paid
approximately $14.7 million dollars in premiums during the period September, 2003 through
December, 2004. The Funds will require that
further audit for the year 2005 and subsequent years be required and made in a more timely
manner.
3. The
City has agreed to issue refunds to annuitants entitled to the same with interest paid on
any such amount for the period through 2004. This
refund payment is to be made available within the next 30 to 45 days. The payment will be without prejudice to any
additional funds found owing after the audit, any such funds may require an additional
refund from the City or a credit.
4.
After a preliminary audit revealed
two categories of coverage, single medicare and annuitant and spouse non-medicare classes
are not entitled to a refund payment as no overpayment for these categories of coverage
was made. The Funds have insisted, and the City has agreed, to waive any attempt to
recapture any over payment on the part of the City from those annuitants
5.
For the year 2005, and thereafter, the Funds are in the process of negotiating a
procedure which will provide for a more prompt reconciliation of the actual costs and
premiums paid. The Funds recognize that annuitants, on a fixed income, would appreciate a
lower premium now as opposed to receiving a possible refund years later.
This Fund believes that the City should have more promptly addressed this issue and
advised the various Funds of this matter on a more timely basis. At the same time, this Fund believes the City, now
aware of the over payments, has acted in the best interest of all City annuitants in
attempts to correct the matter and to provide a mechanism to avoid future problems.
The Fund trusts this letter will answer all of your questions, and the Fund will keep you
advised when further information is available. As
always, please feel free to contact the Fund, which is here to serve its participants.
Very truly yours,
John J. Gallagher, Jr.
Executive Director
For All Pending Legislation - Click on Links to
Other Sites - Then select
The State of Illinois Legislative Web Site.
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For more Information regarding the Pension Fund
This page was last updated on:
June 19, 2008 08:13:30 PM |
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