If you don’t know what an IRS-qualified retirement plan is, you are not alone.
As a qualified retirement plan, not only do MPERS’ active members receive preferential tax treatment on their contributions, but employers do as well. Although Closed Plan and Year 2000 Plan members are not required to contribute to their retirement, 2011 Tier members are. Because of MPERS’ qualified status, those contributions are made prior to any taxes being deducted (pre-tax), thus reducing the employee’s taxable income and subsequent tax liability.
Likewise, employers (MoDOT, the Highway Patrol, and MPERS) receive preferential tax treatment for the contributions made on the employees’ behalf. In this case, employers do not have to pay withholding tax (or income tax) on the contributions made for employees.
What if MPERS was no longer a qualified retirement plan?
Employers would have to pay income tax on the contributions made on behalf of their employees, and the employees would have to pay taxes on not only their own contributions but on those contributions made by the employer. The tax savings to the employees and the employers add up to many millions of dollars annually if MPERS remains qualified.
To be clear, MPERS is currently a qualified plan by way of an IRS Determination Letter issued several years ago. MPERS' staff monitors relevant changes to the Tax Code as well as changes to our own statutes and those statutes that affect ours, to be sure that the plan remains in compliance.
