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nondeductible employee contributions. The Pension System is also
a qualified defined benefit plan under section 401(a) but
generally does not require mandatory nondeductible employee
contributions. The State of Maryland contributes to both the
Retirement System and the Pension System on behalf of the members
of those systems. The trusts maintained as part of the
Retirement System and the Pension System are both exempt from
taxation under section 501(a).
Within a few weeks after the effective date of petitioner's
transfer from the Retirement System to the Pension System, the
Retirement System issued a check to petitioner in the amount of
$172,559.14 (the Transfer Refund). The Transfer Refund consisted
of $18,112.25 in previously taxed contributions made by
petitioner during his employment tenure as a teacher and
$154,446.89 of earnings. The earnings constitute the taxable
portion of the Transfer Refund.
At the time that he received the Transfer Refund, petitioner
was 47 years old and was not disabled.
If petitioner had not transferred to the Pension System but
rather had remained a member of the Retirement System, he would
have been entitled to retire at an appropriate age and receive a
normal service retirement benefit, including a regular monthly
annuity. He would not, however, have been entitled to receive a
transfer refund because a transfer refund is only payable to
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Last modified: May 25, 2011