- 5 -
(2)(a) (1988). Additionally, the Accumulation Fund holds all
reserves for the payment of all benefits, except for those
payable from the Annuity Savings Fund. Md. Ann. Code, art. 73B,
sec. 14(2)(a) (1988).
The Transfer Refund
On January 11, 1991, petitioner elected to transfer from the
Retirement System to the Pension System, effective February 1,
1991. As a result of the election to transfer, petitioner
received a distribution (the Transfer Refund) from the Retirement
System in the amount of $390,513.91. The Transfer Refund
consisted of $12,460.05 in previously taxed contributions made by
petitioner, $374,918.36 of earnings, $2,732.09 of employer "pick-
up contributions",5 and $403.41 of interest on the employer pick-
up contributions. The earnings, pick-up contributions, and
interest on the pick-up contributions; i.e. $378,053.86,
constitute the taxable portion of the Transfer Refund.
The rate of earnings paid as part of the Transfer Refund was
not the rate of regular interest of 4 percent, but was an amount
based on the average interest rate for the 5 years preceding the
year of transfer, compounded annually. Md. Ann. Code, art. 73B,
sec. 11B(5) (1988). The interest rate for each of the 5 years
was computed as the sum of the investment income and the realized
gains and losses, divided by the book value of the total
investments of the Retirement System. Id.
5 See sec. 414(h).
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