C. Merritt and Dorothy Pumphrey - Page 5

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          15.9 percent, and constitute the taxable portion of the Transfer            
          Refund.                                                                     
               Petitioner did not roll over the Transfer Refund into either           
          an individual retirement account or an individual retirement                
          annuity.                                                                    
               When petitioner transferred from the Retirement System to              
          the Pension System, he had attained the age of 66.  If petitioner           
          had not transferred to the Pension System but had remained a                
          member of the Retirement System, he would have been entitled to             
          retire and receive a normal service retirement benefit, including           
          a regular monthly annuity.  He would not have been entitled to              
          receive a Transfer Refund because a Transfer Refund is payable              
          only as a consequence of transferring from the Retirement System            
          to the Pension System.                                                      
               Also, as a consequence of transferring from the Retirement             
          System to the Pension System, petitioner became, and presently              
          is, a member of the Pension System.  As a member of the Pension             
          System, petitioner is entitled to receive a retirement benefit              
          based upon his salary and his creditable years of service,                  
          specifically including those years of creditable service                    
          recognized under the Retirement System.5  However, because                  
          petitioner received the Transfer Refund on account of                       

          5 Petitioner became a member of the Retirement System in                    
          1966 and therefore had been a member of the Retirement System for           
          some 24 years at the time of his election to transfer to the                
          Pension System.                                                             




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