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The Retirement System and the Pension System
The Retirement System is a qualified defined benefit plan
under section 401(a) and requires mandatory 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).4
The Transfer Refund
On October 4, 1989, petitioner elected to transfer from the
Retirement System to the Pension System, effective November 1,
1989. As a result of his election to transfer, petitioner
received a distribution (the Transfer Refund) from the Retirement
System in the amount of $174,802.14, which petitioner received in
the form of a check dated November 30, 1989.
Petitioner's Transfer Refund consisted of $11,695.84 in
previously taxed contributions made by petitioner during his
employment tenure with the Highway Administration, $693.52 in
4 For a further discussion of the Retirement System and
the Pension System, see Adler v. Commissioner, 86 F.3d 378 (4th
Cir. 1996), vacating and remanding T.C. Memo. 1995-148; Maryland
State Teachers Association, Inc. v. Hughes, 594 F. Supp. 1353,
1357-1358 (D. Md. 1984).
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Last modified: May 25, 2011