28
Aug
2012

New scrutiny from IRS on public pensions

Categories: California Developments
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A newly proposed IRS rule could cause thousands of California charter school employees to become ineligible for CalSTRS. In addition, some special districts that are part of 1937 Act counties could face similar eligibility questions. The IRS is also looking at whether public pension systems qualify for certain tax deferrals, when using excess earnings to fund retiree health care.

New scrutiny from IRS on public pensions

By Ed Mendel | 07/30/12 12:00 AM PST

The IRS is taking a new look at whether public pension systems qualify for tax deferrals, raising questions about nonprofit charter schools in CalSTRS and county systems using “excess” earnings to fund retiree health care. Taxes on employer-employee contributions to pension systems and their investment earnings can be avoided until retirees are paid. But if the rules are not followed, the IRS can change the tax status and impose fines and penalties.

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