Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question:  My client has been told she can purchase service credits toward her Illinois state employees’ pension plan.  Can she use money in her IRA to do that on a pre-tax basis?

Answer:  Yes, if she follows the procedures outlined by the state pension plan administrator.

Here’s a piece describing the Illinois benefit program.  See page 12, which indicates that IRA money can be used to transfer into TRS to pay for the optional service credits.

http://trs.illinois.gov/subsections/members/pubs/memberguide/tieri_print.pdf

The client should contact the pension plan administrator and ask for specific instructions on how to do it.  Her best course of action would be a direct transfer of money from the IRA to the TRS, making it simple for the client to explain to the IRS if there’s ever a question regarding what the IRA money was used for.

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