ILPF participants get a double benefit by participating in the ILPF: they accrue the long-term benefit of retirement security while realizing the short-term benefit of reducing their tax liability.
The Inter-Local Pension Fund is a trust described in the International Revenue Code: Section 501(c) (18)* and Section 219(b) (3) and (e). As such, ILPF participants can deduct up to $7,000 of contributions per year (or 25% of their income, whichever is less) on their taxes, subject to certain limitations, thus lowering their adjusted gross income, and, in turn, taxes payable. The level of deductibility is periodically adjusted by the IRS.
In addition, those who participate in other payroll deferral plans, such as a 401(k), may be eligible for a higher combined maximum limit on deductibility, depending upon their age. Under current rules, participants who contribute to the ILPF as well as to a 401(k) can deduct up to $18,000 (combined) on their income taxes.
As the Inter-Local Pension Fund does not provide tax advice, you should discuss these issues with your accountant or tax advisor.
*Since there is no specific line on the Form 1040 for Section 501(c)(18) plans such as the Inter-Local Pension Fund, the IRS instructions state that the words “Section 501(c)(18) Plan $ (fill in the total of the year’s contributions) should be written on Line 36 immediately following the words “add lines 23 through 31a and 32 through 35”. The sum of lines 23 through 35 plus the Inter-Local Pension Fund contributions should be included in the box at the right-hand end of Line 36.