The City employee who handles payroll reporting is usually the person who prepares and remits W-2’s for the city's employees as well. There are some fields on the W-2 that require specific attention, since TMRS is a pension fund. Form W-2 (Wage and Tax Statement) provides information to your employees, the Social Security Administration (SSA), the IRS, and state and local governments.
- Filing requirements: Furnish Copies B, C, and 2 of Form W-2 to the employee generally by February 1 each year. You will meet the “furnish” requirement if the form is properly addressed and mailed on or before the due date.
- File all Copy A’s of Forms W-2 with the entire page of Form W-3 (Transmittal of Wage and Tax Statements form) by March 1. However, if you file electronically, the due date is extended to March 31.
Example: Jane Brown earns $1,000 per month in a TMRS member city with a 5% employee contribution rate. Jane would pay $50 each month to TMRS; however, her income tax withholding would be calculated on a salary of $950. At the end of the calendar year, Jane's taxable earnings, as reported on the W-2 form, would be $11,400 ($950 x 12) instead of the $12,000 she actually earned.
TMRS contributions are tax-deferred under Section 414(h)(2) of the Internal Revenue Code. This means employees pay federal income tax on their gross earnings minus the amount contributed to TMRS.
Federal income taxes are deferred on employee contributions to TMRS until the time they are paid to the member, either in the form of a monthly retirement benefit or a refund of deposits, unless the refund is a "rollover" to another tax-exempt retirement option, such as an IRA.
For detailed information, download IRS W-2 Instructions.
Social Security (if any) should be deducted separately from the member’s gross salary BEFORE deducting the TMRS contribution.
Filling Out W-2 Forms
TMRS is a qualified plan under Section 401(a) of the Internal Revenue Code. TMRS employee contributions are subject to Social Security and Medicare taxes. (Of course, employees who do not participate in Social Security or Medicare will not be subject to Social Security or Medicare taxes.)
The list below refers to boxes as numbered on the current W-2. Fill out the boxes as follows:
Boxes related to TMRS
- Box 1 (wages, tips, other compensation): gross wages less TMRS employee contributions. Present the amount AFTER the deduction for TMRS contributions.
- Box 3 (Social Security wages): gross wages, not reduced by TMRS employee contributions. The dollar amount in Box 3 could be less than amount in Box 5, if the employee reaches the Social Security maximum contribution limit for the calendar year. This amount is presented BEFORE the deduction for TMRS contributions.
- Box 5 (Medicare wages): generally same as Box 3 (gross wages, not reduced by TMRS employee contributions). Note that amount in Box 5 could be higher than the amount in Box 3, as there are no maximum contribution limits for Medicare wages. This amount is presented BEFORE the deduction for TMRS contributions. NOTE - Boxes 3 and 5 will be the same unless wages exceed the Social Security wages cap.
- Box 12: This box is NOT related to TMRS. TMRS contributions are "picked up" in accordance with Section 414(h)(2), and are not to be reported in Box 12. This box is for items such as 457 plans and other fringe benefits. NOTE: To get a complete listing of codes for Box 12, see the IRS W-2 Instructions.
- Box 13: Mark the "Retirement Plan" box to indicate participation in TMRS.
- Box 14: The IRS W-2 instructions state that 414(h)(2) contributions are NOT included/coded in Box 12. Instead, use Box 14 for these items and any other information you wish to give your employee. (You can choose to mention TMRS employee contributions in Box 14 for information purposes only, but it is not required.)
Other Boxes (not related to TMRS)
Boxes a, e, f, 1,2,3,4,5,6,7,8,9,10,11: Employee information; matches data you have on file for each employee or in your payroll records; some boxes may not apply.
Boxes b, c, d, and 15: Employer information; reported the same for all employees.