Monday update: Scranton School District hopes for agreement with IRS by end of year

Times-Tribune (Scranton, PA)

Nov. 2--The Scranton School District and Internal Revenue Service may reach an agreement on early retirement incentive payments by the end of the year.

In the spring, the IRS directed the district to temporarily cease all payments as the agency started an audit of the funds.

"We're finally reaching an end of the road," district solicitor John Audi told school directors last week. "It is our hope ... to have a final agreement very soon."

Under the teachers contract, qualified retirees receive seven $10,000 payments over seven years, which the district should distribute into an IRS-approved retirement fund. Most retirees use the incentive to stay on the district's health insurance plan until they qualify for Medicare. The money goes into a 457 plan, an action that the IRS informed the district is out of compliance, according to a letter the district sent retirees in April.

With the current structure, the retirees pay for their health insurance pretax, meaning that part of the incentive is not taxed. Any money left over -- or if the retirees just opt for a cash payment -- is taxed. The district has distributed funds that way since 2002.

Rosemary Boland, president of the Scranton Federation of Teachers, said retirees often contact the union office for updates. The district did not require the retirees to find the money to pay for insurance while payments are on hold, she said.

Once the district reaches an agreement, the retirees will receive the money they are owed, Audi said.

"It hasn't been easy, but it's our true hope to get it done by year's end," he said.

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