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All Members |
|
1) |
Are
my retirement benefits subject to State of
Hawaii
taxes? |
|
2) |
Are my death benefits taxable to
my beneficiaries or estate? |
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3) |
After I retire, how
will I know the taxable amount that I need to pay the IRS? |
|
Contributory
Plan
|
|
4) |
If
I do not select Option Four or Five, why am I being taxed on my "own" money that
was already taxed when I was working? |
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5) |
What happens if I should
die before I recover my own contributions? |
|
6) |
Can
I rollover the taxable
portion of my Option Four or Five refund payment into an
Individual Retirement Account (IRA)? |
|
7) |
Can I rollover a portion of my
Option 4 or 5 refund payment to my deferred compensation plan?
|
| 1) |
Are my retirement
benefits subject to State of Hawaii
taxes?
No,
all benefits paid by ERS are nontaxable for State purposes.
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| 2) |
Are my death benefits
taxable to my beneficiaries or estate?
Yes.
Prior to August 20, 1996, regulations allowed a beneficiary or estate of a deceased employee to
exclude up to $5,000 from income taxes.
The Small Business Job Protection Act of 1996 repeals this
exclusion for deaths occurring after
August 20, 1996.
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| 3) |
After I retire, how will
I know the taxable amount that I need to pay the IRS?
ERS will calculate the taxable amount of your pension and mail you the
appropriate tax form by January 31 of each year with information necessary
to file your Federal income tax return.
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THE FOLLOWING ONLY APPLY TO
CONTRIBUTORY PLAN MEMBERS
|
| 4) |
If I do not select
Option Four or Five, why am I being taxed on my "own" money that was already taxed when I was working?
The Tax Reform Act of 1986 eliminated the "three year basis recovery
rule" which enabled members to defer tax payments until they
recovered their contributions to the ERS.
Under the current law, you can only recover your after-tax
contributions over your lifetime.
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| 5) |
What happens if I should
die before I recover my own contributions?
For those
members who retire after
July 1, 1986, your beneficiary or estate may recover the cost by amending your tax
returns for the previous three years and carrying the unrecovered cost
forward for fifteen years if necessary.
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| 6) |
Can I rollover the taxable portion of my Option Four or Five refund
payment into an Individual Retirement Account (IRA)?
Yes. Effective
January 1, 1993, the taxable portion of an Option Four or Five refund payment can be
rolled over into an IRA or another qualified plan.
Death benefits and refund payments to terminating employees who
forfeit retirement benefits, can still be rolled over.
Members
should seek the advice of a financial consultant or call the applicable qualified plans or administrator of the IRAs, to determine if the plan
they are interested in is qualified.
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| 7) |
Can I rollover a portion
of my Option 4 or 5 refund payment to my deferred compensation plan?
No. Hawaii Benefits, Inc. and
Aetna
have advised us that they are not allowed to accept rollovers under the
current provisions of the Internal Revenue Code.
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