By Mike Miles
August 13th, 2013 | Uncategorized
Q. I plan to start withdrawing a specific amount each month from my Thrift Savings Plan account next year. Will my withdrawals be taxed by my state of North Carolina?
A. From the North Carolina Department of Revenue website:
“If you received retirement benefits as a former employee of the State of North Carolina or any of its local governments or as a former employee of the federal government and you did not have five years of service with the government as of August 12, 1989, you may deduct the amount included in federal adjusted gross income or $4,000, whichever is less. This deduction also applies to retirement benefits paid to former teachers and state employees of other states and their political subdivisions regardless of the five-year service date. If you are married filing jointly and both you and your spouse received federal, state or local government retirement benefits, you may each deduct up to a maximum of $4,000 for a total of $8,000.”
Beverly Peters Says:
August 13th, 2013 at 2:29 pm
The TSP appears to be handled differently according to the NC Dept. of Revenue website:
“Vesting” Period for Qualifying Federal Retirement Systems
Generally, participants in the qualifying federal retirement systems listed above, including military retirees, are vested for purposes of the settlement if they had five or more years of creditable service as of August 12, 1989. The general rule, however, does not apply to the Thrift Savings Plan.
The Thrift Savings Plan has both an employee and an employer component. The employee component is similar to the State’s § 401(k) and § 457 plans and allows the employee to voluntarily contribute to the Plan. The employee is vested in the employee component if the employee first made a contribution to the plan prior to August 12, 1989. The employer component includes both contributions by the employer of a fixed percentage of the employee’s salary and contributions by the employer that match the employee’s voluntary contributions.
The Court has not yet resolved issues about when the employer component is vested and how the settlement and future income tax exclusion apply to the retirement benefits received from the Federal Thrift Plan if the retiree is not vested in both the employee and employer components of the Plan.