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This applies to active members of all Retirement System plans:
The amount you contribute each year from your salary to the Retirement System is subject to Kansas income tax. Your contributions are deducted from your pay on a pre-tax basis for federal income tax purposes. Because of this, you need to add the contributions back into your gross income when you file your Kansas state income taxes each year.
See the "Schedule S Line-By-Line Instructions" in the Kansas Income Tax Booklet for more information or contact the Kansas Department of Revenue.
Generally, lump-sum payments can be paid directly to you or rolled over into an eligible retirement plan. Read the Important Tax Information booklet carefully to understand the federal tax treatment before taking a lump-sum payment.
Payment Paid to You
Depending on the type of plan, the later distribution may be subject to different tax treatment. If you roll over a payment from KPERS when you withdraw or retire, the funds adopt the tax characteristics of the plan that receives them. The tax treatment of later payments from the eligible employer plan or traditional IRA receiving your direct rollover might be different than if you received your benefit directly from KPERS.
KPERS lump-sum benefits, including earnings, generally keep their Kansas state tax-exempt status, even when rolled over into a qualified retirement account containing other retirement funds.
For more information on Kansas tax treatment of KPERS distributions, please contact the Kansas Department
You made contributions on an after-tax basis if you:
If you retire: Federal law allows you to "recover" these amounts gradually without paying income tax on them again. A portion will be included in your PLSO payment and the rest will be paid to you gradually in your regular monthly benefit payments according to IRS regulations.
If you withdraw: Nontaxable amounts may be paid to you or rolled over into a traditional IRA or to certain employer plans that accept rollovers of after-tax contributions.
In general, Retirement System benefits, including the $4,000 retiree death benefit, are subject to federal income tax, but not Kansas income tax. If you move to another state, check if your retirement benefit is taxable in that state. Your monthly benefit is taxable from the time your benefits begin. KPERS will withhold 20 percent for federal income tax from a lump-sum payment unless it is rolled over into an eligible plan. You may also be subject to an additional 10 percent tax if you are under age 59 1/2.
If your monthly benefit is $1,680 or more, KPERS will withhold federal tax, unless you file a W-4P tax form with KPERS. You will receive the form when you retire. If you don't return the form by the deadline, KPERS is required to withhold taxes as if you are married and claiming three exemptions. If you choose not to have taxes withheld from your retirement benefit, you are still liable for federal income tax. You may also be subject to penalties under the "Estimated Tax Payment" rule if your withholdings are not high enough.
If your monthly benefit is less than $1,680 per month, KPERS will not automatically withhold federal income tax. To have tax withheld, file a W-4P tax form with KPERS. You can download one from our web site or contact our office to receive one by postal mail.
If you contributed to the Retirement System before July 1984, part of your pension will not be taxable. Federal law allows you to "recover," tax-free, any contributions you made on a post-tax basis, and regulates the rate at which you make this recovery. If you did not contribute to the Retirement System before July 1984, your entire benefit is taxable unless you have purchased service with a lump-sum payment. Lump-sum purchases other than rollovers or trustee-to-trustee transfers are on a post-tax basis.
On January 31 each year, the Retirement System will mail 1099-R tax forms to you. These forms contain important information for your federal tax return. If you don't receive a form by mid-February, please contact the Retirement System. For questions about taxes not covered on this page, please contact a qualified tax professional or the IRS.
Additional information and IRS instructions are printed on the back of the form. See a qualified tax professional or contact the IRS for questions about your individual tax situation.
Taxability Rules for KPERS Retirement Benefits
If you retired before July 1, 1986
If you retired July 1, 1986 to November 18, 1996
If you retired after November 18, 1996
Note: Simplified Method(s) above were formerly known as Simplified General Rule(s).
If you are a beneficiary or joint annuitant, your benefit generally has the same income tax status as the deceased members benefit. However, special rules may apply. For detailed information, see IRS Publication 575 "Pension and Annuity Income."
Retiree Death Benefit: KPERS provides a $4,000 death benefit when a retiree dies. This benefit is taxable for federal income tax purposes to the named beneficiary, but not Kansas state taxes.
If you are a beneficiary, you will receive a 1099-R form to include with your federal tax return, even if you assign the benefit to a funeral establishment.
When are 1099-R forms mailed?
Why didn't I receive my 1099-R form?
Why did I receive more than one 1099-R form?
You'll receive more than one 1099-R if you:
How do I change my tax withholding?
You can also complete a Withholding Certificate for Pension Benefit Payments form (Substitute W-4P) and mail it to KPERS.
What is Box 5?
Simply put, box 1 - box 2a = box 5. Box 1 shows everything we paid you in the last calendar year. Box 2a is the taxable portion. Box 5 is the non-taxable (previously-taxed) portion. If your benefit is fully taxable, Box 5 will be blank.
Why is the amount in Box 5 not taxable?
What is "IRS Net Investment"?
I am a beneficiary. Can I roll over the $4,000 retiree death benefit?
I am a beneficiary. I received a $4,000 retiree death benefit as a direct payment. Why did I receive a 1099-R form?
I am a beneficiary. I assigned the $4,000 death benefit to a funeral home. Why did I receive a 1099-R form?