Taxability of Benefits

How do I determine the taxability of my retirement benefit?
When you retire, you will be notified of the amount that you contributed to the retirement plan on an "after-tax" basis, how much of each monthly benefit payment will be taxable and how much will be a return of your after-tax contributions. The amount of money you contributed to the plan that was subject to tax in the year in which the contributions were made is known as the "investment in contract." This amount will include any after-tax payments you may have made toward the purchase of additional service credit.

Each year TRS will send you an IRS Form 1099R. This form will show the gross amount you received during the last calendar year, the taxable amount and the amount you received that is not subject to federal income taxes. The form will also include federal and state taxes that were withheld to pre-pay your tax liability for the year. It is very important that you follow directions on the IRS 1040 Form under the heading "Pensions & Annuities" in filing your taxes after retirement. For more information, please contact the IRS directly or visit their website. For more information on taxes, visit our Income Tax Obligation section.

When I retire, what will be deducted from my monthly retirement check?
TRS will deduct for federal and state income taxes, health insurance premiums for retirees enrolled in the Oklahoma State and Education Employees Group Insurance Plan and monthly dues for membership in the Oklahoma Retired Educators Association. TRS is required to deduct for federal income taxes unless you request no withholding. Federal and state income tax withholdings can be made based on federal withholding tables or you can specify an amount to be withheld each month. You must remember that IRS may charge a penalty if federal income taxes are not pre-paid prior to the end of the tax year. For more information on taxes, see our section on Income Tax Obligation.