During a recent board meeting of the Employees' Retirement System (ERS), the
Board of Trustees voted to discontinue the 3 percent tax offset adjustment
for ERS members whose effective date of retirement is on or after July 1,
2013. Members who retire on or before June 1, 2013 will continue to receive
the 3 percent tax offset adjustment and will not see a decrease to their
retirement payment.
The Board of Trustees of the Judicial Retirement System (JRS), the
Legislative Retirement System (LRS), and the Public School Employees
Retirement System (PSERS) also voted to discontinue the 1.75 percent tax
offset adjustment for JRS, LRS and PSERS members whose effective date of
retirement is on or after July 1, 2013 during the October Board meeting.
Members who retire on or before June 1, 2013 will continue to receive the
1.75 percent tax offset adjustment and will not see a decrease to their
retirement payment.
Prior to 1989, Georgia did not include income from Georgia state retirement
systems as taxable income. However, the U.S. Supreme Court ruled in 1989
that each state must treat the taxation of federal and state retirement
benefits in the same manner. In response to this ruling, the Georgia General
Assembly enacted legislation in 1990 to authorize the retirement system
Boards to grant a special benefit increase to retirees receiving benefits on
July 1, 1990 to at least partially offset the taxation of state retirement
benefits. The benefit increase was only able to be applied to the first
$37,500 of annual income from the plans.
Georgia's tax code has been amended throughout the years to increase the
amount of retirement income exclusion. As of calendar year 2012, the amount
of the exclusion is up to $35,000 for all retirees aged 62-65, and up to
$65,000 for retirees aged 65 and older. Retirees who are at least 62 years
old are currently receiving a double benefit by receiving both the tax
offset and the tax exclusion collectively for the same retirement income.
With this tax exclusion in place, the original intent of the tax adjustment
is no longer valid once a retiree reaches age 62.
The Board of Trustees is committed to maintaining its position as the
guardian of the retirement plans it administers by making necessary changes
to ensure financial stability and actuarial soundness as required by Georgia
law. For the last several years, it has been necessary to increase the
employer contribution rate to the plan. Discontinuing the tax adjustment,
which is a discretionary feature of the plan, is part of the overall
management of the plan for the protection of the members, retirees, and
beneficiaries the retirement system serves.
The discontinuation of the tax offset does not impact the retirement benefit
calculation that is defined in Georgia Law. Retirement estimates produced by
ERSGA do not include the tax adjustment (and never have) as this has always
been a discretionary adjustment granted only at the time of retirement.
Please feel free to contact our office if you have any questions or concerns
regarding this change. Visit
http://www.ers.ga.gov/accountaccess/taxoffset.aspx for more information.
-Story by Employees'
Retirement System of Georgia
