Most of your retirement benefit will be subject to federal income tax. Only the portion taxed before it was contributed is exempt. Since September 1, 1984, many employers have deducted member contributions before taxes.
Note: If you retire with a Plan 1 duty disability retirement benefit, your benefit is not subject to federal income tax and this section does not apply to you.
After you retire, DRS will let you know what portion of your contributions have already been taxed. The IRS refers to this taxed amount as your “cost basis.”
You must complete a W4-P form to tell DRS how much of your benefit should be withheld for taxes. If you do not, DRS will follow IRS rules requiring withholding as if you are married and claiming three exemptions. It is your responsibility to declare the proper amount of taxable income on your income tax return.
Retirement benefits are not generally subject to assignment or attachment. However, payments received by you in the form of retirement benefits, or as a refund of your contributions, may be subject to payment of court and administrative orders for spousal maintenance and child support, or payment of any orders authorized by federal law.
DRS is authorized to divide pensions between members and ex-spouses based upon court-ordered property division. If the divorce decree complies with the applicable law, DRS will send the property division payment directly to the ex-spouse. For more information, review the DRS publications, Can Legal Action Affect My Retirement Account? and How Can a Property Division Affect My Retirement Account? available on this Web site.