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Serving New York Educators Since 1921

Taxes and Estate Planning

Federal and State Tax Rules for Your Retirement Benefit

Your retirement benefit is subject to federal income tax (except for previously taxed contributions). The federal tax tables can help you determine how much NYSTRS would withhold from your benefit payment under various scenarios.

You can have federal taxes withheld from your monthly payments or make quarterly estimated tax payments. To elect a new withholding amount, file a W-4P Withholding Election and Certificate form at any time; changes NYSTRS receives by the 12th of a month will generally be reflected in that month's payment. MyNYSTRS account holders have the convenience of updating their W-4P withholding election online.

NYSTRS will send you a 1099-R form each January showing the gross amount of your benefit, the taxable amount and any federal tax withheld for the previous year. With a MyNYSTRS account, you can securely access and print seven years' worth of 1099 statements.

Your retirement benefit is exempt from New York State income tax. However, if you live in another state, your benefit is subject to that state's tax rules. You can find information about other states' tax laws at www.rpea.org.

Key to Estate Planning: Keeping Beneficiaries Informed

Coping with the passing of a loved one is difficult enough; dealing with estate issues can make it that much harder. You can help your family and beneficiaries clear up your estate more quickly by maintaining a list of important documents

NYSTRS must be promptly notified when a retiree or beneficiary dies. To report a death, call us at (800) 356-3128, Ext. 6140. Notifying the Social Security Administration and/or your last school district is not sufficient. Beneficiaries will not receive the payments you intended unless NYSTRS is notified directly.

Pension Protection Act of 2006 Allows Non-Spouse Beneficiaries to Rollover Death Benefits into an IRA

The Pension Protection Act of 2006 enables non-spouse beneficiaries to have a qualified lump-sum death benefit payment directly rolled over into an IRA. This provision took effect Jan. 1, 2007. The IRA must be treated as an inherited account, according to the IRS. Previously, only spouses had the ability to have payments rolled over.

NYSTRS will provide beneficiaries with the necessary forms and information on payment choices upon notification of a member's death. Claims processing cannot proceed, however, until the System receives a copy of the death certificate.

The System does not offer advice on what payment choice is best for the individual. Instead, we recommend consulting with a qualified financial planner or tax advisor before making financial decisions.