LAGERS sends retirees tax documents each year that help ensure retirement income is reported accurately and helps you understand the taxability of your LAGERS benefit. Inside your 1099-R, you will find information about your LAGERS benefits paid during the previous calendar year.
This year, LAGERS made a change to how the information in Box 5 is presented on the 1099-R issued for monthly benefit payments. Box 5 is an informational box and does not affect your taxable income. Although this change will have no impact on how your taxes are calculated, it is designed to help you better understand any non-taxable portion of your benefit.
To have a non-taxable portion of your benefit, you must have contributed employee contributions to LAGERS. If you worked at a non-contributory employer (meaning your employer paid the entire contribution to fund your benefit) your entire benefit will be subject to applicable state and federal tax, and your Box 5 will read “0.”
For retirees with employee contributions, a portion of your monthly benefit is non-taxable because employee contributions are made on an after-tax basis to LAGERS, meaning you paid taxes on the contributions while you were working.
Previously, Box 5 reported the same amount every year: your total lifetime member contributions and any service purchases or reinstatements. It did not represent the non-taxable portion of your monthly benefit. While your total contribution amounts can still be viewed any time on your myLAGERS account, Box 5 will now show the non-taxable portion of your annual benefit that was funded through your after-tax employee contributions.
This change was not made on the 1099-R issued for PLUS payments. Box 5 will continue to represent your total amount of employee post-tax contributions including service purchases or reinstatements.
Updates to Box 5 on 1099-R’s issued for monthly benefit payments are designed to help you better understand the taxability of your LAGERS benefit, making it clearer, more transparent, and easier for you to understand.
If you have questions regarding your specific tax situation, please contact a qualified tax professional.
For more information about taxes and your benefit, please visit molagers.org.
