As a retiree, it is important to understand the taxability of your LAGERS retirement benefit. Tax laws frequently change, so this information should be verified by consulting with a certified public accountant and is presented for informational purposes only. It should not be considered tax advice. Here are some of the most commonly asked questions about taxes and your benefit.
Is my benefit subject to federal income tax?
Yes. However, if you were required to contribute a percentage of your salary while employed, those contributions have already been taxed. Therefore, at normal retirement age, a portion of your benefit will not be taxable.
Is my benefit subject to Missouri income tax?
Depending on your adjusted gross income, your public pension benefits may be up to 100% exempt from Missouri state income tax. Married couples with an adjusted gross income of less than $100,000 and single individuals with an adjusted gross income of less than $85,000, may qualify for their public pension income to be 100% tax exempt. The exemption amount is limited to the maximum social security amount for each spouse. If your income exceeds the eligibility requirements, you may qualify for a partial exemption.
Will LAGERS withhold taxes from my monthly benefit?
Yes. If you choose, LAGERS will withhold federal and/or state income taxes. You can change your tax withholding at any time throughout retirement. Additionally, if you move out of state, you can notify LAGERS to stop withholding Missouri state income taxes (if applicable).
Will LAGERS produce tax documentation I can use to file my taxes?
LAGERS will send you a 1099-R by Jan. 31 each year. The 1099-R lists the taxable income that you received from LAGERS, the amount of taxes withheld from your benefit, and much more. You can also access these documents on myLAGERS.
How are taxes applied to the Partial Lump Sum (PLUS)?
Taxation of the Partial Lump Sum (PLUS) depends on how you decide to receive your payment. If you elect to receive your benefit directly, LAGERS will remit 20% to the IRS for federal (not state) taxes, but your actual tax liability will depend on your income level. If you elect to roll the payment into a qualified retirement account, you will not be taxed until you withdraw funds.
Is my disability retirement benefit taxable?
Yes. Even though some disability benefits are tax exempt, a disability benefit received from LAGERS is a normal retirement benefit and will be reported on your 1099-R as taxable income.
What is not taxable?
If you made contributions to LAGERS in addition to what your employer contributed, these contributions have already been taxed. The portion of your income that is tax free is determined by IRS guidelines.
How do I adjust my withholdings?
LAGERS will withhold taxes from your monthly benefit for federal and Missouri income taxes only. The amount withheld from your benefit is at your direction and can be changed at any time. To adjust your current withholding, you can either complete a Tax Withholding form and submit it to the LAGERS office or log on to your myLAGERS account.
How can I find out more?
Because the rules about taxation are constantly changing, you should always consult a competent tax professional. More information about the internal revenue code can be found at IRS.gov or DOR.MO.gov.
