Click here to make the text larger When will I qualify for a post-retirement increase and how much will it be?
All post-retirement increases are provided by action of the North Carolina General Assembly and/or the board of trustees governing the Retirement Systems. Although post-retirement increases are not guaranteed, they are typically provided at July 1 of each year and are paid as a percentage increase in benefits.
New retirees who have been retired for less than a year will receive a prorated increase based on how long they have been retired since the legislation passed. For example, for a 2.2% cost-of-living increase passed on July 1, a member who has been retired for 11 months will receive 2.0167%.
Are my retirement benefits subject to North Carolina state income tax?
As a result of the “Bailey” tax case, retirement benefits that are payable to members of the Retirement Systems who have maintained five or more years of retirement service credit as of August 12, 1989 are not subject to North Carolina state income tax. If you did not have five years of maintained retirement service credit as of August 12, 1989, your retirement benefits are subject to North Carolina state income tax, less a $4,000.00 annual exclusion when you file your North Carolina state income tax return. The taxable portion is equal to the portion of your benefit that is taxable for federal tax purposes.
Do I have to pay Federal or North Carolina state income tax on my retirement contributions on which I have already paid income tax?
No. Retirement contributions which have been previously taxed will not be taxed again. If you have previously paid tax on all or some of your contributions, a very small portion of your retirement benefit will be excluded from federal income taxes each month for your expected lifetime. When you receive your annual 1099-R from the Retirement Systems, the non-taxable and taxable portions are shown for tax purposes.
Block 5 on my income tax form 1099-R, which I received from the Retirement Systems, includes an amount described as "Non-Taxable amount." What does this mean?
The amount shown in Block 5 of a 1099-R issued by the Department of State Treasurer is the amount of retirement contributions paid by you that is not taxable.
Why is no federal tax being withheld from my monthly retirement benefit even though I checked the box on the "Choosing Income Tax Withholding Preferences” form (Form 290), requesting federal tax withholding?
The Retirement Systems withholds federal tax from your monthly benefit based upon the taxable amount of your monthly benefit, the standard withholding tables, your marital status, and the number of allowances you may claim. If your marital status and the allowances do not require any federal tax to be deducted based upon your taxable portion, then, no federal tax will be deducted. If you need federal tax withheld, you can always complete a Form 290 to give us a minimum monthly withholding amount. We can honor your request for a minimum monthly withholding as long as the amount is greater than the amount required by the tax table. All retirement benefits are subject to federal tax, but you do have a choice as to whether or not you want the amount withheld monthly by the Retirement Systems. Your Form 1099R will reflect your gross retirement benefit, the taxable amount, and non-taxable amount (if any), as well as the total amount withheld for federal tax. The Retirement Systems is not in a position to offer tax advice to you. Please check with a tax preparer as to your tax liability and how to complete your Form 290 should you require additional assistance.
Do I have to pay North Carolina state income tax on my North Carolina state retirement benefit when I am living in another state?
The N.C. Department of Revenue has advised our office that permanent out-of-state residents are not subject to North Carolina state income tax imposed on benefits from our Systems. You should contact the Department of Revenue where you live to inquire about your state tax liability there. The Retirement Systems is unable to withhold taxes from another state.