In general, SERS pension payments are subject to federal income tax but exempt from Pennsylvania state and local income tax for PA residents. If you live outside of Pennsylvania, you'll need to be aware of the state/other rules regarding taxes.
Each January we will send you at least one 1099-R tax form listing the total benefit you received and other tax information that you will use to file your federal income tax return.
You could receive more than one 1099-R from us in any one tax year if you retired that year and chose to withdraw any of your contributions and interest in a lump sum, you received a payment from your own SERS pension and also received a survivor or beneficiary payment from a deceased SERS member's pension, or you turned 59.5 during that tax year.
If you would like us to withhold money from your monthly pension payments for federal income tax, let us know. You can authorize SERS to start, stop, or change the amount by completing an Annuitant Federal Income Tax Withholding form.
You can estimate the amount of money that will be withheld from your gross monthly pension payments based on current IRS tax tables and various tax filing options using our Federal Income Tax Withholding Calculator.
If you have delinquent tax bills, the IRS may seize a portion of your pension for payment of the outstanding bills.
If you retire before the year you turn 55 and you choose to withdraw any of your contributions and interest when you retire, the taxable portion may be subject to an additional 10% federal excise tax unless you roll the money directly into a traditional IRA or other qualified plan, like your deferred compensation account.
Rollovers allow you to delay paying federal income tax on the money until you withdraw it from the IRA or other qualified plan, when your tax liability may be lower. Contact a tax advisor or financial planner to discuss the different tax consequences.