Currently there is no state income tax on employee rollovers used to purchase credits in the hybrid plan.
This legislation is cast as “plugging a tax loophole” by capturing taxes at the time retirement credits are purchased. It does not impose a state income tax on the retirement distribution upon retirement.
This legislation is in conference committee and part of the ongoing debate regarding the state budget. The effective date of such a measure is likely July 1, 2009. But, as with all budgets issues, there is no certainty about inclusion in a final budget.
If passed, faculty members will be affected if planning a retirement credit purchase using a 403 (b). Faculty members are encouraged to seek financial advice in determining their best course of action.