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HB1550 HD2 SD1 Imposes State Income Tax on Rollovers Made by State Employees

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.