Eldridge Bay Retirement System

Taxation of Pension Benefits

Your Massachusetts public retirement allowance is taxed under both federal and state law — but the rules differ in important ways.

The Eldridge Bay Retirement System cannot give individual tax advice. This page is general information. For tax planning specific to your situation, consult a CPA or enrolled agent familiar with public-pension taxation.

Federal income tax

Most of your retirement allowance is federally taxable as ordinary income.

A portion of your benefit may be recovered tax-free if it comes from contributions you already paid tax on. The board reports the taxable amount on your annual Form 1099-R. For how this applies to you, consult a tax adviser.

Federal withholding

You may elect federal income tax to be withheld from your retirement check by filing IRS Form W-4P with the board's office. You can adjust the withholding at any time. If you don't withhold, you may owe quarterly estimated tax payments to the IRS.

1099-R

Each January, the board issues a Form 1099-R for the prior tax year, showing your payments and any federal tax withheld. It is also available in the Member Portal. If you don't receive it by mid-February, contact the board.

Massachusetts state income tax

Massachusetts does not tax the portion of your retirement benefit that comes from the Massachusetts public retirement system (MGL Chapter 32 § 19). Specifically:

  • Your monthly retirement allowance from the Eldridge Bay Retirement System, MTRS, MSRB, or any other MA public retirement system is not subject to Massachusetts income tax.
  • How a refund of your member contributions is taxed is a separate question. Consult a tax adviser.

This is a real cash advantage for Massachusetts residents over public retirees in many other states. Some states (e.g., New York, New Jersey) tax their public-pension retirees in full.

State withholding

You may also elect Massachusetts state income tax withholding by filing Form M-4P with the board's office. Since the allowance itself isn't MA-taxable, this only matters if you have MA tax owing for other income (Social Security, investment income, part-time work, etc.) and you want it withheld through this paycheck.

Moving out of state

If you move out of Massachusetts in retirement, your benefit becomes subject to your new state's tax law, not Massachusetts's. Some states tax public pensions; some don't. New Hampshire and Florida have no state income tax at all. Ask your tax professional about the tax consequences of any planned move.

The board honors a change of state residence — including for tax-withholding purposes — once you notify us. Use the form in the Member Portal or contact the office.

Disability retirement tax treatment

The tax treatment of disability retirement benefits can differ from that of superannuation benefits. Consult a tax adviser.

Survivor benefits

A spouse or beneficiary receiving an Option C survivor allowance, an Option B refund, or a § 100 line-of-duty death benefit receives a 1099-R and is taxed on the same federal/state framework that applied to the retiree.

Resources