Federal income tax
Monthly benefits from KERS, CERS and SPRS are subject to federal income tax. For members who have made taxed contributions to KRS and elect to receive monthly benefits, current Internal Revenue Service regulations provide that the amount of after-tax dollars in the account be recovered by making a portion of each monthly benefit non-taxable. The non-taxable portion of each monthly benefit is referred to as the monthly exclusion and represents those contributions paid to the Retirement System prior to August 1, 1982, and any service purchases or re-contributions paid with taxed income.
The monthly exclusion, which is a specific dollar amount, remains the same and is not affected by increases in the recipient’s retirement benefit. The monthly exclusion will continue until there are no remaining payments on the account or until the total of all monthly exclusions on the account equals the member’s taxed contributions.
Box 5 of the 1099-R, sent annually to recipients of retirement benefits, reflects the total of all monthly exclusions applied to a recipient’s benefits for the year.
Income tax withholding
You have the right to choose whether you want federal income tax withheld from your monthly retirement benefit payments. You may want to review your decision on withholdings periodically. From year to year, the amount of federal tax being withheld from your benefit payments (if any) may change due to changes in the withholding tables provided by the IRS. Your original withholding choice will remain in effect until you file new tax withholding forms with KRS. Complete Form 6017 - Federal Income Tax Withholding Preference or change your withholdings online using our self service site. Your decision on income tax withholding is an important one, and you should discuss it with a qualified tax advisor.
The Tax Reform Act of 1986 requires tax withholding from benefit payments if you are a U.S. citizen receiving your benefits in a foreign country. If you are not a U.S. citizen and are living in a foreign country, different income tax rules apply.
State income tax
All benefits attributable to service earned on or before December 31, 1997, are exempt from Kentucky income tax. The portion of the member’s benefits earned January 1, 1998 and after is subject to Kentucky income tax; however this income may be excluded up to a certain amount. See Schedule P in the Kentucky Income Tax forms for the exclusion amount and calculation. Retirement credit for unused sick leave is treated as being earned at the time of retirement.
Cost of living adjustments
All future COLAs to KRS recipients must be enacted by the General Assembly. The requirements for providing a COLA stipulate it may only be paid if the funding level in the particular system in which the COLA is being provided is greater than 100% and the COLA payment will not reduce the funding level below 100%, or if the legislature prefunds the COLA. It is possible for recipients of one KRS system to receive a COLA while recipients in another KRS system may not.
Lost or stolen check
In the event your check is lost or stolen, contact the retirement office
immediately and explain what happened. Your check can be replaced if it is
destroyed, lost, or stolen, but the procedure may take up to four weeks.
It is important to keep your address current with KRS. Doing so will ensure
retirement checks, newsletters, and other information related to your account
are delivered to you on time. If you need to change your address, please follow
the procedures listed below:
- Check with the Post Office: Be sure that your correct address is on file at
the U.S. Post Office. Each month, KRS updates the address on file for you with
the U.S. Post Office through the National Change of Address (NCOA) system. If
the correct address is not on file with the Post Office, your address on file at
the retirement office may be replaced with an incorrect address. If you receive
your check by mail, the Post Office will not forward your check. Failure to
update your address with KRS will result in a delay in receiving your
- Complete and File a Form 2040: Complete a Form 2040, Change of Address Notification, and
file it with KRS.
- Login to Self Service: You can easily update your address on our self service website.
- Talk to a Counselor: You can contact our office by phone. After you provide
your PIN and Member ID, a counselor can update your address for
Information from KRS
Following your retirement, you will be notified of any changes made in the
retirement statutes or federal law that may impact your benefits through a
periodic newsletter. In January of each year we will issue a 1099-R providing
the information you need to file your tax return. You do not need to request
this information; your 1099-R will automatically be issued to you by the end of
January if you received benefits during the previous calendar year. You can view
this information online as soon as it is available by checking our self service website.
Power of Attorney
If you execute a Power of Attorney empowering another person to act on your
behalf as your attorney-in-fact, you should submit a copy of the Power of
Attorney to KRS if you wish for your attorney-in-fact to act on your behalf with
regard to KRS matters. If you want your attorney-in-fact to be able to make
health care transactions on your behalf, name beneficiaries, or change your
beneficiary designation, you should specifically grant your attorney-in-fact
that power in your Power of Attorney.