403(b) Plan of the TRS of the City of NY

The TRS operates two retirement plans. One is a Qualified Pension Plan (QPP) and the other is a 403(b) savings plan.

We all know that distributions from the TRS QPP is exempt from the New York personal income tax.

An Advisory Opinion issued by the Department of Taxation and Finance tells us that distributions from the 403(b) savings plan are also exempt from the New York personal income tax. This means the TRS administers two pension plans.

Reality tells us TRS administers only one pension plan with distributions from the 403(b) savings plan subject to the pension and annuity income exclusion which means only the first $20,000 of a 403(b) distribution is tax-free while the amount in excess of $20,000 is subject to the personal income tax.



NYS Pub 36 does not limit the number of pensions eligible for the exclusion. Most eligible govt agencies operate more than one plan, a DC plan (403b) and a DB plan.



 Eric;There are eight defined benefit public-sector pension systems in New York.  Three are on the state level and five are on the City of New York level.  The TRS of the City of New York is the only one of the eight that also operates a defined contribution plan—it is authorized by section 403(b) of the Internal Revenue Code.Publication 36 lists all of the various retirement systems that are exempt from the New York personal income tax.  On the list is the TRS 403(b) savings plan.  Example:  Michael is a TRS retiree and his tax-deferred 403(b)balance is $1,000,000.  His contributions and the gains those contributions have generated have never been taxed.  Michael withdraws $100,000.  This withdrawal is exempt from the New York personal income tax.  Q.: Is it possible that contributions and gains are tax-deferred while withdrawals are tax-exempt?  Sure it is possible but it is contrary to law and the TRS 403(b) plan must be removed from the list of tax-exempt plans.    – 



Section 612(c)(3)(i) of New York law and Section 13-561 of the NYC Administrative Code makes pensions from the TRS Qualified Pension Plan exempt from the New York State and New York City personal income tax.The Department of Taxation and Finance, in error, applies these two sections to distributions from the TRS TDA/403(b) Plan.  This is absurd and must be corrected forthwith. 



It is what it is.
This forum is for helping people deal with tax laws and rules as they are, not what you think they should be
It is time to move on.



To:  Spiritrider:  WHERE IS YOUR SPIRIT? I AM TRYING TO CORRECT A WRONG.     



My spirit is for and at peace.



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