Tax Type
Individual Income Tax
Description
County pension plan
Topic
Subtractions and Exclusions
Taxable Income
Date Issued
12-10-1987
December 10, 1987
Re: Ruling Request/Individual Income Tax
Dear ******************
This is in reply to your letter of March 31, 1987 in which you requested a ruling regarding the Virginia income tax treatment of the********* adopted by the County of ***********. I apologize for the delay in responding to of the County of your letter and I hope that this delay has not caused you any inconvenience.
FACTS
Effective July 1, 1986, the County of ********** (County) adopted a ********* (Plan). In order to participate in the Plan, the individuals must: (1) be eligible for early retirement under the provisions of the Virginia Supplemental Retirement System (VSRS); (2) have been employed by County for 10 of the last 13 years prior to retirement; (3) be at least 55 years of age; (4) currently employed and (5) not retiring under the disability provisions of the VSRS or the Social Security system.
The Plan provides a monthly benefit for a period of five years after retirement or until age 65, whichever comes first. The annual benefit under the Plan is computed in the following manner:
-
- 1. Compute the annual VSRS benefit under plan A or B as indicated by VSRS. This computation shall include any reductions for early retirement, if applicable.
2. Recompute the annual VSRS benefit with the addition of five or more years service or the number of additional years needed to reach age 65, whichever is the lesser.
3. The difference between these two calculations is the annual Plan benefit.
- 1. Compute the annual VSRS benefit under plan A or B as indicated by VSRS. This computation shall include any reductions for early retirement, if applicable.
Specifically, you have asked whether the amounts paid under the Plan qualify for the subtraction from federal adjusted gross income provided under Virginia Code §58.1-322 C.3.
RULING
Virginia Code §58.1-322 C.3. provides for the subtraction from federal adjusted gross income for:
-
- Pensions or retirement income to officers and employees of the Commonwealth, its subdivisions and agencies, or surviving spouses of such officers or employees paid by the Commonwealth or an agency or subdivision thereof. The amount of subtraction allowable for retirement income paid pursuant to a retirement plan established in accordance with §51-111.28 shall not exceed an amount equal to the amount of retirement benefit received, multiplied by the ratio of contributions made while employed by an institution of higher education located in Virginia to the total contributions made while employed by institutions of higher education everywhere.
The Plan, as set forth in the description provided as an enclosure to your letter, is generally providing a pension to employees of a subdivision of this Commonwealth; therefore, it meets the requirements of Virginia Code §58.1-322 C.3. The amount paid under the Plan, which is a pension or retirement benefit, is exempt from the Virginia individual income tax. To the extent that such amount paid pursuant to the Plan is included in federal adjusted gross income, such amount may be subtracted from federal adjusted gross income in the computation of Virginia taxable income.
However, the department has determined that the amount of lump-sum payment that represents the payment of accrued sick leave is neither pension nor retirement income. Accordingly, the amount of such payment may not be included in the amount subtracted from federal adjusted gross income in the computation of Virginia taxable income.
I hope that this will assist you in answering your employees' concerns. If you have any further questions, please do not hesitate to contact me.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner