AB 1023

This bill exempts from taxation all retirement payments received by an

individual from the U.S. Civil Service Retirement System (CSRS) or the Federal

Employees Retirement System (FERS), or both, to the extent that such payments are

not currently subject to an exemption.

Under current law, the pension benefits of certain public employees are exempt

from state taxation. The pensions that are exempt include payments received from

the CSRS, the U.S. Military Employee Retirement System, the Milwaukee City and

County Retirement Systems, the police officer's and fire fighter's annuity and benefit

fund of Milwaukee, the Milwaukee public school teachers' retirement fund, the

Wisconsin state teachers' retirement fund, and the sheriff's annuity and benefit fund

of Milwaukee County. For most of these pension plans, the exemption applies only

to persons who were members of or retired from the plans as of December 31, 1963,

although this limitation does not apply to retirement payments received from the

U.S. Military Employee Retirement System or from payments received from the U.S.

government that relate to service with the U.S. Coast Guard, the commissioned corps

of the National Oceanic and Atmospheric Administration, or the commissioned corps

of the U.S. Public Health Service.

Also under current law, up to $5,000 of payments or distributions received by

certain individuals from a qualified retirement plan under the Internal Revenue

Code, or from certain individual retirement accounts, are exempt from taxation. To

be eligible, the individual must be at least 65 years old and have federal adjusted

gross income under $15,000, or under $30,000 if married.

Under federal law, until 1984, employment by the federal government was

covered entirely under CSRS and not by social security. Federal employees who

began working for the federal government in 1984 or later are covered by CSRS and

Social Security, or by FERS, instead of entirely by the CSRS. In 1986, the federal

government created FERS. Some federal employees who had been covered by CSRS

switched to FERS, and some stayed in CSRS. Work under FERS is covered by social

security. Federal employees who remained in CSRS after 1983 are still not covered

by social security.

This bill exempts from taxation all payments received from CSRS or FERS, or

both, to the extent that such payments are not already exempt, and without regard

to whether the former employee was a member of or retired from CSRS as of

December 31, 1963.

Because this bill relates to an exemption from state or local taxes, it may be

referred to the Joint Survey Committee on Tax Exemptions for a report to be printed

as an appendix to the bill.