Paid Now. Paying Later?

The following article will appear in upcoming issues of NEOEA's newsletters for active and retired members. We're making it available here so that this important information can be distributed as widely as possible. If you're a retired NEOEA member and you don't get NEOEA-R, our newsletter for retired members, it's probably because you're not a member of OEA-R, the only organization of retired Ohio Education Association members. If this information seems valuable to you, maybe that's nature's way of telling you to join OEA-R. You can do so by clicking here, or call 800-282-1500.


Federal Stimulus Plan Impacts Active and Retired Members
by Bill Lavezzi, NEOEA Executive Director


Since some members of NEOEA have families that include both working and retired members, we’re providing information here that applies to both groups.

Many of our members have heard about the “Making Work Pay” tax credit for working individuals and families. This credit (which will provide up to $400 for individuals and up to $800 for families in 2009 and 2010) is being implemented through a change in the tax withholding tables.

According to Terri Bierdeman, head of STRS’s Governmental Relations Department, “pension plan distributions are not considered to be ‘earned income’ for purposes of qualifying for this new credit. However, the Department of the Treasury issued new tax withholding tables to reflect the Making Work Pay credit and other changes resulting from the stimulus package and told pension plans [like PERS, SERS, and STRS] to use the new tables.” STRS Ohio benefit recipients who have federal withholding will receive more information about the application of these new tables to their monthly benefit payment with their April check memo.

Barring a change, then, some retired members may find themselves with tax due at the end of the year since their withholding will have been adjusted for a credit they can’t take.

In addition, the federal stimulus plan includes a one-time $250 payment to Social Security recipients, which they should receive by late May. STRS’s Bierdeman tells us that “initially, this benefit would not have been available to public employees who were not covered by Social Security. However, during the conference on the legislation, Senator John Kerry and others succeeded in adding a section providing a one-time refundable tax credit of $250 in 2009 for such non-covered public retirees ($500 in the case of a joint return where both spouses are eligible). Any such credit must be deducted from any allowable ‘Making Work Pay’ credit.”

Obviously these changes are intended to put more money in members’ hands, but they can have some impact on members’ tax liability. NEOEA does not provide tax advice, so members (both retired and active) are advised to consult a tax professional with any questions on the impact of these provisions.