NGNMRS Tax Information
The State of Alaska and the NGNMRS do not give tax advice. The following is general information regarding the taxability of your NGNMRS benefit. You should consult the Internal Revenue Service or your tax advisor for specific tax information.
If You Are Electing a Monthly Benefit
When electing a monthly benefit you must complete an IRS Form W4-P [PDF] specifying one of the tax withholding options. If a W-4P is not received at the time your monthly benefit is to begin, we will withhold federal income tax from your monthly benefits at the tax rate for a married person with three allowances.
NGNMRS monthly benefits are for a set period of months equaling the number of months of NGNMRS service you have. If you are under 59 ½ your monthly payment may be subject to an additional 10 percent early withdrawal penalty. Please contact the Internal Revenue Service or your tax advisor for information regarding the penalty and its affect on your benefit.
If You Are Electing a Lump Sum Benefit
Taxable portions of distributions you receive will be subject to income taxes in the current year unless you roll it over into a tax qualified plan. In addition, the taxable portion will be subject to an additional 10 percent early withdrawal penalty if you receive your distribution before you reach age 59 ½. The penalty may not apply if you at least age 55 at the time you terminated with the guard, or if distributions are made due to permanent disability or for a qualified domestic relations order (QDRO). Contact the Internal Revenue Service or your tax advisor for more information.
The federal tax law requires the NGNMRS to withhold, and send to the internal Revenue Service, 20 percent of the taxable amount of any distribution we pay directly to you, even if you intend to do a rollover within the 60 day rollover period. If you want to include the 20 percent withheld in your rollover, you must supply it from another source. If the withholding exceeds the actual taxes due, a refund is obtained through your federal income tax return. You can avoid the withholding tax by requesting a direct transfer to another tax qualified plan that accepts your transfer, such as an Individual Retirement Arrangement (IRA). Only taxable money may be direct transferred or rolled over, and any taxable portion that is not direct transferred will be subject to withholding. No income tax will be withheld on the transferred amount and it will not be taxed until you later take it out of the IRA or qualified plan.