Most of your retirement benefit will be subject to federal income tax. The only portion exempt from tax is the part that was taxed before it was contributed. Many employers do not withhold federal income taxes from your retirement contributions.
Note: If you retire with a Plan 1 duty disability retirement benefit, your benefit is not subject to federal income tax and this section does not apply to you.
After you retire, DRS will tell you how much of your contribution has already been taxed. The IRS refers to this taxed amount as your “cost.” Complete a W4-P form to tell DRS how much of your benefit should be withheld for taxes. If you don’t, DRS will follow IRS withholding rules as if you are married and claiming three exemptions.
Retirement benefits are not generally subject to assignment or attachment. However, payments received by you in the form of retirement benefits or as a refund of your contributions may be subject to payment of court and administrative orders for spousal maintenance and child support, or payment of any orders authorized by federal law.
DRS is authorized to divide pensions between you and ex-spouses based on court-ordered property division. If the divorce decree complies with the applicable law, DRS will send the property division payment directly to your ex-spouse. For more information, see Can a Legal Order Affect My Retirement Account?