Pension Staff:
| Nancy R. Walker, Executive Director |
| Daniel Gustafson, Pension Analyst |
| Lora Kluczynski, Management Assistant |
| N. Gail Jarskey, Accountant |
State of Michigan
Pension Withholding Tax Summary for 2012
Beginning in 2012, pension and retirement benefits will be taxed differently depending on the age of the recipient. For couples, age is determined using the age of the older spouse.
For defined benefit pensions, such as the pensions payable from the City of Ann Arbor Employees’ Retirement System, the Michigan State Tax website indicated that:
For pensioners born before 1946, the law remains the same as it was prior to 2012. Those born before 1946 may subtract all qualifying pension and retirement benefits received from public sources, and may subtract private pension and retirement benefits up to $45,842 if single or married filing separate, or $91,684 if married filing a joint return. Withholding will only be necessary on taxable pension payments (private pension payments) that exceed the pension limits stated above for recipients born before 1946.
Recipients born between 1946 and 1952 will be able to deduct $20,000 in pension and retirement benefits if single or married filing separate or $40,000 if married filing a joint return. Withholding is required unless the pension recipient submits form MI W-4P. The pension tax withholding tables included in the Pension Withholding Guide booklet on this website, or available from the State of Michigan, incorporate the deductions of $20,000 for single or married filing separate, and $40,000 married filing a joint return, assuming benefits are paid monthly. Recipients who indicate on the MI W-4P that they are married (withhold as single) should have withholding computed as if they are single.
For recipients born after 1952, all pension and retirement benefits are taxable. The Benefit payor is directed by the State of Michigan to use the monthly withholding table from the Michigan Income Tax Withholding Guide (Form 446) to calculate the appropriate withholding based on the number of personal exemptions claimed on the MI W-4P.
How Much to Withhold
Withholding is required on taxable pension benefits. Ann Arbor Pension Administrators will follow the directions from pension recipients on any MI W-4P we receive. The withholding rate is 4.35 percent of any taxable pension or retirement benefit. The taxable portion is determined by subtracting any pension deduction and personal exemption allowance.
In the absence of a MI W-4P form, the state requires pension administrators to do one of the following:
(1) Do not withhold on benefits paid to recipients born before 1946.
(2) If the recipient was born in 1946 or after, withhold on all taxable pension distributions at 4.35 percent.
This information and the examples were provided by the State of Michigan tax site. Please see your personal tax advisor with questions about your individual situation. More information is available at http://www.michigan.gov/taxes/0,4676,7-238--260229--,00.html
Retirement Workshops
Individual sessions can be scheduled through the Retirement Office at (734) 794-6710.
Future Educational Sessions and schedules to be announced in future Employee Newsletters as well as here on our Web site.
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See the Retirement System Ordinance (navigate to Chapter 18)
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Recently Updated Pages / Reports
Meeting Minutes - updated monthly
Meeting Notices - updated monthly
Retirement System and VEBA Quarterly Report - December 31, 2011
June 30, 2011 Actuarial Valuation (Ret. System)
June 30, 2011 Actuarial Valuation (VEBA Trust)
2011 Retiree Newsletter
2011 Employee Newsletter
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