Thank you for the writeup! Looks like they fixed it to include federal retirees who at that time were not in the Social Security system. I'll send a message to my reps asking them to modify the language to work better for all retirees who delay taking Social Security.Here is a write-up about the rationale: https://mgaleg.maryland.gov/2000rs/fnot ... sb0401.PDFI found out about the exclusion that applies to 401k withdrawals (under a ceiling) but not IRA withdrawals. I don't see the sense in that. What is the difference between withdrawals from a 401k or an IRA? MD has a number of odd tax provisions. This is one of them.
I was able to move funds from an IRA back into a 401k to qualify for this exclusion. It will work for us until SS kicks in when we turn 70.
Basically, the pension exclusion dates to 1968, before ERISA, IRAs, or 401(k)s existed. It used the phrase "employee retirement system." There was confusion over what that meant for all the new kinds of plans that didn't exist in 1968, so in 2000, they clarified it, and explicitly excluded IRAs at that time. There have been periodic attempts to include (at least) rollover IRAs, but the last movement on this was the 502R form added for 2017 so that better data could be collected on how much it would reduce revenues.
I agree that it doesn't seem the legislators or fiscal note people have contemplated the fact that it's increasingly common to be able to put rollover and even contributory IRAs back into an "employee retirement system" and qualify for the exclusion. It also looks like delaying Social Security past age 65 was not a thing before 1972, so in 1968 they did not even consider that anyone would opportunistically delay Social Security so as to fill up their pension exclusion with other would-be taxable income.
Statistics: Posted by furiouschads — Wed Jun 19, 2024 6:43 am — Replies 12 — Views 880