Optional Retirement - Tax Implications

Taxability and Reporting on Form W-2

Salary reductions under this plan reduce your taxable income for the year in Box 1 of Form W-2. Therefore these contributions are exempt from federal and state income tax at the time contributions are made.


See the chart under “Access Your Funds” for information about taxation when you withdraw these contributions. Salary reductions under this plan do not impact your Social Security and Medicare wages (Boxes 3 and 5), and therefore these taxes are withheld on your contributions.


Finally, the total reduction amount for the year is reported in Box 12a and Box 13 “Retirement Plan” will be checked.



Retirement Savings Credit (“Saver’s Credit”)

If you participate in the Optional Retirement Plan, you may be eligible for income tax credit if your adjusted gross income does not exceed the following amounts in 2016:

  • $61,500 for Married Filing Jointly.
  • $46,125 for Head of Household.
  • $30,750 for Single, Married Filing Separately, qualifying widow(er) with dependent child, or tax payers who are age 18 or over before the end of their taxable year, other than full-time students or persons claimed as dependents on another taxpayer’s return.

The amount of the credit that can be claimed varies with your filing status, adjusted gross income, and retirement contributions. Refer to the IRS website, IRS publications 571 (Chapter 10) or consult with your tax professional to see if you qualify.


Optional Retirement



Contact your campus benefits office for more information.

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