Many OPERS retirees have contacted OPERS regarding an increase in their income tax withholding on their January benefit payments. The increase in income tax withholding is the result of confusion over income tax withholding tables published by the IRS.  The IRS published the 2013 income tax withholding tables at the end of December 2012. Because Congress had not yet voted on a “fiscal cliff” plan, the 2013 tables were issued under the assumption that no federal tax legislation passed. These tables, which we were furnished less than a month ago, assumed the Bush-era income tax reductions would expire and income tax rates would increase January 1, 2013. As we know now a compromise was reached by Congress and President Obama leading to legislation signed on January 3, 2013. This legislation kept 2012 income tax rates the same with some limited exceptions for higher income taxpayers.

The IRS published notice 1036 soon after the federal legislation was signed. This notice provided information about the correct withholding rates for use in 2013. The message from the IRS instructed employers to begin using the corrected withholding tables as soon as possible, but no later than February 15, 2013. If OPERS had the information about the new tables earlier in January, OPERS could have used the corrected withholding amounts for the January 2013 benefit payments. Unfortunately, the tables published by the IRS at the end of December were used.

OPERS management and staff apologize to all of our retirees and beneficiaries for this confusion. To ensure that all of our retirees and beneficiaries withhold the correct amount in 2013 as reflected in the most recently-issued IRS tables, OPERS will adjust the February federal tax withholding so that the total taxes withheld for both months, is based on the revised 2013 tax tables. As a result, your February withholding will reflect a smaller amount to offset the incorrect larger amount withheld in January.  In March the withholding will be the correct amount which presumably will be the same for the remainder of 2013.

NOTE: Retirees who have designated a fixed amount of withholding rather than using the tax tables, will not see a change. Only those using the tables will be affected.

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