I recall a federal statute was passed several years ago that prohibits the state of employment (state 1) from continuing to tax the benefits paid to retirees who have moved out of the state (to state 2). Unfortunately, I can't put my hands on the statute.

What I can't recall is whether the installments have to be paid over "more than 10 years" or "10 or more years."

Can anyone help?

I found it - in 1996 Federal PL 104-95 provides that no state can tax retirement benefits paid to a resident of another state if the payment are made in periodic installments over 10 or more years.

http://frwebgate.access.gpo.gov/cgi-bin/ge...id=f:publ95.104

On a side tangent...

What if benefits go to an IRA rollover account, then down the road payments start. Did CA et al ever figure that one out or did they just focus on payments from companies' plans domiciled in their state?

There is nothing California could do even if they figured it out. The federal law prevents the work state from taxing distributions from a qualified plan or an IRA. Doesn't matter where the IRA funds came from . . .

It is unlikely that a state will have access to records showing where former residents who accrued a pension or made deductible IRA contributions now live. The law was passed to prevent CA from withholding state income tax on the pensions of former CA public employees who moved to states like NV that have no state income tax. In any event the states have no authority to withhold taxes from pensions paid to retirees who receive pensions subject to ERISA. Harry Reid, the Sen from NV was the sponsor of PL 104-95.