Massachusetts DOR Issues Final Technical Information Releases

The Massachusetts Department of Revenue has finalized its guidance related to the personal income tax treatment of retirement contributions and distributions after EGTRRA. Technical Information Release 02-6 confirms the DOR's position that the elective deferrals of individuals to 403(b) and 401(k) plans are includible in Massachusetts gross income to the extent that the amount of such deferrals exceeds the amount excludible from gross income under the 1998 Internal Revenue Code.

Technical Information Release 02-7 provides the COLA-adjusted amounts under the 1998 Internal Revenue Code for tax year 2002 in a tabular format. Taxpayers must keep adequate tax records, because in future years when an individual receives plan distributions, Massachusetts allows a deduction for the portion of plan distributions that were previously subject to Massachusetts personal income tax. According to TIR 02-7, the limitation on the exclusion for elective deferrals to 401(k) and 403(b) plans for 2002, under the 1998 version of Code Section 402(g)(1), is $11,000, which is coincidentally equal to the post-EGTRRA applicable dollar amount of $11,000.

It is worth noting that Massachusetts state and local government employees participating in a section 457(b) governmental plan will be able to take full advantage of EGTRRA's increased deferral limits and the age 50+ catch-up contribution provision. However, TIR 02-6 reiterates that Massachusetts will not follow the increased federal exclusions for other 457 plans, including 457(b) plans of tax-exempt entities.

Copies of TIR 02-6 and TIR 02-7 may be downloaded at the Massachusetts Department of Revenue's website at http://www.dor.state.ma.us/rul_reg/OLL_Income.htm (click).