Did Kansas's Washburn University retirement subtraction cover both the basic plan and supplemental annuity, including funds rolled into the Washburn plan?

Plain-English summary

Notice 08-06 clarified which Washburn University plans qualified for the Kansas subtraction described in K.S.A. 79-32,117(c)(xx).

Benefits received on or after January 1, 2008 from either of these plans qualified:

• Washburn's basic defined-contribution retirement plan operating under IRC § 403(b); and
• the university's Supplemental Retirement Annuity.

The benefits were not subject to Kansas income tax whether taken as a lump sum or paid over time.

The notice also addressed rollovers into the Washburn plan from a self-directed IRA or another retirement plan. The Department expressly declined to decide whether federal law and Washburn's plan terms permitted such a rollover. That eligibility question belonged to the IRS and plan representatives. If the rollover was allowed, however, the Department said the incoming funds would presumably become part of the Washburn plan; when later distributed, they would be treated like other plan funds and qualify for the Kansas subtraction.

What this means for you

Washburn retirees

Both the basic plan and supplemental retirement annuity were within the subtraction described by this notice. The method of payment — lump sum or installments — did not change the Kansas result.

People considering a rollover into Washburn's plan

Confirm first that federal law and the plan document allow the rollover. The Department did not rule on that question. Its Kansas tax conclusion was conditional: if the plan validly accepted the funds, later distributions would presumably qualify as Washburn-plan benefits.

Common questions

Q: Did the supplemental retirement annuity qualify?
A: Yes. The notice expressly includes both the basic plan and the supplemental annuity.

Q: Did a lump-sum payment qualify?
A: Yes. Lump-sum and periodic benefits were treated the same.

Q: Did Kansas decide whether an IRA could be rolled into the Washburn plan?
A: No. The Department directed that question to the IRS and Washburn plan representatives.

Q: What if the Washburn plan validly accepted an incoming rollover?
A: The Department said the funds would presumably become plan funds and later distributions would qualify like other Washburn-plan benefits.

Citations and references

• K.S.A. 79-32,117(c)(xx) — subtraction for qualifying Washburn University retirement and pension benefits.
• IRC § 403(b) — Washburn's basic retirement plan.
• Notice 08-04 — the earlier Washburn retirement-benefit notice discussed in this notice.

Subject

Kansas Income Tax Treatment of Certain Washburn University Retirement Benefits

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 08-06

Original ruling text

Notice
Notice Number: 08-06
Tax Type: Individual Income Tax
Brief Description: Kansas Income Tax Treatment of Certain Washburn University Retirement
Benefits
Keywords:
Approval Date: 12/19/2008

Body:
KANSAS DEPARTMENT OF REVENUE

                                                NOTICE 08-06


                                 Kansas Income Tax Treatment of Certain
                                 Washburn University Retirement Benefits

Advice has been requested concerning the income tax treatment of certain payments received from the Washburn
University retirement plan.

Generally

As explained in Notice 08-04, Kansas law [K.S.A. 79-32,117] allows a taxpayer’s federal adjusted gross income to be
modified by subtracting:

        (c)(xx) Amounts received by retired employees of Washburn university as retirement and pension benefits
        under the university retirement plan.

The subtraction modification is allowed for retirement benefits received from the Washburn University retirement
plan on or after January 1, 2008.

Plans Available

According to information published by Washburn University, the university’s basic retirement plan is a defined
contribution plan operating under Section 403(b) of the Internal Revenue Code. In addition, the university also
provides eligible employees the option to participate in a Supplemental Retirement Annuity.

Subtraction Modification Allowed

A subtraction modification will be allowed for retirement benefits received from either the Washburn University basic
retirement plan or from the university’s supplemental retirement annuity. As a result, these benefits will not be subject
to Kansas income tax. This is true whether the benefits are taken in a lump sum or paid out over time.

Rollovers From Self Directed IRA Or Other Retirement Plans

The Department of Revenue does not administer either federal tax law or the retirement plan at Washburn University.
As a result, the Department cannot express an opinion as to whether the funds in a self directed IRA or other
retirement plan can be rolled over into the Washburn University Retirement Plan. Questions in this regard should be
directed to the Internal Revenue Service and/or representatives of the Washburn University Retirement Plan.

If federal law and the terms of the Washburn University Retirement Plan allow the Plan to accept funds moved (rolled
over) from a self directed IRA or other retirement plan the funds would, presumably, be considered part of the Plan

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funds. As a result, upon distribution these funds would be treated the same as any other Plan funds, and would qualify
for the subtraction modification provided under Kansas law.

Taxpayer Assistance

Additional copies of this notice, forms or publications are available from our web site, www.ksrevenue.org. If you
have questions about income tax, please contact:
Taxpayer Assistance Center
Kansas Department of Revenue
915 SW Harrison St., 1st Floor
Topeka, KS 66612-1588
Phone: 785-368-8222
Fax: 785-291-3614

Date Composed: 12/19/2008 Date Modified: 12/19/2008

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