Questions & Answers

What type of benefits qualify for the Michigan Pension Subtraction?

Most retirement benefits on Form 1099-R qualify.

Benefits from these public sources qualify:

  • The state of Michigan
  • Michigan local governmental units (e.g., Michigan counties, cities, and school districts)
  • Federal civil service

  • Benefits from these private sources qualify:
  • Pension plans that define eligibility for retirement and set contribution and benefit amounts in advance
  • Qualified retirement plans for the self-employed
  • Retirement distributions from a 401(k) or 403(b) plan attributable to employer contributions or attributable to employee contributions that result in additional employer contributions (e.g. matching contributions)
  • IRA distributions received after age 59 1/2 or described by Section 72(t)(2)(A)(iv) of the IRC (series of equal periodic payments made for life)
  • Benefits from any of the previous plans received due to a disability, or as a surviving spouse if the decedent qualified for the subtraction at the time of death and was born prior to January 1, 1953 (Note: some additional qualified benefits exist for surviving spouse benefits when the benefits were SSA exempt)
  • Benefits paid to a senior citizen (age 65 or older) from a retirement annuity policy that are paid for life (as opposed to a specified number of years)
  • Foreign pension and retirement benefits that meet Michigan's qualifications

  • For public and private retirement benefits, the following are not allowed:
  • Amounts received from a deferred compensation plan that lets the employee set the amount to be put aside and does not set retirement age or requirements for years of service. These plans include, but are not limited to, plans under Sections 401(k), 457, and 403(b) of the IRC
  • Amounts received before the recipient could retire under the plan provisions, including amounts paid on separation, withdrawal, or discontinuance of the plan
  • Amounts received as early retirement incentives, unless the incentives were paid from a pension trust.
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