Short answer: Alaska has no state income tax, so an Alaska TRS pension isn't taxed by the state. It is taxed by the federal government, except a small tax-free part if you paid contributions before 1991 or paid indebtedness with money that was already taxed. If you move out of Alaska, your new state may tax it, and DRB won't withhold state tax. Handbook (2011), p. 27, Local, State, and Federal Taxes; Retirement booklet (June 2023), p. 26, Section VII; AS 14.25.200
What DRB says
Alaska has no state income tax; recipients living elsewhere may owe state and local tax, and DRB does not withhold state tax. Pension and survivor benefits are federally taxable, except a tax-excludable part if you paid taxed contributions before 1991 or taxed indebtedness payments. Disability benefits are fully taxable. Without a W-4P, withholding defaults to single with zero adjustments. Handbook (2011), p. 27, Local, State, and Federal Taxes; Retirement booklet (June 2023), p. 26, Section VII; AS 14.25.200
The tax-free part
You may have a tax-free part of each check if you paid contributions before 1991 or paid an indebtedness with taxed money. It is figured from your taxed contributions and your life expectancy (and your spouse's, if a survivor benefit will be paid), so it is spread over your lifetime. DRB tells you the amount when you retire. Retirement booklet (June 2023), p. 26, Tax Excludable Benefits Survivor benefits are federally taxable too, though part of a survivor's check may be tax-free depending on the member's situation at death. Retirement booklet (June 2023), p. 26, Tax Excludable Benefits Survivor options are explained on the payment options page.
Withholding and your 1099-R
You choose whether to have federal income tax withheld by filing a W-4P with your retirement application, and you can change it any time with a new W-4P. If you don't send one, DRB withholds as if you were single with zero adjustments. Retirement booklet (June 2023), p. 26, Federal Income Tax Withholding; Handbook (2011), p. 27
Each January you get a 1099-R showing last year's benefit, the taxable amount and the federal tax withheld. Handbook (2011), p. 27, Local, State, and Federal Taxes
Refunds
Refunds: Alaska TRS must withhold 20% federal income tax on the untaxed part of a refund paid to you, but not on a direct rollover to an IRA or other qualified plan. An early-withdrawal penalty may apply before age 59 1/2. Contributions made before 1991 were already taxed and can't be rolled over. Handbook (2011), p. 7, Tax Considerations
Untaxed contributions refunded directly have 20% federal withholding; direct rollovers avoid it. A penalty may apply before age 59-1/2. Contributions made before Dec. 31, 1990 were already taxed. Handbook (2011), p. 7, Tax Considerations Whether to take a refund at all is covered in leaving and refunds.
Going back to work too soon
Going back to work for the State of Alaska during the required break in service can bring extra tax penalties. Retirement booklet (June 2023), p. 26, Tax Consequences of Reemployment with the Same Employer The break rules are on the working after retirement page.
The facts
- Alaska has no state income tax. If you live in another state you may owe its income tax, and DRB does not withhold state tax.Handbook (2011), p. 27; Retirement booklet (June 2023), p. 26
- Alaska TRS pensions are federally taxable. A small part may be tax-free if you paid contributions before 1991 or paid indebtedness with taxed money. Disability benefits are fully taxable.Handbook (2011), p. 27; Retirement booklet (June 2023), p. 26, Tax Excludable Benefits
This isn't tax advice. DRB staff don't give tax advice either; for your own situation, ask a tax professional.
Questions
Does Alaska tax my Alaska TRS pension?
No. DRB says Alaska has no state income tax. If you live in another state, you may owe its income tax, and DRB doesn't withhold state tax.
Is my pension federally taxable?
Yes. A small part may be tax-free if you paid contributions before 1991 or paid indebtedness with money already taxed. Disability benefits are fully taxable.
What if I don't send a W-4P?
DRB withholds federal tax as if you were single with zero adjustments. You can change your withholding any time with a new W-4P.
Is a refund taxed?
The untaxed part has 20% federal tax withheld unless you roll it directly to an IRA or other qualified plan, and an early-withdrawal penalty may apply before age 59 1/2.
Source: Alaska Teachers' Retirement System Information Handbook (Tiers I and II), 2011 edition (current on drb.alaska.gov), checked against the TRS Retirement Application Instruction Booklet (June 2023), pp. 7, 27. Also: Retirement booklet (June 2023), p. 26; AS 14.25.200. Last reviewed .