An Act To Provide Equity in the State Income Tax Deduction for Certain Public Employees Retirement System Pensions
Maine Legislature, Session 130, LD 1413
Committee: Taxation
Sponsors: RAFFERTY, MILLETT, BALDACCI, BABBIDGE, ROCHE, STEARNS
Amends: 36 MRSA §5122

Legislative Document
No. 1413
S.P. 463
In Senate, April 12, 2021
An Act To Provide Equity in the State Income Tax Deduction for 
Certain Public Employees Retirement System Pensions
Received by the Secretary of the Senate on April 8, 2021.  Referred to the Committee on 
Taxation pursuant to Joint Rule 308.2 and ordered printed.
DAREK M. GRANT
Secretary of the Senate
Presented by Senator RAFFERTY of York.
Cosponsored by Representative MILLETT of Cape Elizabeth and
Senator: BALDACCI of Penobscot, Representatives: BABBIDGE of Kennebunk, ROCHE of 
Wells, STEARNS of Guilford.
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  36 MRSA §5122, sub-§2, ¶C-1 is enacted to read:
C-1.  For tax years beginning on or after January 1, 2021:
(1)  For each individual who is a primary recipient of civil service retirement plan 
benefits, the lesser of:
(a)  The aggregate of civil service retirement plan benefits included in the 
individual's federal adjusted gross income; and
(b)  The civil service pension deduction amount reduced by the total amount 
of the individual's social security benefits and railroad retirement benefits paid 
by the United States, but not less than $0;
(2)  For purposes of this paragraph, "civil service pension deduction amount" 
means:
(a)  For the tax year beginning in 2021, $15,000;
(b)  For the tax year beginning in 2022, $20,000;
(c)  For the tax year beginning in 2023, $25,000;
(d)  For the tax year beginning in 2024, $30,000; and
(e)  For tax years beginning on or after January 1, 2025, the maximum annual 
benefit that an individual retiring at the retirement age, as defined in 42 United 
States Code, Section 416(l), during January of the tax year may receive under 
the federal Social Security Act; and
(3)  For the purposes of this paragraph, "primary recipient" and "retirement plan 
benefits" have the same meanings as under paragraph M-2, subparagraph (2);
Sec. 2.  36 MRSA §5122, sub-§2, ¶M-2, as amended by PL 2017, c. 170, Pt. H, 
§3, is further amended to read:
M-2.  For tax years beginning on or after January 1, 2016:
(1)  For each individual who is a primary recipient of retirement plan benefits, the 
reduction is the sum of:
(a)  Excluding military retirement plan benefits, an amount that is the lesser of:
(i)  The aggregate of retirement plan benefits under employee retirement 
plans or individual retirement accounts included in the individual’s federal 
adjusted gross income; and
(ii)  The pension deduction amount reduced by the total amount of the 
individual’s social security benefits and railroad retirement benefits paid 
by the United States and, for tax years beginning on or after January 1, 
2021, also reduced by any civil service retirement plan benefits for which 
a subtraction is allowed under paragraph C-1, but not less than $0; and
(b)  An amount equal to the aggregate of retirement benefits under military 
retirement plans included in the individual’s federal adjusted gross income; 
and
(2)  For purposes of this paragraph, the following terms have the following 
meanings.
(a)  "Employee retirement plan" means a state, federal or military retirement 
plan or any other retirement benefit plan established and maintained by an 
employer for the benefit of its employees under the Code, Section 401(a), 
Section 403 or Section 457(b), except that distributions made pursuant to a 
Section 457(b) plan are not eligible for the deduction provided by this 
paragraph if they are made prior to age 55 and are not part of a series of 
substantially equal periodic payments made for the life of the primary recipient 
or the joint lives of the primary recipient and that recipient's designated 
beneficiary.
(a-1)  "Civil service retirement plan benefits" means:
(i)  Retirement plan benefits received under Title 5, Part 20 excluding pick-
up contributions for which a subtraction is allowed under paragraph E; or
(ii)  Retirement plan benefits received under a retirement plan of another 
state government, local government or the Federal Government as a result 
of service for that government.
"Civil service retirement plan benefits" does not include benefits from a 
military retirement plan.
(b)  "Individual retirement account" means an individual retirement account 
under Section 408 of the Code, a Roth IRA under Section 408A of the Code, 
a simplified employee pension under Section 408(k) of the Code or a simple 
retirement account for employees under Section 408(p) of the Code.
(c)  "Military retirement plan" means retirement plan benefits received as a 
result of service in the active or reserve components of the United States Army, 
Navy, Air Force, Marines or Coast Guard.
(d)  "Pension deduction amount" means $10,000.
(e)  "Primary recipient" means the individual upon whose earnings or 
contributions the retirement plan benefits or civil service retirement plan 
benefits are based or the surviving spouse of that individual.
(f)  "Retirement plan benefits" means employee retirement plan benefits, 
except pick-up contributions for which a subtraction is allowed under 
paragraph E, reported as pension or annuity income for federal income tax 
purposes and individual retirement account benefits reported as individual 
retirement account distributions for federal income tax purposes.  "Retirement 
plan benefits" does not include distributions that are subject to the tax imposed 
by the Code, Section 72(t) or, for tax years beginning on or after January 1, 
2021, civil service retirement plan benefits for which a subtraction is allowed 
under paragraph C-1;
SUMMARY
This bill establishes an income tax exemption for civil service retirement plan benefits 
for recipients who do not participate in the federal social security program in recognition 
of the fact that the current law provides an income exemption for all social security benefits 
in addition to a $10,000 pension exemption for retirement plan benefits.  The bill phases in 
greater parity in treatment of the 2 types of pension systems by increasing the civil service 
pension deduction amount by $5,000 per year until 2025 when it reaches the maximum 
annual benefit that an individual retiring at retirement age would receive under the federal 
Social Security Act.