Payment of Benefits

If your fully completed Service Retirement Application is submitted to STRS Ohio at least 30 days before your retirement date, STRS Ohio may issue a benefit payment on your retirement date. If the actual benefit amount is not calculated by your retirement date and you are eligible for a benefit without additional purchased service credit, we may issue a “partial” payment based on current information available on your account.

Once exact information is available, any balance due will be retroactive to your effective date of retirement and paid as a catch-up payment, which is the difference paid to you after receiving partial payments and before your regular payments begin. Benefits are automatically deposited to your bank account on the first banking day of each month, which is usually the first day of the month, unless that day falls on a holiday or weekend. Most members receive three or more partial payments.

If your fully completed application is not submitted at least 30 days before the retirement date, your partial payment will begin the first of the second month following receipt of your retirement application.

No partial payments or regular payments will be made if:

• STRS Ohio is waiting for clarification of a court order that requires a member to provide a continuing benefit to a former spouse after the member’s death.
• STRS Ohio is unable to determine service retirement eligibility before we have received information from your employer or another Ohio public retirement system (if you are combining your STRS Ohio service credit with credit in another system).
• You need to purchase service credit to attain service retirement eligibility.

DC Plan

Your benefit is final on your effective date of retirement. At this time, your account is cashed out and you cannot change your decision to begin taking your benefit.

CO Plan

The defined benefit portion of your benefit is final on the 15th of the month of the first regular benefit payment. The defined contribution portion is final on the retirement date.

Taxation of benefits

Federal income tax

Beginning with the first payment, STRS Ohio retirement benefits are taxable. STRS Ohio will withhold federal taxes from your benefits unless you direct otherwise. If federal taxes are not withheld, you will be responsible for filing federal quarterly estimates. You can estimate your federal tax withholding using our W4-P Tax Withholding Estimate calculator.

If you paid taxes on some of your contributions, a small percentage of your benefit will be tax-free until your taxed contributions are exhausted. For example, if you paid taxes on $25,000 of contributions and the Internal Revenue Service (IRS) determines these contributions are to be spread over 25 years, $1,000 of your retirement benefit will be tax-free for the first 25 years of your retirement. Information regarding any amount excludable from tax will be sent to you after your retirement account is finalized and will be reflected on your 1099-R form.

Under federal tax laws, a Partial Lump-Sum Option Plan (PLOP) payment that is eligible for rollover, but is paid directly to you instead, is subject to a mandatory 20% federal tax withholding. In addition, you may be subject to a 10% penalty for early withdrawal. This penalty does not apply if you withdraw the lump sum after you reach age 59-1/2, or you have separated from service and have taken payment in or after the year in which you turned age 55.

Ohio income tax

The taxable portion of a retirement benefit or a PLOP payment paid directly to you is subject to Ohio income tax for Ohio residents. On request, we will withhold Ohio income taxes.

Income tax — other states

If you are a resident of another state, your state tax liability is governed by the laws in that state. STRS Ohio cannot withhold tax for states other than Ohio.

Local or municipal taxes

STRS Ohio retirement benefits are exempt from local or municipal taxes in Ohio.

School district income tax

STRS Ohio retirement benefits may be subject to local school district income taxes in Ohio. Some districts in Ohio have a provision where the school district income tax applies to earned income only.

Taxable income

Following the end of the calendar year, benefit recipients who have not opted out of receiving paper copies will be mailed a 1099-R form for monthly benefits showing annual gross benefits and taxable amount as computed by STRS Ohio. You will receive a separate 1099-R form for a PLOP payment if elected. The 1099-R form is also made available in your Online Personal Account.

For more details about taxation of benefits, contact the IRS, the Ohio Department of Taxation or a professional tax advisor. STRS Ohio cannot provide tax advice.