June 24, 1980
You request information concerning the income tax consequences to an employee who has retired or terminated employment of transferring assets from a qualified pension plan, as defined in Section 401, to an Individual Retirement Account (IRA).
The qualified pension plan was funded from employer contributions. The employee will receive a lump sum representing his entire interest in the qualified pension plan. These assets will be transferred to an IRA within 60 days.
The assets will be "rolled over" within the meaning of Section 402(a)(5) of the Internal Revenue Code. With certain restrictions and limitations, this Section permits a taxpayer a tax-free transfer of money or property from a qualified plan into an IRA.
Massachusetts gross income is federal gross income with certain modifications. (General Laws Chapter 62, Section 2). Generally, an item of income which is not included in federal gross income for a taxable year is not included in Massachusetts gross income.
An employee who retires or terminates service with an employer and transfers assets from a qualified pension plan to an IRA administered by a bank or insurance company will not realize any income from the transfer to the extent that no income is realized from such transfer for federal income tax purposes.
Very truly yours,
/s/L. Joyce Hampers
L. Joyce Hampers
Commissioner of Revenue