November 25, 1981
You request a ruling concerning the income tax treatment of contributions to and pensions paid by the Co-operative Banks Employee Retirement Association Pension Plan.
The Co-operative Banks Employees Retirement Association was organized pursuant to Section 51 of Chapter 170 of the Massachusetts General Laws for the purpose of providing pensions for eligible employees of the participating banks who retire on account of age or disability. Eligible employees may contribute a portion of their salaries or wages; such contributions shall be deducted by the employing banks and paid to the Association. A participating bank may also contribute to the funds of the Association.
Section 53 of Chapter 170 states that "[t]he property of the association, the portion of the wages or salary of any employee deducted or to be deducted under, or under authority of, sections fifty-one and fifty-two, the right of an employee to an annuity or pension, and all his rights in the funds of the association, shall be exempt from taxation...".
Section 53 exempts from taxation an employee's "right to an annuity or pension" and his "rights in the funds of the association" prior to receiving any payments. It does not exempt amounts actually distributed to an employee.
Based on the foregoing, it is ruled that:
1. Amounts contributed by employees and employers for the benefit of eligible employees participating in the Co-operative Banks Employees Retirement Association Pension Plan are not taxable to the employee under Massachusetts personal income tax laws in the year the funds are contributed.
2. Such amounts are not subject to withholding of Massachusetts income taxes at the time such amounts are contributed and are not included on the Form W-2 (Wages and Tax Statement) as wages or other compensation until the year in which the funds are made available to the employees.
3. Amounts paid to eligible employees are includible in their Massachusetts gross income and are subject to withholding of Massachusetts income taxes during the taxable year in which such amounts are paid or otherwise made available to such employees through retirement or disability.
Very truly yours,
/s/L. Joyce Hampers
L. Joyce Hampers
Commissioner of Revenue