State Rep. Jeff Yaroch recently introduced legislation to bring fairness to Michigan retirees who were blindsided by the state’s new pension tax.

Yaroch’s plan would exempt retirees from the pension income tax if they began collecting their pension benefits prior to January 1, 2012, the effective date of the new retirement tax.

“Deciding when to retire is a major decision that takes years of advance financial planning,” said Yaroch, of Richmond. “The rules were changed on Michigan retirees in 2012, and thousands didn’t have an opportunity to prepare. They found themselves paying a new tax they hadn’t expected or budgeted for when planning their retirement.

“This is a fairness issue. I do not believe it was fair to place a new tax on Michiganders who had retired with the belief their retirement and pensions would not be taxed.”

Yaroch’s measure would not change the retirement tax system for those who retired after Michigan’s 2012 tax changes took effect.

Current state law includes a three-tiered retirement tax structure – with different rules for taxpayers depending on what year they were born, regardless of when they actually retired and began collecting retirement pensions.

“Regardless of whether you believe pensions should be taxed or not, it wasn’t fair to begin taxing people after they had already retired,” Yaroch said. “Thousands of Michigan retirees were blindsided by these changes, and my legislation sets things right.”

Yaroch’s legislation is House Bill 4949. It was been referred to the House Tax Policy Committee for consideration.

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