September 18, 1998 

Massachusetts employees contributing to their employers' tax-deferred retirement programs – such as the MGH 403(b) plan – soon will see a decrease in state income taxes withheld and a slight increase in net pay on their paychecks. Where Massachusetts previously taxed such contributions as ordinary income, under new legislation the state defers taxation on the contributions just as the federal government does.

The next paycheck employees receive – Sept. 24 for weekly and Sept. 28 for monthly employees – will reflect exclusion of any 403(b) contributions from state-taxable income, reducing the amount withheld for state taxes.

This change in tax law simply changes the timing of taxation. Employees will be taxed in the future when they begin receiving payments from their tax-deferred accounts.

Although this tax legislation is retroactive to Jan. 1, 1998, state taxes that have already been withheld cannot be refunded on paychecks. Employees will need to claim a deduction when filing state income taxes for 1998.

For more information, call the Benefits Office at 6-8133 and press "2" or send e-mail to ibenefits@partners.org.

For information on retirement saving programs at MGH, please see "The MGH personal savings plan for retirement," in this issue.