Chapters

00:00 Introduction to PERS Form 9P

00:34 PERS Form 9P Timeline

01:55 PERS Form 9P: Section 1 - Member Information

02:35 PERS Form 9P: Section 2 - Retirement Plan

03:29 PERS Form 9P: Section 3 - Federal Tax Withholding Preference

06:33 PERS Form 9P: Withholding Preference Strategy - Example #1

09:19 PERS Form 9P: Withholding Preference Strategy - Example #2

10:56 PERS Form 9P: Withholding Preference Strategy - Example #3

13:15 PERS Form 9P: Consult a Tax Professional

13:41 PERS Form 9P: Section 4 - Optional Monthly Cost-of-Living Adjustment (COLA) Election

14:48 PERS Form 9P: Section 5 - Bank Account Information

16:16 PERS Form 9P: Section 6 - Applicant Authorization

16:49 How to Submit PERS Form 9P

17:40 Action Items

18:20 Preview of Next Video and Calls to Action

19:36 Legal Disclaimer

Transcript

Hi everyone, I'm Ryan Earley, vested PERS member, former Public School Finance Officer, Current Financial Planner, and host of the PERS Pro YouTube channel. Today, we are walking through PERS Form 9P payroll authorization, which is a mandatory document where you select your direct deposit account, your federal income tax withholding amount, and whether you will receive your COLA monthly or annually. Let's get started.

Before we review this form section by section, let's look at exactly what Form 9P does and the timeline you need to be aware of. Your retirement timeline is governed by a strict two-phase application process defined under PERS Board Regulation 35. As we reviewed in video number 56, you first file your Form 9A pre-application for service retirement benefits to initiate a PERS account audit.

Once processed by PERS, you receive your phase two retirement packet containing your official audited final estimate of benefits, your Form 9S service retirement application, this Form 9P payroll authorization, and if eligible Form PLSO, partial lump sum option distribution election. Form 9P should ideally be filed with Form 9S and Form PLSO before your effective date of retirement although you can file it up until 90 days following that effective date. 

For example, if your effective date of retirement is June 1st, then ideally you submitted your Form 9P by May 31st, but absolutely no later than August 30th. If you miss this 90-day window, your retirement application becomes completely null and void, forcing you to restart the entire process, which results in a new delayed effective date of retirement.

Just like Form 9A, Form 9S, and Form PLSO, you need to legibly print or type using black ink throughout Form 9P. Let's look at the actual form starting with section 1, member information. 

Here you will provide your full legal name, first name, middle initial, and last name, your current mailing address, including city, state, and zip code, your social security number, double check this for typos as errors can delay processing; your email address, PERS email updates will be sent to this address and include legislative changes, retirement plan changes, and leadership updates. And finally your primary phone number. 

Section two retirement plan is brief and fairly straightforward for most. You must select the specific retirement plan administered by Mississippi PERS that you are retiring from. You will see three checkboxes: Public Employees Retirement System of Mississippi or PERS.  This covers the vast majority of state employees, public school teachers, university staff, and participating local government workers. Mississippi Highway Safety Patrol Retirement System, or MHSPRS, this is exclusively for sworn officers of the Highway Safety Patrol. And Supplemental Legislative Retirement Plan, or SLRP, this applies to elected members of the state legislature and the president of the Senate. 

As a reminder, if you are a retiring lawmaker, you may be a member of both systems and must check both the PERS and SLRP boxes. For most of you watching, you will simply check the first box for PERS.

Now we arrive at section three, federal tax withholding preference, which requires careful consideration. This section instructs PERS how much to withhold from your monthly service retirement benefit each month to go towards federal income taxes. You are presented with three distinct options. 

Option one, table-based withholding. PERS will calculate your withholding automatically using standard IRS tax tables.  If you select this option, you must specify whether you are filing as single or married and write in the precise number of withholding exemptions you wish to claim. If you opt for this, it's vital to understand how your choices impact your take-home pay. 

Selecting a married status will result in less money being withheld from your monthly benefit, and claiming a higher number of exemptions will result in less money being withheld from your monthly benefit.

Conversely, selecting single status will result in more money being withheld from your monthly benefit, and claiming a lower number of exemptions will also result in more money being withheld from your monthly benefit. If you want the most amount withheld for federal income tax purposes based on IRS tax tables, you would select single and zero exemptions. 

With the table base withholding, you can also withhold an additional amount by writing in an amount next to the number of exemptions.  This will be the additional amount withheld each month, not each year, so be careful. 

Option two, fixed dollar withholding. You specify an exact fixed dollar amount to be deducted from every single monthly PERS retirement check, and that is exactly what will be withheld. 

Option three, no withholding. You explicitly direct PERS not to withhold any federal income tax from your monthly benefit check. You receive your gross eligible benefit but you assume full responsibility for managing your federal tax liabilities independently throughout the year. Keep in mind that PERS retirement benefits are taxable income for federal income tax purposes. A PERS retiree would select this if they knew they wouldn't have any taxable income for the year because of tax deductions or tax credits, or if they make estimated tax payments throughout the year for other reasons, such as their spouse being a business owner. 

As you plan for how much in federal income taxes you'll pay in retirement, keep a few things in mind. While your PERS retirement benefit will be lower than the gross wages you earned while actively working you will no longer have pre-tax deductions for retirement contributions or state health insurance, which both reduced your taxable income below your gross wages while working. Furthermore, depending on your total combined income, up to 85% of your Social Security benefits could also be subject to federal income tax. Let's look at three examples to illustrate how much in federal income taxes PERS retirees could be looking at paying annually in retirement and how that could impact their withholding selection in section three of Form 9P. 

Our first example, the career changer, single age 65 in drawing Social Security. This retiree spent 25 years in private industry before transitioning to public service for eight years with an average compensation of $100,000 at retirement.  They have an annual gross PERS pension of $16,000. To supplement their cash flow, they take taxable distributions of $35,000 annually from a traditional $401 they built during their prior private sector career. They also draw $24,000 in gross annual Social Security benefits. This retiree's combined income for Social Security taxation purposes is $63,000 which means up to 85% of their Social Security benefits, or $20,400, are subject to federal income taxes. 

Here we see a total gross income of $75,000 across all three income sources: the PERS pension, plus the 401k distribution, plus the Social Security benefits. However, look closely at the next line down. The total gross federal income drops slightly to $71,400 because we are assuming the IRS taxes only 85% of the Social Security income, which is the maximum percentage allowed.  

From there, this retiree who files single takes full advantage of $24,150 in total federal income tax deductions, which includes the standard deduction for single filers, plus the extra age 65 deduction, plus the senior bonus deduction, since their income is still below the $75,000 threshold before that deduction is phased out. That brings the total federal taxable income down to $47,250, generating an estimated federal income tax liability of $5,422. 

Now pay close attention to the Form 9P withholding strategy for this retiree. Because traditional 401k distributions can trigger a mandatory 20% federal withholding this retiree could easily have $7,000 already being withheld from their $35,000 401k distribution and being sent directly to the IRS from their retirement account. 

Since that $7,000 withheld completely wipes out the anticipated $5,422 tax bill, the retiree can strategically check option three on Form 9P and choose to have nothing withheld for federal income tax purposes from their PERS pension.  This prevents overwithholding and giving the federal government an interest-free loan until the retiree files their annual tax return and gets their refund. 

Our second example: the early retirement couple, Assume we have two dedicated public employees who both hit a 28-year service milestone concurrently at age 50 and decided to retire early from PERS.  They had a combined highest four average compensation of $125,000. Spouse A was $65,000, and spouse B was $60,000. They also have a combined $100,000 balance in deferred comp 457(b) plans and take $10,000 in annual distributions from the 457(b) plans.

Here, our PERS couple starts with a total gross income of $81,875, which includes both PERS pensions plus their $457B plan distribution. Next, our couple is taking the standard $32,200 federal income tax deduction for a married couple filing a joint return. This drops the household's federal taxable income down to $49,675 leaving them with an estimated federal income tax liability of $5,731. 

To cover this estimated tax liability, both spouses can select option two on the respective Form 9P and write in a fixed amount of $240. Combined, this sends $480 a month or $5,760 a year directly to the IRS.  This covers their tax obligation without sacrificing too much of their monthly cash flow.

Our third example: the high-paid executive and small business entrepreneur married filing jointly, both age 58, with net business income. Assume a high-earning household where spouse A retires from PERS after 35 years of service with a peak average compensation of $250,000. Assumes spouse B was a stay-at-home parent for most of spouse A's career, but spouse B has spent the last 10 years after their children left their home operating a successful side hustle LLC as a sole proprietor, generating consistent net business income of $40,000 a year. Both are currently age 58.

We begin with a household total gross income of $227,500, combining spouse A's PERS pension with spouse B's net business profit. Moving to the next line, their total gross federal income drops slightly to $224,400, reflecting how the IRS calculates the baseline for self-employment. Next, they claim $34,826 in total federal income tax deductions  This includes the standard deduction for a married couple filing jointly with an above-the-line deduction for half of the self-employment taxes paid by spouse B's business. This drops their final total federal taxable income to $189,614. 

When you combine their ordinary income tax liability with the small business self-employment tax liability, their total estimated federal income tax is $36,791.  Instead of making manual estimated quarterly tax checks to the IRS for the side business, spouse A can select option two on their Form 9P and specify a monthly withholding amount of $3,070. This automatically pulls $36,840 over the year straight out of the predictable PERS pension check from spouse A and sends it to the IRS. This satisfies their household income tax burden, satisfies the IRS quarterly tax payment requirement on the self-employment income and removes the administrative headache of manual tax payments. 

Because everyone's household tax situation is so unique, I highly recommend you consult a qualified tax professional before selecting your withholding option on Form 9P. If your financial situation changes down the road, your choice on Form 9P isn't set in stone. You can modify your selection at any time in the future by filing PERS form seventeen alongside federal form W four P.

Next is Section 4, Optional Monthly Cost of Living Adjustment Election. As a reminder, you must be retired one full fiscal year before you become eligible to receive COLA. Please go back and watch video number three for more information on cola eligibility. By default, once eligible, your Mississippi PERS Cola is paid out once a year in December as a single lump sum distribution, which many retirees call their 13th check. 

However, section four of Form 9P allows you to alter that distribution frequency. By checking the box in this section, you elect to have your annual cola broken down into 12 equal parts and added directly to your standard monthly benefit check throughout the year. Pay close attention to this special warning: electing to receive your cola in monthly installments now is completely irrevocable. Once you check this box and sign this form, you can never switch back to the annual December lump sum.

To help you make this decision, please go back and watch video number eight. If you have any doubt today, leave this section blank to preserve your future options.

Section 5 banking account information is where you establish your direct deposit instructions. You must mark whether the destination is a checking account or savings account. Next, print the official name of your financial institution, their nine-digit routing number, and your specific account number. 

To validate this information provided, you must attach a physical voided check to Form 9P. Simply write void clearly across the front of an unused check and staple it to the form.  If your account does not utilize paper checks, you should obtain an official direct deposit authorization letter directly from your bank institution, signed by a representative, and attach that instead with a note. 

Keep these two key rules in mind as you fill out section five of Form 9P. First, Form 9P only permits you to list one primary account. If you want your retirement money split across multiple accounts or distributed to a secondary savings goal, you must establish the direct deposit into this main account first and then arrange automatic transfers through your bank's online portal. 

Second, the account owner does not have to be the PERS member retiring. If you are routing your benefits into a joint account or an account held by a spouse or legal trust, that is entirely permissible, provided the bank accepts the routing parameters. Just keep in mind that the PERS retiree is still responsible for paying the taxes on the benefits received.

We have reached section six applicant authorization. By signing this section, you certify that you understand the direct deposit requirements, the tax withholding choices you've made, and the irrevocable nature if selecting monthly COA. Sign your name on the signature of applicant line and write the current date. Note, if an authorized representative is completing this form on your behalf, they must attach copies of a durable power of attorney, guardianship,

or conservators ship papers to establish their legal authority to sign on your behalf.

Once Form 9P is completed, signed by you, and paired with your attached voided check or direct deposit authorization letter, what comes next? Just like Form 9S and Form PLSO, do not give Form 9P to your employer. Your employer has no role in facilitating or processing this document. Submitting it is 100% your responsibility. You must package your completed Form 9P alongside your other supplementary phase two documents including Form 9S and Form PLSO if applicable, and send them together directly to the main PERS office in Jackson, Mississippi.

You can submit Form 9P one of two ways, by mail, by sending it to the address listed on the bottom of the form, or by fax, by faxing directly to the secure PERS fax number listed at the bottom of the form.

If you are completing Form 9P, here are your action items for today. One, locate a physical check from your primary account and write void across it, or download an official direct deposit verification letter from your bank. Two, double check your numbers. Ensure the routing and account digits written in section five perfectly match your attached bank documentation. Three, consult a tax professional to help select your federal income tax withholding option in section three.  This is an area where professional guidance can protect you from unexpected year-end tax bills or unnecessary tax withholdings giving the federal government an interest-free loan throughout the year. 

I hope this video helps PERS members complete Form 9P. In our next video, we'll explore “What should a PERS retiree do with their 457B plan?” to help you understand what your options are with your deferred compensation money at and in retirement.  Please make sure you subscribe so you don't miss this and other videos in our new retirement series. 

If you found this video helpful, you can thank me by hitting the thumbs up button and sharing it with other PERS members. If you have a follow-up question about PERS or anything else related to personal finance, please visit our website at PERSpro.ms, click YouTube, and submit your question or topic for a future episode. And finally, if you're looking for a financial planner that specializes in helping PERS members plan for retirement, including selecting a federal tax withholding preference and deciding between monthly versus annual COLA, please visit our website at PERSpro.ms to learn more about our firm and to schedule your initial consultation. 

Thank you for your valuable public service to the state of Mississippi. We'll see you next time.

Disclaimer, this video is for educational and informational purposes only. Neither the host nor this YouTube channel are officially affiliated with, endorsed by, or sponsored by the Public Employees Retirement System of Mississippi. Always consult a qualified professional for personal advice specific to your situation.