Did Louisiana's tax exemption for Teachers' Retirement System benefits continue after the money was transferred into an IRA?

Plain-English summary

Louisiana's exemption applied when benefits were disbursed from a Teachers’ Retirement System of Louisiana account, but it did not follow the money into an IRA. Once transferred, later IRA payments were not benefits paid under the Teachers’ Retirement provisions covered by La. R.S. 11:704.

The ruling therefore treated the source of the payment—not merely the history of the dollars—as decisive for this particular exemption.

What Section 11:704 protected

La. R.S. 11:704 exempted rights and benefits arising under Chapter 2, Subtitle II, Title 11 from state and municipal tax, including Louisiana income tax, subject to exceptions identified in Sections 11:291 and 11:292.

The Department said money held in a Teachers’ Retirement System of Louisiana account qualified as retirement benefits or allowances under that statute. A disbursement from the TRSL account was therefore exempt from Louisiana individual income tax.

Why later IRA withdrawals were different

An IRA distribution was not a benefit paid under Chapter 2, Subtitle II, Title 11. The ruling also stated that the Louisiana Revised Statutes did not otherwise provide an exemption for IRA disbursements in this situation.

Accordingly, after TRSL funds were transferred into an IRA, payments later made from the IRA were not exempt under Section 11:704.

What this means for you

Retired Louisiana teachers

The ruling distinguished a payment directly from TRSL from a later payment by an IRA custodian. Moving the money changed the account from which later benefits were paid.

Taxpayers considering a rollover

Do not assume a Louisiana exemption tied to a particular public retirement system will attach permanently to the transferred dollars. Review the state treatment of the destination account and the timing of each payment.

Accountants and tax professionals

Analyze the initial TRSL disbursement and subsequent IRA withdrawals separately. This ruling did not address federal rollover rules or claim that every IRA distribution is taxable under every Louisiana provision.

Common questions

Q: Were benefits paid from a TRSL account exempt?

A: Yes. The ruling treated those disbursements as exempt under La. R.S. 11:704.

Q: Did the exemption continue after a transfer to an IRA?

A: No. Later IRA payments were not benefits paid under the covered Teachers’ Retirement chapter.

Q: Did the ruling identify another Louisiana exemption for IRA payments?

A: No. It stated that the Louisiana Revised Statutes did not otherwise provide an exemption for those IRA disbursements.

Q: Did the ruling decide federal rollover treatment?

A: No. Its stated purpose and analysis concerned Louisiana individual income tax.

Citations and references

• La. R.S. 11:704 — exemption for covered Teachers’ Retirement System rights and benefits
• La. R.S. 11:291 and 11:292 — exceptions referenced in the quoted exemption
• Chapter 2, Subtitle II, Title 11 of the Louisiana Revised Statutes — covered retirement provisions
• LAC 61:III.101.C — Revenue Ruling authority and reliance statement

Source

• Landing page: Louisiana Department of Revenue Policies
• Original PDF: LA Revenue Ruling 08-007

Original ruling text

Revenue Ruling No. 08-007
June 13, 2008
Individual Income Tax
Taxability of Money Transferred from the Teachers’ Retirement System of Louisiana
Account into an Individual Retirement Account (IRA)
Purpose
The purpose of this Revenue Ruling is to address whether or not money transferred from a Teachers’
Retirement System of Louisiana account into an individual retirement account (IRA) will be taxable for
Louisiana individual income tax purposes and whether these amounts will be taxable for Louisiana
income tax purposes when subsequently withdrawn from the IRA.
Background/Analysis
Louisiana Revised Statute 11:704 provides for a state tax exemption for benefits paid out under the
provisions of Chapter 2, Subtitle II, of Title 11.
The right of a person to a pension, an annuity, or a retirement allowance, to the
return of contributions, the pension, annuity, or retirement allowance itself, any
optional benefit or any other right accrued or accruing to any person under the
provisions of this Chapter, and the monies in various funds created by this Chapter
are exempt from any state or municipal tax, all state income tax, and exempt from
levy and sale, garnishment, attachment, or any other process whatsoever, except as
provided in R.S. 11:291 and 292 and shall be unassignable except as otherwise
specifically provided in this Chapter. The exemption provided herein is also
applicable to cases filed under any operative chapter of the United States
Bankruptcy Code (11 U.S.C.).
Monies in Teachers’ Retirement System of Louisiana accounts qualify as retirement benefits or
allowances under the statute and are exempt from Louisiana individual income tax when withdrawn
from the account. However, disbursements from other retirement accounts such as IRAs are not benefits
paid under the provisions of Chapter 2, Subtitle II, of Title 11 of the Revised Statutes, and the Louisiana
Revised Statutes do not otherwise provide an exemption for disbursements from IRAs.
Ruling
For Louisiana individual income tax purposes, retirement benefits paid under the provisions of Chapter
2, Subtitle II, of Title 11 of the Louisiana Revised Statutes, including disbursements of money from
Teachers’ Retirement System of Louisiana accounts, are exempt from state taxation. However, once
funds are transferred to an IRA, any payments from the IRA are not exempt under the provisions of
Chapter 2, Subtitle II, of Title 11.
Cynthia Bridges
Secretary
A Revenue Ruling is issued under the authority of LAC 61:III.101.C. A Revenue Ruling is written to provide guidance to the
public and to Department of Revenue employees. It is a written statement issued to apply principles of law to a specific set of
facts. A Revenue Ruling does not have the force and effect of law and is not binding on the public. It is a statement of the
department's position and is binding on the department until superseded or modified by a subsequent change in statute,
regulation, declaratory ruling, or court decision.