Semi-Retired wrote: It seems that not everyone would be able to meet the 1989 Bailey tsp vesting requirement & that this is the key factor that makes NC an attractive State.
There is some interpretation, but the way I read it a federal pension annuity (CSRS or FERS) is vested if the worker started 3-5 years before Aug 12, 1989. I believe to be vested in the TSP, a federal worker only needs to have made a contribution before Aug 12, 1989 (not the employer portion, but the employee contribution). FERS employees can look at there TSP annual statement and it will list the TSP SCD, so if that is before Aug 12, 1989 then they are vested in the TSP for Bailey Decision purposes.
Semi-Retired wrote: As a ballpark estimate, does it seem that the Bailey Decision is worth a State tax savings of $500-$1000 per month?
Assuming they are vested as per the NC Bailey settlement, there are two factors that influence how much they will save.
1) Amount of pension (CSRS or FERS annuity, TSP withdrawls).
2) Comparing to the income tax rate of another state.
I live in Maryland right now, so I compare it to Maryland's effective rate of 7.75% (4.75% state plus 3.0% county income tax). If a federal retiree has $80,000 in retirement income (annunity plus TSP withdrawls), then the tax savings is:
$80,000 x 7.75% = $6,200 per year
Or $516 per month
Some state are higher, some are lower.
There are also some minor state exemptions for older people, such as age 65 or more exclude the first $20,000 (varies by state). But those are tiny changes ($20,000 x 7.75% = $1,550/yr or $129/month. And some states reduce the old age exemption if you have more than $X income.
Quote:NC DOR website: NC TAX RULES AND BULLETINS
The Thrift Savings Plan has both an employee and an employer
component. The employee component is similar to the State's 401(k)
and 457 plans and allows the employee to voluntarily contribute to the
Plan. The employee is vested in the employee component if the employee
first made a contribution to the plan prior to August 12, 1989.
An employee is vested in the employer fixed component only if the employee had three years of service (two years of service for certain highly ranked employees) as of August 12, 1989.