Tax Type
Individual Income Tax
Description
TIAA Total Disability Insurance benefits
Topic
Subtractions and Exclusions
Date Issued
10-31-1988
October 31, 1988
Re: Ruling Request: Individual Income Tax
TIAA Total Disability Insurance Benefits
Dear******************
This is in reply to your letter of June 9, 1988 in which you requested a ruling regarding the applicability of the Virginia income tax to disability insurance benefits provided to employees of public institutions of higher learning.
The intent of the language that was added to Virginia Code §58.1-322 by the 1986 General Assembly (1986 Acts, Chapter 474) was to ensure that employees of institutions of higher education covered by the Teachers Insurance and Annuity Association-College Retirement Equities Fund (TIAA/CREF) retirement system, would receive similar tax treatment for their retirement benefits as their fellow employees covered by the Virginia Supplemental Retirement System (VSRS). With the exception of the proration requirements applicable only to TIAA/CREF retirement benefits, such retirement benefits receive the same Virginia income tax treatment as VSRS benefits.
Based upon the information that you have provided, the total disability insurance benefits plan provided to all participants of the TIAA/CREF retirement plan is analogous to the disability retirement option provided under VSRS. It is also my understanding that this plan was established pursuant to Virginia Code §51-111.28. Therefore, amounts received under the total disability insurance benefits plan qualify for the tax exemption contained in Virginia Code §51-111.15 and the subtraction provided under Virginia Code §58.1-322.
As required by Virginia Code §58.1-322, the applicable subtraction is limited to the amount of TIAA/CREF total disability benefit that is required to be included in federal adjusted gross income multiplied by the ratio of contributions made while employed by a public institution of higher education located in Virginia to the total contributions made while employed by institutions of higher education everywhere. Since the disability benefits plan currently in effect is noncontributory to the participant, contributions made on the participant's behalf must be included in the computation.
Because the types of disability plans provided by public institutions of higher learning may vary in terms and conditions, this ruling is only applicable to the plan that you submitted for review.
I hope that this will assist you in answering your employees' concerns. If you have any further questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner