State pension plans, particularly those for public employees like teachers, firefighters, and government workers, are subject to various federal regulations, including IRS rules and other federal laws, to ensure compliance with tax, nondiscrimination, and retirement benefit standards. These rules apply because state pensions often receive tax advantages (e.g., tax-deferred contributions) and may opt out of Social Security; therefore, they must align with federal standards to maintain their tax-qualified status or avoid penalties. Below are detailed examples of how state pensions fall under IRS rules and other federal regulations, with a focus on key provisions and their implications.

Paying off the obligations the state of Michigan owes public retirees and others would require each taxpayer to surrender another $4,100 to the public treasury, according to a new report from a nonprofit that analyzes state budgets. The report also warns that Michigan’s budget could face an 8% shortfall if the federal government were to reduce its financial support of Michigan to its pre-pandemic level.

llinois taxpayers in 2024 owed an average of $38,800 each, ranking No. 3 in the U.S. Illinois earned an “F” for fiscal management.