The Oregon PERS Tax Remedy: A Key Benefit for Tier 1 Members

Working with many Oregon PERS retirees, I often get questions about the Oregon PERS tax remedy—especially from Tier 1 members. This post will break down the tax remedy, explain qualifications, and answer common questions about it. If you learn best by video, you can find the brass tacks below.

What is the Oregon PERS Tax Remedy?

The Oregon PERS tax remedy is a benefit for Tier 1 PERS members designed to offset Oregon state income taxes on their PERS pension benefits. In simple terms, it’s an increase in monthly benefits that can add up to 9.89%. The idea behind the tax remedy is to compensate for the fact that the state of Oregon taxes PERS benefits.

However, it’s essential to know that only Tier 1 members are eligible for this tax remedy. If you’re a Tier 2 or OPSRP member, this won’t apply to you. The remedy is proportional and based on your service time, meaning the longer your service, the closer you’ll get to the full 9.89%.

Who Qualifies for the Tax Remedy?

Tier 1 Membership: The tax remedy is only available to Tier 1 members.
Oregon Residency: You must be an Oregon resident to receive the remedy.
AND, one of the following:
- Those hired before July 13, 1995 with at least ten years of service time, OR
- Those hired before October 1, 1991.

How to Get the Oregon PERS Tax Remedy

Qualifying for the remedy isn’t automatic. Even if you’re an Oregon resident and a Tier 1 member, you’ll need to verify your residency status with PERS. There are two ways to do this:

Submit a Residency Certification Form: This form is available through PERS and must be submitted by December 15 to ensure the remedy applies to your pension the following year. You can also complete this on the PERS OMS site. OR,
Let PERS Verify Your Residency Through the Oregon Department of Revenue: PERS can also verify your residency based on information provided in your Oregon tax return. Most often, this information is automatically pulled in by PERS. However, if you file a tax extension or don’t have enough income to file for an Oregon return (unlikely if you are collecting a pension), you’ll need to ensure they receive verification.

If you meet these requirements and submit the necessary paperwork, you should receive the tax remedy as part of your monthly benefit.

What Happens If You Move?

If you receive your Oregon PERS pension and move out of Oregon, you will lose the tax remedy. Since this benefit is designed to offset Oregon state taxes, once you’re no longer an Oregon resident, PERS has no state taxes to compensate for.

But what happens if you move back to Oregon after living out of state? In that case, you can become eligible for the tax remedy again by certifying your Oregon residency. Once your residency is confirmed, the tax remedy will be applied to your benefits in the future.

However, keep in mind that there’s no retroactive application of the tax remedy. You won’t receive a lump sum payment for the time you were living out of state without the remedy. Once you’re certified as an Oregon resident, the tax remedy will pick up from that point forward and increase your monthly benefits.

Common Questions About the Oregon PERS Tax Remedy

1. How is the tax remedy percentage calculated?

The tax remedy is based on your years of service as a Tier 1 member. The closer you are to a full career of service, the closer you’ll get to the maximum 9.89% increase. If you’ve worked fewer years, the remedy is prorated accordingly.

2. Does the tax remedy apply to lump-sum settlements?

The tax remedy primarily applies to monthly payments. If you choose to receive a lump-sum settlement of your PERS benefits, the tax remedy won’t be factored in the same way it would with monthly payments. You should carefully evaluate this option, as it may reduce your overall benefit when compared to receiving the tax remedy through monthly disbursements. You can read more about lump sum payments in our blog, Understanding Oregon PERS Lump Sum Options.

3. Can I resume the tax remedy if I return to Oregon after moving?

Yes, if you move out of Oregon temporarily and return later, you can reapply for the tax remedy by certifying your residency again. Once your residency is verified, the tax remedy will apply to your pension. However, you won’t receive back pay or a lump sum for the period you were out of state. The remedy only applies once your Oregon residency is reestablished.

4. Can I receive the tax remedy if I split time between Oregon and another state?

If you split time between Oregon and another state, your eligibility depends on where your primary residence is. If you’re legally considered an Oregon resident for tax purposes, you may still be eligible for the tax remedy. However, if your primary residence is out of state—even if you spend part of the year in Oregon—you likely won’t qualify. PERS will rely on your tax filings and residency certifications to determine your eligibility.

5. Do I need to file the residency verification form annually?

If you file an Oregon tax return, your information will be provided to PERS automatically each year. If you don’t file an Oregon return but live in Oregon, you must file the residency verification form to get the tax remedy. PERS will reach out to you if they don’t receive residency information from the Oregon Department of Revenue. Still, it’s good to have this on your radar when changes in your residency occur.

6. How do I know if my residency verification has been accepted?

PERS will notify you once your residency verification is accepted. If you submit a certification form, keep a record of it and follow up with PERS if you don’t hear back within a reasonable timeframe. Similarly, if your verification is being handled through the Oregon Department of Revenue, it’s a good idea to confirm with PERS that your residency status has been successfully updated.

7. Is the tax remedy affected by federal taxes?

The Oregon PERS tax remedy is designed to offset state taxes, so it does not affect your federal tax liability. Your PERS benefits, including the tax remedy, are still subject to federal income tax just like any other retirement income.

8. What if I’m a Tier 1 member who has been retired for years? Do I need to do anything?

If you’re a retired Tier 1 member living in Oregon/filling an Oregon state return, you’ve very likely been receiving the tax remedy. However, if you’ve never submitted a Residency Certification form or moved out of state and returned, you may need to update your residency status with PERS. You can confirm your current benefit status by contacting PERS directly (888-320-7377) to ensure you receive the full tax remedy.

Final Thoughts

The Oregon PERS tax remedy is a valuable benefit for eligible Tier 1 members that can significantly impact your retirement income—especially if you’re a long-term resident of Oregon. However, understanding the qualifications and ensuring you follow the correct steps to certify your residency is key to receiving the benefit.

You can find more information by visiting the Oregon PERS website, or drop me a line. I’m happy to serve as a resource however I can.