Allows a modification to federal adjusted gross income for all public pension benefits administered by the Employees Retirement System of Rhode Island.

Rhode Island Public Pension Tax Exemption Bill

This bill would allow Rhode Island state employees, teachers, and other public workers who receive pension benefits through the Employees' Retirement System of Rhode Island (ERSRI) to exclude those pension payments from their taxable income on their state tax return. Currently, some or all of these pension benefits may be counted as taxable income when calculating what a retiree owes in Rhode Island state income taxes. This change would let retirees subtract — or "modify" — their public pension income from the amount of income the state uses to calculate their tax bill.

The people most directly affected would be retired Rhode Island public employees — including state workers, municipal employees, teachers, and other government workers — who receive monthly pension payments through ERSRI. For these retirees, the change could meaningfully reduce their annual state income tax bill, putting more money in their pockets during retirement. The benefit would be greater for those who rely more heavily on their pension as a primary source of income.

On the other side of the ledger, this bill would reduce the amount of tax revenue Rhode Island collects from retirees, which could affect the state's overall budget. The bill has been introduced and sent to the Senate Finance Committee, where lawmakers will review its potential costs and benefits before deciding whether to move it forward.