Important: Tax Withholding Correction in Progress

A message from our Chief Financial Officer

We want to make you aware of an issue that affected the federal tax withholding on some members’ January 2026 retirement benefit payments. Shortly after payments were issued, we identified a processing error that caused higher than expected federal withholding for certain members.

Our payroll and benefits teams are working to correct this as quickly and accurately as possible. The correction is being programmed and tested for the February benefit payment, but it may take until March for the corrections to be processed. Because retirement benefits are issued once per month, this is the earliest point in our payroll cycle when a correction can be made.

We understand how important your monthly benefit is, and we know that any unexpected reduction can create real financial stress—especially for retirees living on fixed incomes. Please know that we take this matter very seriously. We regret any anxiety this error may have caused.

We will continue to share updates on this website as more information becomes available.

Mr. Christopher Novell
Chief Financial Officer
Division of Retirement and Benefits

March 3 Update

Summary of Federal Income Tax Withholding Error

When the 2026 federal tax tables were loaded into our system, an error occurred that was not detected until after the January 2026 pension payments were issued. As a result, some benefit recipients experienced higher federal income tax withholding than they should have. The system error has been corrected, and tax withholding on February pension payments was accurate based on each recipient’s current W 4P elections.

To ensure the correct amount is reported to the IRS on each recipient’s 2026 Form 1099 R, a tax withholding adjustment will be applied to a future pension payment. This correction requires extensive programming and testing. The original goal was to include the adjustment in February payments; however, due to unforeseen programming issues, the work is taking longer than anticipated.

January 22 Update

Some members may have noticed tax withholding errors related to their monthly January 2026 pension benefits. Please be assured that the Active Payroll team, in coordination with the Retirement Benefits Information Service, is fully aware of the issue and is actively working to resolve it. The Division regrets any inconvenience this may have caused and appreciates your patience. We will provide updates as soon as they become available.

Frequently Asked Questions

The newest FAQs will be listed first.

Why is there a “FED TAX ADJUSTMENT” on my March stub?

This adjustment refunds the federal taxes that were mistakenly withheld from your January payment.

Why does my March gross pay look higher than usual?

The refunded tax amount is included in March’s monthly gross pay, which temporarily increases the monthly gross.

Does this adjustment increase my Year-to-Date gross pay?

No. Your Year-to-Date gross pay will show only your normal March earnings. The adjustment is not added to the Year-to-Date gross total.

How does this affect my Year-to-Date federal taxes?

Your Year-to-Date federal income tax withholding will decrease by the amount of the adjustment, because the January over withholding is being corrected.

See below examples:

Example: Pension Benefit with Federal Income Tax Withholding
	Gross	FITW	Tax Adjustment	Adjusted FITW
January	$1252.09	$209.40	N/A	N/A
February	$1252.09	$146.70	N/A	N/A
March	$1314.75	$146.70	$62.70	$84.00
Year-to-Date	$3756.15	$502.80 (before tax adj)	$62.70	$440.10

How is the Monthly Gross Benefit and Year to Date Gross benefit calculated on my warrant?

The January pension included an incorrect federal tax deduction due to a system error. As a result, $62.70 was withheld for federal taxes. In this example, we have manually applied an adjustment, which will appear in the "Adjustments" column of your warrant. Please note that the March Gross Benefit includes tax adjustment amount. If you calculate your year-to-date gross income, this adjustment will not be reflected. This means the additional amount that was mistakenly deducted from the January pension for federal withholding will not affect your overall gross.

See below examples:

Example: Pension Benefit without Federal Income Tax Withholding
	Gross	FITW	Tax Adjustment	Adjusted FITW
January	$940.13	$29.59	N/A	N/A
February	$940.13	$0.00	N/A	N/A
March	$969.72	$0.00	$-29.59	$-29.59
Year-to-Date	$2820.39	$29.59 (before tax adj)	$-29.59	$0.00

How is the Monthly Gross Benefit and Year to Date Gross benefit calculated on my warrant?

The January pension included an incorrect federal tax deduction due to a system error. As a result, $- 29.59 was withheld for federal taxes. In this example, we have manually applied an adjustment, which will appear in the "Adjustments" column of your warrant. Please note that the March Gross Benefit includes tax adjustment amount. If you calculate your year-to-date gross income, this adjustment will not be reflected.

Why have website updates been limited?

The Division has been working diligently to determine the most accurate and efficient method for implementing the tax correction. Because several programming options were under evaluation, there were periods when no meaningful updates were available to post. This dedicated webpage will continue to be updated as soon as new information becomes available.

Why wasn’t February’s payment adjusted?

Although the February withholding was accurate, the correction for January’s excess withholding requires additional programming and testing. Because this work is taking longer than expected, the adjustment could not be included in the February payment.

Will benefits be adjusted for March?

The Division is working at full capacity to implement the tax withholding adjustment for the March pension payment. However, some programming variables related to this unique error are still being resolved. At this time, we are unable to fully commit to a specific date for when the adjustment will appear on monthly benefits.

How will I see the adjustment in my benefit payment?

Once completed, the adjustment will appear as a separate line item in the Adjustment section of your Monthly Benefit Summary on your EFT advice or check stub. Your year to date federal withholding totals will also be updated to reflect the corrected amount.

When will letters be mailed?

Letters explaining the error and the correction process will be mailed to members early next week (week of March 2, 2026).

Who can I contact for additional information?

Benefit recipients may visit drb.alaska.gov webpage for updates as they become available. They may also contact the at or .

Where can I submit a complaint?

Complaints may be submitted through the Division’s online feedback form webpage.

Why was I not notified about the upcoming changes to my pension?

There was an issue with the loading of the 2026 tax tables that caused some members to experience higher tax withholding then what should have been withheld.

Why was my account changed without my permission?

Tax tables for 2026 were not loaded correctly and this caused some members to experience higher tax withholding then what should have been withheld. No other changes were made to members accounts; this is isolated to tax withholding only.

What action will you take to remedy this issue?

The 2026 tax tables have been reloaded, and testing is being performed to ensure the correct tables are applied to all future benefit payments for 2026. The proposed correction will require February tax withholding to be off set at a lower rate for the affected group so when January and February 2026 taxes are calculated, the correct amount between the two months is accurate. We confidently expect tax withholding will return to normal for March 2026.

Will you mail the corrected monthly warrant and a pension verification letter to the address on file?

Since January’s payment has already processed and the tax withholding reported to the IRS, January’s pension payments will not be reissued. Instead, February’s tax withholding will be offset to a lower amount, so when January and February 2026 tax withholding is calculated, the correct amount between the two months is accurate. We expect tax withholding will return to normal for March 2026.

Should I submit an updated 2026 W-4P form?

Members should not submit a new W-4P in response to this issue. The January 2026 tax withholding will be corrected in accordance with the 2026 tax tables with normal tax withholding scheduled for March 2026 pension payments. Member can expect lower tax withholding for February 2026 pension payments to correct and offset January 2026 incorrect amounts withheld.

How will I be notified about this error?

The Division will be sending out a letter to all impacted members. This letter will explain the issue and the resolution that is being implemented and the month the correction will be made.

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