And, yes, you guessed it, of course, all public and 401K system have generous employer match provisions and private employers tend not to.

But if you worked for an organization that didn’t match (or only matched small amounts or were self employed or made independent 401K contributions), you’re out of luck. So if you worked for an organization that matched your contributions, the matching money and the employee’s equivalent contributions would result in tax-free withdrawals. What to do? The ‘ingenious’ idea is to make 401K withdrawals tax free but only for monies that were subject to employer match. There’s a twist though–Michigan’s public employees were largely been switched to 401Ks by Republican administrations in the 90s. Now that Democrats have retaken control of state government, they’re about to make their supporters’ pensions tax-free again.

In the early 2000s, Republicans made pensions also subject to tax (understandable given that those receiving pensions now are mostly public-sector and union Democratic voters while Republicans tend to have 401Ks). In Michigan, pensions were once tax-free while 401K withdrawals were not.

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