PA taxes employer pension for retirees aged 59.5-64 (is_retired age-65 cutoff inconsistent with the 59.5 retirement-distribution threshold)

[DTrim99]

Issue

Pennsylvania excludes commonly recognized pension / old-age / retirement benefits from PA taxable income for retirees, but PolicyEngine taxes an employer pension when the recipient is aged 59.5–64.

pa_nontaxable_pension_income gates the exclusion on is_retired, which is hard-coded to age ≥ 65:

def formula(person, period, parameters):
    retired = person("is_retired", period)          # is_retired = age >= 65
    us_taxable_pension = person("taxable_pension_income", period)
    return where(retired, us_taxable_pension, 0)

But the parallel variable pa_nontaxable_retirement_distributions (IRA/401(k)/403(b)/SEP/Keogh) uses PA's own retirement_age_threshold = 59.5:

retired = person("age", period) >= p.retirement_age_threshold   # 59.5

Why this is inconsistent

61 Pa. Code §101.6 treats IRAs, SEPs, Keogh plans, and federally qualified employee pension plans alike — all are excluded once the recipient reaches the plan's retirement age. The PA-40 IN (2023, p.8) lists as NOT taxable:

Commonly recognized pension, old age, or retirement benefits paid after becoming eligible to retire, and retiring

There is no basis for excluding IRA/401(k) distributions at 59.5 but taxing an employer pension until 65. A 60–64-year-old drawing an employer pension with no wages has retired, and PA excludes it.

Impact (from TAXSIM #1165)

PA 2023 joint filer, primary 72 / spouse 64, no wages; $37,636 interest, $201,382 pension, $52,916 Social Security. The pension is split 50/50 across spouses, and the 64-year-old's half ($100,691) is wrongly taxed because 64 < 65:

• PE: PA AGI = interest $37,636 + spouse's half $100,691 = $138,327, tax $4,246.64
• Correct (TaxAct): 100% of pension + SS excluded → PA AGI = $37,636 (interest only), tax $1,155.42

Fix

Change pa_nontaxable_pension_income to gate on PA's retirement_age_threshold (59.5), matching pa_nontaxable_retirement_distributions and §101.6.

Reported via PolicyEngine/policyengine-taxsim#1165.