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Tax information

Tax on retirement benefit
When you retired, you completed a form giving SDCERA instructions regarding if and how you want income tax withheld from your retirement payments. You may elect to have or not to have federal and/or California state tax withheld at any rate you choose. SDCERA does not withhold income tax for states other than California.

SDCERA will send you an IRS Form 1099-R tax statement each year in late January. IRS Form 1099-R contains detailed information regarding your retirement income from the previous year, and is necessary to complete your federal and state tax returns.

You may change your tax withholding at any time. Use the Tax Election for Monthly Retirement Payment form if you would like to change your tax election.

Tax exclusion
Most of your monthly retirement benefit is taxable. The retirement contributions you made beginning January 1, 1997, all interest earnings and all of the County's contributions you receive in the form of a monthly benefit payment during retirement are taxable.

The retirement contributions you made prior to 1997, however, were made on an after-tax basis. This portion of your retirement will not be taxed.

The Internal Revenue Service allows you to recover this amount on a nontaxable basis, but not all at once. The nontaxable amount of your monthly benefit is reflected on your monthly earnings statement as Basic Allowance Non-Taxable. This calculation of the nontaxable amount is effective with the start date of your benefit payment and remains constant, even though your monthly payment may increase due to cost-of-living adjustments. Your nontaxable exclusion ends when you have received the total amount of your after-tax employee contributions. Then, the entire retirement benefit will be fully taxable. Please note that the calculation factors used are taken from federal tax laws, which are subject to change.

If you don't have an estimate either from a retirement meeting or individual request, you can request your after-tax contributions in writing. Send your request to:

Attn: Member Services
2275 Rio Bonito Way, Suite 100
San Diego, CA 92108-1685

Please allow up to two weeks for a written response.

The IRS has determined the methodology to calculate how much of each monthly retirement payment is nontaxable.

Annual Tax Equity and Fiscal Responsibility Act (TEFRA) Notice
The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) requires that SDCERA remind retired Members each year that the retirement benefit SDCERA pays them is subject to federal income tax. The 2018 TEFRA notice will be included with retirees' April 2018 earnings statement.