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Tax information

SDCERA does not provide tax advice, and you should seek tax advice from a qualified tax professional. The information below is
based on SDCERA's understanding of current tax requirements and related SDCERA procedures.

Tax Withholding

Your monthly Service Retirement benefit is taxable, and, in most cases, SDCERA is required to withhold tax. When you retired, you completed a Tax Election for Monthly Retirement Payment form that provides SDCERA instructions on how you want income tax withheld from your retirement payments.

Annual Tax Equity and Fiscal Responsibility Act (TEFRA) Notice

You may change your tax withholding at any time. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) requires that SDCERA notify retired Members each year that they may change their tax withholding election. Each year, SDCERA includes the TEFRA notice with your earnings statement.

Use SDCERA's Tax Election for Monthly Retirement Payment form if you would like to change your tax withholding. If you reside outside of the U.S., please contact Member Service Center at (619) 515-6800 or via email at memberservicecenter@sdcera.org.

With respect to state tax withholding, SDCERA only withholds income tax for California residents, and we will stop withholding state income tax if your home street address is located outside of California.

Service Retirement Taxation

SDCERA will send you IRS Form 1099-R each year in early February. Form 1099-R is necessary to complete your federal and state tax returns and contains detailed information regarding your retirement income from the previous year. The Internal Revenue Service has determined the methodology for calculating how much of each monthly retirement payment is non-taxable.

Retirement contributions made prior to 1997 were made on an after-tax basis. Therefore, this portion of your retirement will not be taxed. The non-taxable amount of your monthly benefit is reflected on your monthly earnings statement as "Basic Allowance Non-Taxable." The non-taxable benefit amount is calculated before your benefit payment begins and remains constant throughout your retirement, even though your monthly payment may increase due to cost-of-living adjustments. The non-taxable portion of your benefit will end when you have received the total amount of your after-tax employee contributions. Then, your entire retirement benefit will be taxable.

Retirement contributions made after January 1, 1997, interest earnings and County contributions that make up your monthly retirement benefit payment are taxable.

Disability Retirement Payments

If you received a Nonservice Connected Disability retirement, your benefit is taxable.

If you received a Service Connected Disability retirement, all or a portion of your benefit may be non-taxable. For more information, please contact the Member Service Center at (619) 515-6800 or via email at memberservicecenter@sdcera.org.