This information applies to LACERA retirees, survivors, and beneficiaries who are U.S. citizens or resident aliens (green card holders) and live in the United States.
Retirement allowances are considered taxable income under both federal and State of California income tax laws. LACERA must withhold federal and California state taxes from your monthly retirement allowance unless you elect to have no withholding.
LACERA mails a Form 1099-R at the end of January to each retiree, survivor, and beneficiary who received a benefit from LACERA in the previous year. Copies of your 1099-R are also available on My LACERA.
In compliance with federal law, California income tax is not withheld from your retirement allowance if your primary residence is outside California. However, if you are receiving other income from California you may still be subject to California state tax. You may elect to have LACERA withhold taxes from your retirement allowance to satisfy your other California obligation(s).
If you reside in another state, your LACERA retirement income may be taxable in that state. Tax requirements on retirement income differ from state to state, but the “source tax" law protects you from paying state taxes in two states on the same retirement income.
Read the Moving Out of State section for further information.
Federal Income Tax Withholding
When you retire or begin receiving benefit payments from LACERA, you can choose the federal income tax withholding from your benefit payments. You can also elect not to have federal income tax withheld.
You have the option to change your tax withholding election at any time. Your original withholding choice will remain in effect until you file a new IRS W-4P form or California DE-4P tax withholding election form with LACERA.
The quickest and easiest way to adjust and submit your tax withholding election is on My LACERA. Or you can print a W-4P/DE-4P form, complete and sign it, and mail it to LACERA. Your new tax withholding will be reflected on the check that is issued at least 30 days after we receive your form.
Note: The IRS has updated the W-4P form for 2022, but LACERA will not switch to the new form until 2023. Please continue to use the 2021 form linked above until further notice. (Do not submit a 2022 version of the form or your withholding change will be rejected.) For more information, see this Q&A sheet about the changes.
LACERA will remind you about your option to adjust your tax withholding annually through our Spotlight newsletter and on your January check.
Payment of your income tax is your responsibility. Withholding is one way for you to pay a portion of your tax. If no tax or not enough tax is withheld from your benefits, you may have to pay estimated taxes during the year or pay a tax penalty at the end of the year. Whether you have to pay federal income tax on your benefit depends on the amount of your taxable income and the type of benefit you receive.
Your decision on withholding tax is an important one. For questions regarding tax matters, consult with a professional advisor; LACERA does not offer tax or legal advice.
A member’s retirement allowance is generally not subject to garnishment or other levies except to satisfy a judgment for spousal or child support or a division of community property, or a tax levy by the IRS or the California Franchise Tax Board for payment of delinquent federal or state income tax.