Taxability of pension benefits is based on the type of retirement and the tax classification of contributions made by the member. In general, retirement benefits are taxable when distributed. A portion of a member’s benefit may be non-taxable if employee contributions were made on a post-tax basis. In addition, benefits for a service connected disability retirement are non-taxable up to 50% of Final Average Salary.
TCERA reports taxable and non-taxable disbursements annually on Internal Revenue Service form 1099R for each recipient of retirement funds (refund disbursements, death benefits, and pension payments). The 1099R provides the information necessary for the members and beneficiaries to report this information on federal and state tax returns. Questions regarding TCERA 1099R reporting should be directed to the Retirement Office.
Tax and legal advice is not available from TCERA. Members should consult the Internal Revenue Service or a qualified tax advisor for questions and advice regarding taxes and tax planning.
If you are receiving a monthly pension payment and need to update your tax withholding information TCERA will require a completed Federal Tax Withholding Form and/or if you reside in the State of California a State Tax Withholding Form.