We provide you a tax form by the end of January each year that shows you how much of your CalPERS pension was taxable.
Retirees’ monthly retirement benefit payments are treated as ordinary income. Unless you specify the income tax withholding election you want applied to your benefit, federal and/or California state income tax is withheld based on the rate of a married person with three exemptions. A one-time, lump-sum benefit may be taxed differently.
Active members’ payments are taxed using the same tax rules that apply to a service retirement pre-retirement for Option 2W, 1957 Survivor Benefit, 1959 Survivor Benefit, and Alternate Death Benefit.
Only a portion of each is taxable, with the exception of the 1959 Survivor Benefit, which is fully taxable and may be subject to a mandatory 20% federal withholding, if the allowance is paid to a spouse for less than 10 years. The benefit can be rolled over to an individual retirement account (IRA) to avoid federal income tax withholding.
A mandatory 20% federal tax withholding rate is applied to certain lump-sum paid benefits, such as the Basic Death Benefit, Retired Death Benefit, Option 1 balance, and Temporary Annuity balance.
The lump-sum benefits can be rolled over to an IRA to avoid federal income tax withholding. Spouses can roll over to a traditional IRA, and non-spouse beneficiaries can roll over to an inherited IRA.
If you received a benefit, we will provide you with a 1099-R tax form by the end of January that lists the amount you were paid in the previous tax year. You are responsible for reporting the benefit to the IRS with your personal income taxes. You can access and download your tax statements online by logging in to your myCalPERS account.
For more information on understanding your 1099-R tax form or changing your income tax withholding election, visit Taxes on our website.