CALIFORNIA INCREASES WITHHOLDING TAX EFFECTIVE NOVEMBER 1, 2009

LACERA retirees and survivors who have California tax withheld based on State withholding tables will see a ten percent increase in the amount of tax withheld. Beginning with their November checks, those affected by this withholding increase will notice a lower dollar amount on their monthly allowances.

AB 17, which was enacted by the California legislature and signed by Governor Schwarzenegger on July 28, 2009 in response to the ongoing State budget crisis, requires the California Franchise Tax Board to adjust payroll withholding tables to generate an additional ten percent in withholding tax. Payroll withholding tables apply to pensions, as well as wages.

By increasing payroll withholding, the statute assures the State will receive more tax revenues throughout the year.

NOT A TAX INCREASE

It is important to understand that AB 17 increases payroll tax withholding; it does not increase California personal income tax rates.

WHO IS AFFECTED

The increase in payroll withholding affects individuals who are paid wages in California on or after November 1, 2009. This includes retirees and survivors who have submitted DE-4P tax forms directing LACERA to withhold tax based on the California withholding tables.

Impact of California Tax Withholding Increase on Affected Allowances
Example: Retiree with a $1,000 monthly allowance who elects married with 0 allowances:

• Before: California withholding tax was $8.65 (0.865%)
• After: California withholding tax increases to $9.52 (0.952%)

WHO IS NOT AFFECTED

• Individuals who direct LACERA not to withhold California State income tax from their retirement or survivor allowances.
• Individuals who direct LACERA to withhold a designated amount of California tax from their monthly allowances.
• Retirees and survivors who reside outside of California.

TO ADJUST YOUR TAX WITHHOLDING ELECTIONS

You may adjust your California, as well as federal, tax withholding elections at any time. You may submit new withholding elections using any of the following methods:

• Visit My LACERA to adjust and submit your tax elections online
• Complete a W-4P/DE-4P tax form
  • Mail completed form to LACERA, P.O. Box 7060, Pasadena, CA 91109-7060
  • Or fax completed form to 626-564-6155
• Call 1-800-786-6464 to have a W-4P/DE-4P tax form mailed to you

Requests to adjust tax elections received by the 15th of the month will be applied to that month’s allowance; requests received after the 15th will be applied to the following month’s allowance.

LACERA cannot make recommendations regarding your tax withholding elections. Consult with professional advisors regarding tax or legal matters; LACERA does not offer tax or legal advice.

10/19/09