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BENEFITS


TAX ISSUES: SERVICE-CONNECTED DISABILITY (SCD)

TAX LIABILITY ON SCDs

Section 104(a)(1) of the IRS code provides that an amount equal to 50 percent of your final compensation may be excludable from your gross income for federal tax purposes (fully non-taxable). The amount of any COLA adjustment attributable to that amount may also be excludable.

Any portion of your allowance that exceeds 50 percent of your final compensation at the time of retirement is subject to taxation.

Upon your death, your surviving spouse or minor child will be eligible for this tax exclusion if he or she is eligible to receive a continuing allowance from LACERA.

Note: You may be required to file a tax return even if you do not owe any taxes. For questions regarding tax or legal matters, consult with a professional advisor; LACERA does not offer tax or legal advice.

TAX REPORTING ON SCDs

To comply with IRS regulations, LACERA reports your retirement income to the IRS each year on Form-1099-R. We identify the "Taxable Amount" of your SCD and report it in box 2a on Form 1099-R. A copy of your 1099-R is mailed to you at the end of each January.

The taxable amount of your SCD is also displayed in the Total Taxable YTD category on your check stub or automatic deposit receipt (ADR).

For questions regarding your retirement account, call 800-786-6464 to speak with a LACERA Retirement Benefits Specialist.

7/2/12