Retirement allowances (including disability retirement) are generally considered taxable income under both federal and State of California income tax laws. At the time of retirement you will need to instruct OCERS on your tax withholding election. If you have any questions regarding the taxability of your retirement allowance, please consult a tax professional.
OCERS does not withhold state income taxes for any state other than California.
Changing Your Tax Withholding
You may change your current tax withholding options at any time, by downloading the following two forms and returning them to OCERS:
The W-4P IRS form
Please note: Effective January 1, 2023, the revised IRS W-4P form is required for any member making a change or initiating retirement. Existing payees who have received benefit payments prior to December 31, 2022 are not required to submit the revised IRS W-4P form. 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 OCERS. OCERS will be reaching out to identified members scheduled to receive their first benefit payment on or after January 1, 2023 to provide the revised IRS W-4P form, or you may download the form above.
OCERS will update this page when new forms are available.
Taxability of Lump-Sum Payments
Per IRS rules, lump-sum payments are subject to mandatory 20 percent federal income tax withholding and an additional 2 percent in California state tax if you reside in California at the time of the withdrawal. Additionally, if you are under 59 ½ years of age at the time of your lump-sum withdrawal, the IRS will assess a 10 percent excise tax on the amount of the lump-sum payment at the time you file your taxes. However, if you are under age 72, a portion or all of the benefit is usually eligible for a tax-deferred rollover to a traditional Individual Retirement Account (IRA) or eligible employer plan. (A rollover is a payment by you or OCERS of your benefit payment to an IRA or other plan that allows you to postpone taxation of that benefit until it is paid to you.)
Information on IRA contributions and distributions is available in the publications linked below, your local IRS office, or by calling 800-TAX-FORMS.
- IRS Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs)
- IRS Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs)
Click here to visit the IRS Seniors & Retirees Web page for a wealth of tax tips and publications.
The IRS also has a Tax Scams/Consumer Alerts Web page with up-to-date safety tips to avoid becoming a victim of tax scams and identity theft. To learn more, click here.
The 1099-R form provides each payee with detailed information of his or her income for the previous year. OCERS mails out 1099-R statements to all payees by January 31st of each year. You may also view or print copies of your 1099-R statement online, by logging into myOCERS. To request copies of your 1099-R for previous years, please call OCERS at (714) 558-6200. Get more information on how to read your 1099-R statement.
415 Limits and The Economic Growth and Tax Reconciliation Act of 2001
The Annual Benefit payable to a Member under OCERS at any time shall not exceed $265,000 for 2023 ($245,000 for 2022) or such other dollar limit specified under section 415(b)(1)(A) of the Internal Revenue Code, automatically adjusted under § 415(d) of the Code, effective January 1 of each year, as provided by the Internal Revenue Service. The limit may be decreased for members retiring prior to age 62 or increased for members retiring after age 65. Members should consult their tax professionals with questions regarding limits.
Annual Benefit Compensation Limit for PEPRA Plan Formulas U, V, and W
- 2023 $175,250
- 2022 $161,969