The following letter will be sent to about 15% of CalPERS retired members. While I don’t expect too many of our folks to be affected by this change in Federal Tax Withholding, it is possible there are a few.
This change does not change your tax obligations, it only effects how federal tax is withheld. The letter is expected to out very soon so if you are on a “flat tax” federal withholding plan now, expect to see this letter. If you are currently having federal tax withheld in the aggregate method (such as “Married & 3), you will not receive a letter.
Ray Snodgrass
CDF Firefighters
State Retiree Director
October 18, 2013
[Member Name]
[Address]
[City, State, Zip]
Dear [Member Name],
Effective January 1, 2014, CalPERS {program in context} can no longer accept a federal tax election for a specific dollar amount, also known as a “flat tax election.”
A recent review of both the Internal Revenue Services (IRS) publication 505 “Tax Withholding and Estimated Tax” and the instructions for completing the IRS Form W-4P “Withholding Certificate for Pension or Annuity Payments” has revealed that, under current law, a specific dollar amount, referred to as “flat tax election,” is not a valid federal tax withholding election.
Our records indicate that you currently have a flat tax election for your federal tax withholding. You are required to make a new federal tax withholding election. Please complete the enclosed form (PERS-PRS-W-4P/DE-4P) and return to CalPERS {program in context} by January 1, 2014.
If CalPERS {program in context} does not receive the new tax election form by January 1, 2014, your federal tax election will be automatically changed to a default tax rate of married with three exemptions which could result in a change to the federal tax deduction on your future warrants. This will remain in effect until you submit a revised, completed tax withholding form. If you have already sent in a revised form or have contacted CalPERS to change your tax election, no action is required.
Your current state tax withholding election is not affected and you may leave this section of the form blank. However, if you would like to make a new state tax withholding election, please complete the state tax withholding section of the form.
For federal tax information or advice, please contact your tax consultant or the Internal Revenue Service.
Thank you,
Benefit Services Division
Section 490