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CONTRA COSTA COUNTY
EMPLOYEES' RETIREMENT ASSOCIATION

Special Notice: RETIREES May Need to Adjust Their Federal Income Tax Withholding for 2009

The American Recovery and Reinvestment Act of 2009 includes a tax credit designed to boost working American's take-home salary by a few dollars each pay period as part of the federal economic stimulus package. To accomplish this credit, the IRS issued new tax tables to allow slightly less withholding from pay checks, so workers could keep these dollars, which in prior years, would have been withheld for income tax. This program is called the "Making Work Pay" tax credit. The new tax tables went into effect in April 2009, and are effective for both 2009 and 2010.

What does this have to do with CCCERA Retirees?

The new income tax tables are withholding less from pension payments, too.Since the tax credit is only for employed men and women as an "earned income credit," many retirees may not be eligible for the tax credit created by decreased withholding amounts. (Pension benefits are not considered "earned income" by the IRS.) Generally, retirees who do not qualify for the tax credit are people whose sole income source is from pension benefits. These retirees may not have the correct tax amount withheld from their incomes for 2009.

What should retirees do about this change in tax withholding?

Please take some time now to estimate how much tax you will owe for 2009, especially if you have another job or if you are married and your combined income with your spouse puts you in a higher tax bracket.

If you do not want your withholding amount reduced for 2009, you must file a new Form W-4P with CCCERA.

If retired members verify that their current withholding amounts will cause incorrect withholding due to the new tax tables, retirees should request a Form W-4P from CCCERA, fill out any additional amounts or withholding status changes and return the form to the Retirement Office. This form is also available on this web site by clicking this link.

CCCERA cannot offer tax advice to our members. We strongly encourage retirees to consult with their personal tax advisors to make sure their withholding amounts are correct. The IRS has information and resources that can assist with calculating any additional tax amounts retirees may owe on their web site, including a withholding calculator. Click this link for the IRS home page.

As a member of CCCERA, you are investing in your most valuable asset, your future. Whether you are beginning your working life or have extensive public service,contributions to your CCCERA retirement account ensure financial security that will benefit you (and in some cases, your survivors) long after you complete your career.

CCCERA is a "defined benefit" retirement plan. This means your future retirement benefit is not based on how much you and your employer contribute, investment returns or other factors that could cause your pension value to fluctuate.

Defined benefit pensions are based on a formula set by law, in this case the County Employees' Retirement Act of 1937, which was adopted by Contra Costa County in 1945. The Association is administered by the Board of Retirement to provide service retirement, disability, death and survivor benefits to County employees and 16 other participating agencies.

We invite you to explore your membership benefits through this website, our publications, or Group Counseling program. CCCERA staff is also available to answer your questions by telephone Monday through Friday, from 9 a.m. to 4 p.m. (The office is closed between Noon and 12:30 p.m. for lunch.)