Pension Plan – Payment of Benefits
How Your Pension Will be Paid to You
You may have your retirement benefit paid to you under one of the payment forms described in How Your Pension Will Be Paid To You – Choosing a Payment Option in the Pension Summary Plan Description. With the exception of the automatic cash-out payment form for small benefit amounts, each option provides you with monthly benefit payments for your lifetime. Some provide survivor benefits beyond your death to your spouse or eligible Dependents. The availability of certain payment forms and how they are calculated may depend on whether or not your benefits are subject to the Rehabilitation Plan. The rules that pertain to each payment form are described in the Pension Summary Plan Description.
Federal Income Tax Withholding
Federal Income Taxes will be automatically withheld from any benefits paid by the Plan that exceed the limits established by the Internal Revenue Service, unless you elect not to have income taxes withheld. You will be given complete information and the opportunity to elect or reject withholding when you apply for benefits.
State Income Tax Withholding
State Income Taxes will be automatically withheld from any benefits paid by the Plan that exceed the limits established by the California Franchise Tax Board, unless you elect not to have income taxes withheld. You will be given complete information and the opportunity to elect or reject withholding when you apply for benefits.
Mandatory 20% Withholding and Eligible Rollover Distributions
A federal law called the Unemployment Compensation Amendments of 1992 requires that if you, your spouse or eligible Dependent are receiving benefits under certain payment forms from the Plan that are includable in gross income, the Plan must withhold 20% of the payment for income tax purposes. This is not a tax. The withheld monies are applied towards any taxes you may owe when you next file your income tax returns.
The types of benefits that may be subject to mandatory withholding for this Plan are:
- The lump-sum cash-out of a benefit worth $5,000 or less;
- 36-Payment Pre-Retirement Death Benefit
However, these types of benefits are also eligible for a “rollover” into an IRA or other tax-exempt retirement plan. If you roll over your benefits, withholding is not mandatory and your tax obligations in connection with these monies may be deferred to a later date.
Special rules apply to rollovers of eligible distributions. You, your surviving spouse or eligible Dependent will be given complete information when you apply for benefits and the opportunity to elect or reject rollover treatment if your benefit is subject to 20% mandatory withholding.
IMPORTANT: To determine the best way for you to receive payment of your retirement benefits and the tax consequences of the retirement benefits you receive, it is a good idea to consult a qualified tax or financial adviser. The information contained on this website does not constitute tax advice. In addition, while the Fund Office will provide you with notices and forms, its staff cannot provide you with tax or financial advice.