Quarterly. in Retirement. review. Preparing for Taxes IN THIS ISSUE. Published by the San Bernardino County Employees Retirement Association

Transcription

1 SPRING 2019 Published by the San Bernardino County Employees Retirement Association Quarterly review Preparing for Taxes in Retirement Does it feel like everyone is talking about taxes right now? From political arguments in the news about tax rates to frequent ads for tax software, not to mention tax discussions within your own home, the topic can be hard to avoid at this time of year. Debates and rebates aside, spring is the season for the filing deadline and it often prompts basic tax questions from Active and Retired Members alike. You too may have questions about the tax implications of your SBCERA benefits and how any taxes will be handled. Though we are unable to offer advice, we can provide facts and resources to help you take charge of managing your tax situation in retirement. Your SBCERA benefit will be considered taxable income generally. As most contributions are made on a pre-tax basis, SBCERA benefits are generally considered taxable income for both state income tax (if you permanently reside in a state with income tax) and federal income tax purposes. If you have ever made after-tax contributions to SBCERA, such as paying for a service credit purchase with after-tax money, a portion of your benefit may fall under the Safe Harbor laws and would not be considered taxable income. Moreover, if you receive a Service-Connected Disability Retirement, your benefit may be wholly or partially excluded from tax. You can elect to have taxes withheld from your SBCERA benefit. SBCERA can withhold federal income tax and state income tax for the State of California. However, if you permanently reside in another state that has income tax, you would be responsible for reporting your income and paying those taxes on your own. You can elect, revise or cancel your tax withholding at any time. We will send you a Tax Form 1099-R each year. Similar to the W-2 forms you received while working, SBCERA will send you a Form 1099-R each year reporting your annual SBCERA retirement benefit. The Form 1099-R also reports the amount of federal and state taxes withheld, if any. The amount of taxable and/or non-taxable income will automatically be calculated by SBCERA and reported on the 1099-R. We offer simple tools to make your life a little easier. In addition to receiving a 1099-R in the mail, you can also easily view, download and print 1099-Rs online in MemberDirect ( for each benefit type you have received since We also offer a 1099-R Frequently Asked Questions publication at that explains each box on the tax form. Talking about taxes may not be the most entertaining part of retirement, but wisely staying on top of your tax situation can provide peace of mind and more opportunity for the things you enjoy. Happy filing! This information is provided for informational purposes only. If you have questions regarding your tax situation, future tax obligation or wish to seek tax advice, SBCERA encourages you to contact a qualified tax advisor. IN THIS ISSUE Retirement in Bloom FAQ 2.00% Cost-of-Living Adjustment Approved PLUS: Upcoming Seminars, Insights on Investments, Group Consultations

2 CEO Column: Retirement in Bloom For those still working, you may have observed colleagues around your office talking more about the prospects of retirement. For those already retired, you may have noticed more friends joining you in your exciting season of life. The statistics seem to back such observations. In the United States and other developed countries, a retirement wave is well underway as baby boomers age into their 60s and 70s. Within our own doors, commensurate with the increase in our overall membership, we have seen a steady rise in the number of annual members added to our benefit payroll. As an organization, it is essential for us to efficiently process the increasing number of service retirements and we must do so while keeping our administrative expenses as low as possible. One way to do this and provide high levels of service is to invest in self-service options for members. Whether you prefer to sign your retirement paperwork in our office or at home in your pajamas, we want to offer both options in the future. While we plan ways to build out a broad range of self-service features, our team has launched smart, cost-effective new resources that are available for you to use right now. Group Consultations these interactive sessions blend the content with the service provided during individual consultations, such as explanations of required paperwork and process timelines. In short, they allow us to provide the same high level of personalized service for up to 30 members at a time. Group Service Retirement to consolidate individual Service Retirement appointments, we offer a select number of sessions where members can review and ensure the completeness of forms and documents, engage with SBCERA Retirement Specialists in a classroom-style setting, submit paperwork and receive information on important next steps. Presentation materials online whether you are brand new to SBCERA or are nearing retirement, you can take advantage of some excellent resources on our website. The presentation is available at and a recorded new member webinar, along with presentation slides for download, can be accessed at NewMemberOrientation. Don t forget that you can always login to your MemberDirect account at The demand for self-service is transforming our industry and we fully intend to stay on top of those trends to meet your needs. Throughout the generational retirement boom and beyond, we will continue to adapt our service delivery models in smart and efficient ways. Sincerely, Debby Cherney

3 SPOTLIGHT Webinar June 27, 2019 from 1:30 to 4:45 P.M. To view our entire 2019 seminar schedule and register for a particular event, visit Upcoming Seminars Mid-Career Seminar April 4, 2019 from 1:30 to 4:00 P.M. Victorville Children & Family Services Center Palmdale Road Victorville, CA May 2, 2019 from 1:30 to 4:45 P.M. Department of Aging and Adult Services 9445 Fairway View Place, Suite 110 Rancho Cucamonga, CA May 30, 2019 from 1:30 to 4:45 P.M. Victorville Children & Family Services Center Palmdale Road Victorville, CA April 18, 2019 from 1:30 to 4:45 P.M. San Bernardino County HR Test Center 175 W. Fifth Street, First Floor San Bernardino, CA May 14, 2019 from 1:30 to 4:45 P.M. Department of Behavioral Health 303 E. Vanderbilt Way, 1 st Floor (Room 109) San Bernardino, CA June 6, 2019 from 1:30 to 4:45 P.M. Department of Behavioral Health 303 E. Vanderbilt Way, 1 st Floor (Room 109) San Bernardino, CA FAQ Understanding the complexities of retirement can be challenging. In SBCERA s continued effort to easily explain this complex information, our retirement experts have compiled a list of Frequently Asked Questions (FAQs), and answers to those questions. We have segmented the answers by membership type and subject, so you will find answers under the categories of Retired or Deferred Members and Active Members, as well as the subjects of Service Purchases and Disability. Please visit to find answers to your Frequently Asked Questions. As always, if you don t find the answer to your question in these helpful FAQs, please reach out to an SBCERA representative and we will be happy to help you.

4 Group Consultations Serving members efficiently and promptly is a top priority here at SBCERA. At one point, staff at SBCERA would speak about the busy season, but increasingly that busy season has become year round. Recognizing a need to increase efficiency in consulting members regarding the complexities of retirement, SBCERA has introduced Group Consultations. SBCERA s Retirement Specialists conduct Group Consultations at SBCERA headquarters, providing individualized service to a larger group of members. If you are within 3 years of retiring, SBCERA is encouraging attendance at one of the Group Consultations. We are offering them on the last business day of each month. Please reach out to SBCERA to be scheduled for one and a Retirement Benefits Technician will register you to attend, as well as send you relevant paperwork to fill out and bring with you. If your retirement is further away than 3 years but you want to become better informed, SBCERA offers Mid-Career Seminars and s throughout the year. To find out more about these other seminars, please visit for a full schedule. Insights on INVESTMENTS - by Donald Pierce, Chief Investment Officer As is often said in the investment industry, the market tends to take the stairs up and the elevator down. We certainly saw this in the last quarter of 2018 when the prospects of rising interest rates caused U.S. stocks (equities) to quickly give back their annual gains, including a painful but short-lived correction (a decline of more than 20 percent). Since that time, the S&P 500 index has gained steadily, effectively retracing to near its previous high. During the correction, we added to our equity positions and have benefited accordingly during the recent upswing. Although, if you have read this column previously, you likely know we are not reliant on equities as a major provider for the needs of our Plan. While many of our peers prefer a portfolio comprised of 60% equities, we see equities as an important but much smaller piece of our overall strategy, which instead is focused on income-producing assets in credit and private markets. Financial commentators have written a great deal over the past decade about asset valuations in our climate of historically low interest rates, so I will keep my analysis to a minimum. In short, we see most asset classes as being sensitive to rising interest rates and equities is certainly one of those. While rate hikes directly influence the bond market (increasing rates cheapen the value of existing bonds), bond sell-offs do not lead investors into stocks. Why move into an even riskier and more volatile asset? Our reluctance to invest heavily in equities proved helpful in the tail end of Largely due to being underweight in our equity allocation, our overall calendar year investment performance was up 0.8%, compared to -4.6% for our equityheavy peers. Earning a small positive return is not our goal, but in an investment climate where virtually all asset classes are down, we are very pleased with the outcome and our ability to manage downside risk. Heading into 2019, we were cautiously optimistic about the year ahead. Though we still expect to be positive in our fiscal year performance, given the global financial headwinds at this time, it will be difficult to reach our expected rate of return (7.25%), as Key Takeaways We noticeably outperformed our peers in calendar year 2018 We are positioned to withstand volatile markets will be the case for pension funds globally. We anticipate modest interest rate increases in the year ahead and have positioned our portfolio to withstand associated risks. While no strategy is perfect, we believe ours has proven its ability to weather tough markets, as evidenced by our performance over the past one and three-year periods, which placed the SBCERA Plan in the top percentile of its peer group. If further rate increases take a toll on equity valuations, we will be positioned to buy at attractive prices while still benefiting from our income-focused investments. As we see it, taking the stairs and avoiding the elevator as often as possible is better for our long-term health. For detailed quarterly investment performance reports from our outside consultant, NEPC, visit

5 Upcoming Retiree Benefit Pay Dates 2.00% Cost-of-Living Adjustment Approved At its February 7, 2019 meeting, the SBCERA Board of Retirement (Board) approved a 2.00% Cost-of-Living Adjustment (COLA) for all SBCERA Retired Members and beneficiaries. Friday, March 29 Tuesday, April 30 Friday, May 31 Friday, June 28 How the COLA Works Each year, the Board reviews and approves the COLA based on the change in the regional Consumer Price Index (CPI), rounded to the nearest one-half percent. The COLA can never exceed 2.00%. However, during years when the CPI change is greater than 2.00%, excess amounts are awarded toward each payee s accumulated COLA bank, to be applied in future years when the CPI change is less than 2.00%. For 2019, in addition to the 2.00% COLA, payees will see a 1.50% increase in their accumulated COLA bank. New Geographic Area for Determining the COLA In past years, the Board used the CPI for the Los Angeles-Riverside-Orange County area to determine the COLA. However, in January 2018, the Bureau of Labor Statistics (BLS) introduced a new geographic area sample for the CPI (Riverside-San Bernardino-Ontario), which the Board now uses in accordance with California Government Code section The CPI change for the Riverside-San Bernardino-Ontario area is published bi-monthly in the odd months. Since no report was published for the month of December 2018, the COLA for this year was calculated by comparing the CPI change from December 2017 to November In future years, a comparison of the November indices will be used. Riv-SB-ONT CPI Change as of 11/30/18 Rounded CPI Change Approved COLA COLA Bank Increase 3.62% 3.50% 2.00% 1.50% Should you need more information on the COLA and the COLA bank, we encourage you to view our Frequently Asked Questions publication, available at The COLA will take effect April 1, 2019 and will automatically be included in SBCERA benefit payments beginning April 30.

6 IMPORTANT DATES AND EVENTS Holiday Schedule SBCERA will be closed on the following dates: Memorial Day...May 27 Independence Day...July 4 Regular office hours are Monday through Friday from 8:00 a.m. to 5:00 p.m. Board of Retirement Meetings SBCERA Board meetings are typically held at 9:00 a.m. the first Thursday of every month in the Board Chambers. All meetings are open to the public. View agendas and minutes at April 4 May 2 June 6 Annual Financial Report Now Available SBCERA s 2018 Comprehensive Annual Financial Report (CAFR), Journey to the Top, is now available at The report features all financial, investment, actuarial and statistical information for the fiscal year. This year s CAFR celebrates the all-time high in assets under management achieved by SBCERA. It also spotlights many of the visual wonders and recreational activities within San Bernardino County that retirees can enjoy. A reader-friendly, condensed version known as the Popular Annual Financial Report (PAFR) is also available on the same webpage. PRESORTED STANDARD US POSTAGE PAID CLAREMONT CA PERMIT # W. Hospitality Lane, Third Floor San Bernardino, CA Board of Retirement Chair: Janice Rutherford Vice Chair: Neal Waner Members: Marc Bracco, Louis Fiorino, Sean Flynn, John Johnson, Michael Kennedy, Ensen Mason, John Michaelson, Jared Newcomer, Dawn Stafford, Vere Williams Chief Executive Officer Debby Cherney Chief Investment Officer Donald Pierce, CFA Quarterly Review is published for members of the San Bernardino County Employees Retirement Association. It is written by the SBCERA Communications Department (unless noted otherwise) and designed by Spencer Lewis Group. Member comments and suggestions should be directed to SBCERA s Communications Officers. Communications@SBCERA.org Call: (909) / Toll Free: (877) or (877) SBCERA 1 Visit: