Month: April 2016

The California Franchise Tax Board (CFTB) is now re-validating the tax returns affected by the delayed reporting of 2015 quarterly tax information by Northern Trust, our pension benefit payment vendor.  If you have previously received a Notice of Tax Return Change from the CFTB, you may receive a Second Notice of Tax Return Change, to allow your California withholding credits as claimed.  This means no further action on your part should be required based on your pension tax withholdings.

We apologize for any inconvenience this issue may have caused.  Northern Trust will be accountable and has implemented a secondary audit as part of its quality control measure to ensure future accurate state tax posting and oversight by its management.  Northern Trust will also incur related penalties, should any be assessed by the California Franchise Tax Board.

If you have questions regarding these notices, please contact the California Franchise Tax Board at (800) 852-5711.  We understand that callers may leave a call back number for the California Franchise Tax Board in order to avoid the long call wait time.

Please contact the LAFPP Retirement Services Section at (213) 279-3125 or toll free at (844) 88-LAFPP extension 93125, if you have related concerns and questions.

The following are the two distinct issues that affected our members:

ISSUE 1: Northern Trust’s submittal of the 2015 Quarter 1 and Quarter 2 tax information at the individual payee level was delayed.  As of April 4, 2016, the California Franchise Tax Board has confirmed the proper posting of these quarterly taxes. 

ISSUE 2: The California Franchise Tax Board is experiencing a technology issue which may have created discrepancies in tax withholding information for Quarter 2 and Quarter 4 of 2015.  We were informed this issue affects many California taxpayers, regardless of the employer.  Therefore, for pensioners who have other sources of income in addition to their LAFPP pension, further efforts may be necessary to resolve this issue.  These efforts include providing copies of W-2s and year-end earnings statements, to substantiate the California state tax amounts withheld from all sources of income.

The Cost of Living Adjustment (COLA) effective July 1, 2016 is +2.4% and all eligible pensions will be adjusted accordingly beginning with the pension payment dated July 29, 2016.

The 2016 COLA of 2.4% was presented and approved by the LAFPP Board at its regular meeting on April 7, 2016. The COLA will be effective July 1, 2016, and eligible pensioners and DROP participants will receive an increase of up to 2.4% beginning with their July 29, 2016 monthly pension payment.

COLAs are made to eligible pension benefits effective July 1 of every year. Pursuant to the City Charter and the Administrative Code, the COLA is based on the annual change in the Consumer Price Index (CPI) as published by the Bureau of Labor Statistics.  Specifically, we look at the change in the CPI for All Urban Consumers in the Los Angeles-Riverside-Orange County Area for the prior 12-month period ending February.  As of February 2016, the change in the CPI is +2.4%.

How does this affect LAFPP Pensioners?

COLAs can increase or decrease one’s pension benefit, or have no effect. For example, in 2009 the 12-month CPI change yielded a flat COLA (0.00%) for pensioners for the first time in LAFPP history.  Also, please note that your monthly pension can never be reduced to less than your original pension amount as a result of a negative COLA.

For illustrative purposes, the following is an example of how an average monthly LAFPP pension benefit of $5,309 would be affected by a 2.4% COLA:

If 2.4% of $5,309 = $127.42

($5,309 x 0.024)

Then the monthly pension benefit would be increased to $5,436.42.

($5,309 + $127.42)

For more detailed information on the calculation of the CPI, please visit the Bureau of Labor Statistics website at http://www.bls.gov/cpi/.