If you believe you qualify to purchase service credit, complete an Application to Purchase Retirement Service Credit and return it to LACERA. The application can be accessed online or can be ordered by calling 1-800-786-6464.

After LACERA verifies your service and calculates the cost to purchase it, we will send you a Cost Notification Letter, along with a Service Credit Payment Schedule and Payment Contract.

Contract terms vary according to the type of service credit; some types must be purchased within five years and others may be purchased within ten years. Terms on purchases of temporary service or periods of absence without pay due to illness are limited to the number of months you are purchasing. The Payment Contract you receive from LACERA will indicate your options regarding the length of your contract.

PAYMENT OPTIONS
You have a choice of three payment options: lump-sum payment, payroll deductions (on a before or after-tax basis), or a combination of both.

• Lump-Sum Payment: a single payment for the total cost of your service credit, including interest calculated through the contract expiration date.
• Payroll Deductions: automatic monthly deductions from your paycheck, determined by dividing the total dollar amount of your contract by the term (number of months) of your contract. Interest is calculated over the term of the contract; therefore, the total amount you pay through payroll deductions is greater than it would be through a lump-sum payment.
• Combination Lump-Sum Payment/Payroll Deductions: allow you to pay an amount of your choice in a single upfront payment and pay off the balance of the contract through monthly payroll deductions.

FUNDS YOU MAY USE TO PURCHASE SERVICE CREDIT
Under the Pension Protection Act, service credit may be purchased with any of these types of funds:

• Payroll deductions (using before or after-tax dollars)
• Qualified Plans: 401(k)/401(a)/KEOGH
• 457 Fund Plan Transfers: In-Service or after Termination
• IRAs: Non-Roth/Non-After Tax
• 403(b)
• After-Tax Dollars

SIGNIFICANCE OF BEFORE-TAX AND AFTER-TAX DOLLARS
Before-tax dollars are funds that are not subject to income tax at the time they are earned (before-tax payroll deductions reduce your taxable income). They become taxable when you retire, terminate County service, or when your beneficiary receives them upon your death. Payroll deductions and rollovers from your County 457 plan and/or other tax qualified plans are examples of before-tax dollars.

After-tax dollars are funds — such as proceeds from mortgage refinancing or savings accounts — that were subject to income tax at the time they were earned. Since they have already been taxed, they are not subject to income tax at retirement, termination, or death.

If you use after-tax dollars for a lump-sum payment, a portion of your retirement allowance will be considered non-taxable income. This status will continue until the amount equal to the amount of your lump-sum payment has been paid to you.

Consult with a professional advisor regarding tax and legal matters pertaining to your individual situation; LACERA does not offer tax or legal advice.

CONTRACTS PAID WITH ANY TYPE OF BEFORE-TAX DOLLARS ARE IRREVOCABLE
The ability to change or revoke your contract depends on the type of payment method you select:

• Once you sign a contract that includes before-tax payroll deductions and/or payments using any other before-tax funds, the contract is irrevocable.
• Only contracts based on payments made exclusively with after-tax dollars may be revised or revoked.

If you revoke your after-tax dollar contract before it is paid in full, LACERA will prorate the amount you have paid and credit your account for years/months of service credit accordingly. This does not apply if you are redepositing withdrawn contributions. If you do not complete the redeposit of your withdrawn contributions, your prior County service will not be restored.

In either case, LACERA cannot refund the money you already paid until you retire or terminate County service; if you die, the money will be paid to your beneficiary

HOW INTEREST IS CALCULATED
The formulas used to calculate interest on Payment Contracts vary according to the type of service you are purchasing, the date you entered membership, and your current and prior retirement plan. (For formula details, visit the Benefits section of lacera.com.)

On purchases of previous County service , the cost includes the interest your contributions would have earned had they been on deposit with LACERA from the date you became a member (or from the date you withdrew your funds) to the expiration date on your Payment Contract.

The cost to purchase other types of service credit is based on the present value of the retirement benefits you will receive (and not on back interest). Your current age and salary are factors that most affect the purchase cost.

If you choose payroll deductions, your monthly deduction will be calculated using a projected semi-annual interest crediting rate, set by the Board of Investments, for the term of the contract. At the end of your contract, LACERA will reconcile your balance and adjust your deductions to prevent any over or underpayment.

According to the law, interest is credited (at a rate set by the Board of Investments) to member contributions on deposit in the retirement fund. Interest crediting is applied twice a year (semi-annually) on June 30 and December 31 to all member contributions that have been in the retirement fund for at least six months immediately prior to the date of credit.

FOR ADDITIONAL INFORMATION
Call 1-800-786-6464 to speak with a knowledgeable LACERA Retirement Benefits Specialist.

4/18/08