Plans A, B, and C Brochure

SECTION 5 | Additional Impacting Factors

COLA

California law mandates that each year, prior to April 1, the Board of Retirement (BOR) will determine whether there has been an increase or decrease in the cost-of-living, as reflected in the Bureau of Labor Statistics Consumer Price Index (CPI) for All Urban Consumers in the Los Angeles-Riverside-Orange County area.

If the CPI has increased, the BOR grants a cost-of-living adjustment (COLA) increase for monthly retirement and survivor allowances. The maximum allowable annual increase for Plan A is 3.0 percent; for Plans B and C the maximum allowable is 2.0 percent.

In the event the CPI has decreased, it is possible for the BOR to apply a COLA decrease. However, in the event a cost-of-living decrease is ever required, it may not reduce a member's allowance to an amount less than the allowance received at the time of retirement. Only past COLA increases could ever be subject to a decrease.

Social Security

The County withdrew its employees from the federal Social Security program on December 31, 1982. You may be entitled to a Social Security benefit upon retirement based on your County service prior to January 1983 and/or your work at other jobs where you contributed to Social Security. However, be aware in some cases Social Security can affect your LACERA retirement allowance and vice versa.

Plan A, B, or C members will have their LACERA retirement allowance reduced by a fixed dollar amount for each year of County service prior to 1983 that was covered by Social Security.

The Windfall Elimination Provision and the Government Pension Offset are federal laws that impact Social Security benefits for some individuals receiving government pensions.

Windfall Elimination Provision

The Windfall Elimination Provision (WEP) reduces the Social Security benefit for retired and disabled workers receiving government pensions from employment not covered by Social Security. Basically, the Social Security Administration uses a different (less favorable) formula to calculate a worker's benefit under the WEP than it does to calculate the benefit of a worker who is not affected by the WEP.

The WEP formula includes a sliding scale based on the length of your Social Security-covered employment. If you have 30 or more years of “substantial earnings” under Social Security, you are fully exempt from the WEP.

Government Pension Offset

The Government Pension Offset (GPO) affects spouses, widows, and widowers. Under the GPO, if you receive a LACERA pension (based on work when you did not pay Social Security taxes), your Social Security spouse's, widow's, or widower's benefits may be reduced by an amount equal to two-thirds of your LACERA pension.

For more information and specifics of how the GPO and the WEP may apply to your individual situation, contact the Social Security Administration at 1-800-772-1213.

Eligibility Requirements

• Service retirement prior to age 62
• Submit a Social Security statement of benefits to verify eligibility
• Elect of one of the following:
  • Unmodified Option
  • Option 1

If you are considering the Pension Advance Option, we recommend you call 1-800-786-6464 to consult with a LACERA Retirement Benefits Specialist prior to making your decision.

Taxability

Your LACERA retirement allowance is subject to both federal and California state income tax.* Withholding tax is based on the gross amount of your service retirement allowance.** You may elect to have federal or state tax withheld from your retirement allowance at whatever rate you choose—or to have no tax withheld—by submitting a W-4P/DE 4-P Tax Withholding Form to LACERA. If you do not complete this tax form, your allowance will be taxed as if you were a married person claiming three (3) withholding exemptions.

*Certain exceptions may apply.
**In compliance with Federal law, California income tax is not withheld from your retirement allowance if you reside outside of California.

Dissolution of Marriage (Divorce)

Active and Retired Members

If your marriage is dissolved, you must contact LACERA promptly to update your records.

Documents You Must Provide:

• Judgment of Dissolution
• Domestic Relations Order (DRO) or Qualified Domestic Relations Order (QDRO), if the judgment requires
• Notice of Entry of Final Judgment (if applicable)

You must provide LACERA with a conformed copy (with the court clerk's filing date stamp and the judge's signature) of all the pages of your Judgment of Dissolution. If the judgment states a further order is required, provide LACERA copies of a DRO or a QDRO. If you are unsure about the need for additional documents, LACERA's Legal Division will review the judgment to ascertain if an additional order is required. If your dissolution occurred after 1984, you must also submit a copy of your Notice of Entry of Final Judgment.

Active Members

If you are an active member, failure to provide LACERA with the required documents may result in a delay of your retirement benefits.

Upon legal notice that a member's benefit is subject to a division of community property and an additional court order is required, LACERA must place a legal hold on the member's account. A member may not withdraw his or her contributions while a legal hold is in effect. This hold will remain on the member's account until retirement (and will appear on the member's Annual Benefit Statement), even if LACERA receives an appropriate court order.

If you are in the process of a divorce at the time of retirement, LACERA cannot pay your retirement allowance until the Judgment of Dissolution of Marriage is final and a court order directing the community property division of your LACERA benefits is received.

Beneficiary Eligibility: Ex-Spouse

If you divorced on or after January 1, 2002, your ex-spouse is not eligible for any benefit upon your death unless payment is mandated by court order or you designate your ex-spouse as beneficiary after the divorce. If you divorced before January 1, 2002 and your ex-spouse is your primary beneficiary at the time of your death, he or she would be eligible for a lump-sum death benefit, if applicable.

Active Plan A, B, and C members may change their beneficiary designation at any time prior to retirement.

Retired Members

LACERA is bound by certain legal restrictions in paying retirement benefits when a divorce is pending.

If you divorce after retirement, LACERA will continue paying your full monthly allowance pending receipt of the documents referenced in this section.

Beneficiary Eligibility: Ex-Spouse

An ex-spouse is not an eligible surviving spouse and is not eligible to receive a monthly continuing allowance under the Unmodified Retirement Option, even if he or she is named as beneficiary after the divorce. An ex-spouse would be eligible to receive a community property portion of a lump-sum benefit, if applicable.

If you named your spouse as a beneficiary at retirement under Option 2, 3, or 4 and later divorce, he or she will receive a monthly continuing allowance after your death.

Garnishment

In general, a member's retirement allowance is not subject to garnishment or other levies except as follows:

• A court may order LACERA to pay a portion of a member's retirement allowance to satisfy a judgment for spousal or child support or a division of community property.
• A member's retirement allowance is subject to a tax levy by the IRS or the California Franchise Tax Board for payment of delinquent federal or state income tax.

Your Records Are Confidential

In keeping with provisions set forth in CERL, the individual records of members remain confidential and may not be disclosed to anyone other than the member. Exceptions provided in the law also allow disclosure as necessary in the administration of the retirement system, upon order of a court of competent jurisdiction, or upon the member's written authorization.

9/21/10