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BENEFITS


STATE AND FEDERAL COMPENSATION LIMITS

STATE COMPENSATION LIMITS UNDER PEPRA

Government Code Section 7522.10

Individuals who first entered LACERA membership on or after January 1, 2013 (LACERA General Plan G and Safety Plan C members) are subject to an annual compensation limit for calculating retirement benefits under Section 7522.10 of the California Public Employees’ Pension Reform Act of 2013 (PEPRA). The amount of a PEPRA member’s pensionable compensation that may be taken into account for calculating benefits is capped, as established by Government Code Section 7522.10.

The compensation limit is adjusted annually, based on the changes to the Consumer Price Index for All Urban Consumers: U.S. City Average. Each fall, the California Actuarial Advisory Panel (CAAP) publishes an advisory letter providing the PEPRA compensation limit that will apply for the following calendar year effective January 1.

2018 Compensation Limit

As calculated by the CAAP, the limit for 2018 earnings that may be taken into account for calculating benefits for LACERA General Plan G and Safety Plan C members is $145,666.

Applying Section 7522.10

In the event that a General Plan G or Safety Plan C member’s annual earnings reach the maximum amount permitted that year under Section 7522.10 as calculated by CAAP, LACERA will discontinue deducting retirement contributions from that individual for the remainder of the year. Deductions for contributions will resume the following January.

Final compensation is one of the factors (along with age at retirement and amount of service credit) that is used to calculate a member’s retirement allowance. In compliance with PEPRA, for purposes of retirement calculations, the amount of annual final compensation is limited to the amount set forth under Section 7522.10.

FEDERAL COMPENSATION LIMITS

Internal Revenue Code Section 401(a)(17)

To achieve and maintain tax-qualified status, retirement plans such as LACERA’s must meet requirements set forth in the Internal Revenue Code (IRC). Section 401(a)(17) of the IRC imposes a limit on the amount of annual compensation that can be used to calculate a participant’s retirement benefit. This limit applies to General Plan D and E members who first entered LACERA membership on or after July 1, 1996.

2018 Compensation Limit

The limit set by the federal government for 2018 earnings that may be taken into account for calculating benefits is $275,000.

Applying Section 401(a)(17)

In the event a member’s annual earnings reach the maximum amount permitted under Section 401(a)(17), LACERA will discontinue deducting retirement contributions from that individual for the remainder of the year. Deductions for contributions will resume the following January.

Final compensation is one of the factors (along with age at retirement and amount of service credit) that is be used to calculate a member’s retirement allowance. In compliance with the IRC, for purposes of retirement calculations, the amount of annual final compensation is limited to the amount set forth under Section 401(a)(17).

Internal Revenue Code Section 415(b)

Individuals who first entered LACERA membership on or after January 1, 1990 are subject to IRC Section 415(b) limits on the amount they can receive annually from LACERA's defined benefit plan (Plan A is exempt). The County-funded and administered Replacement Benefit Plan (RB Plan) pays the difference when a retiree's annual LACERA allowance exceeds the Section 415(b) annual dollar limit.

10/4/18