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FAQS - ADDITIONAL RETIREMENT CREDIT (ARC)

PEPRA Discontinues ARC Purchases

The California Public Employees’ Pension Reform Act of 2013 (PEPRA) ended the availability of ARC purchases effective January 1, 2013.

The following information applies to ARC purchases prior to PEPRA taking effect.

SECTION I: GENERAL ARC INFORMATION

  1. What is Additional Retirement Credit (ARC)?

    Under prior law, ARC was credit that could be purchased to increase your service credit total. It was not based on actual employment.

  2. What was the advantage of purchasing ARC?

    Members who increased their total years of service credit through a purchase of ARC increased the amount of the monthly allowance they will receive at retirement. In accordance with all LACERA retirement plans, the more service credit a member has accumulated, the greater the amount of the monthly allowance he or she will receive at retirement.*

    * In certain circumstances, this may not apply to a service-connected disability. For more information, call 800-786-6464.

  3. Are there limitations to ARC?

    ARC adds to your total retirement service credit for purposes of calculating your retirement allowance only. However, regardless of ARC, the retirement allowance of a Plan A, B, C, or D member cannot exceed 100 percent of his or her final compensation. The allowance of a Plan E member cannot exceed 80 percent of final compensation.

    Additionally, ARC does not apply when calculating any of the following:*

    • Minimum eligibility requirements for a service or disability retirement
    • Cancellation of contributions for members who attain 30 years of service credit
    • Retiree healthcare benefits
    • Cost-of-living adjustments for members of non-contributory Plan E

    * Disability retirement and 30-year cancellation of contributions do not apply to Plan E.

  4. Can I make changes to my existing ARC contract?

    Only contracts based on payments made exclusively with after-tax dollars may be revised or revoked. Contracts that include payroll deductions and/or payments using other before-tax funds are irrevocable.

  5. What If I revoke my after-tax dollar ARC contract before it is paid in full?

    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 ARC accordingly. LACERA cannot refund the money you already paid until you terminate County service; if you die, the money will be paid to your beneficiary.

  6. What happens if I retire or terminate County service before completing my ARC Payment Contract?

    If you retire or terminate County service and defer your retirement (leave your contributions on deposit with LACERA) before your contract is paid in full, you may complete the contract within 120 days after your effective date of retirement or termination. If your contract is not paid in full, your retirement allowance will be prorated to include ARC for whole months already paid.

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Section II: Plans A, B, C, D

  1. When I retire, will cost-of-living (COLA) adjustments apply to the ARC I’ve purchased?

    Yes. The annual April 1 COLA percentage is applied to a retiree’s total monthly retirement allowance, which includes any ARC purchased. (COLA adjustments are subject to annual approval by the Board of Retirement.)

  2. What happens if I receive a disability retirement before completing my Payment Contract?

    If you are granted a disability retirement before completing your Payment Contract, your account will be credited for the years/months of ARC paid up to the date your disability retirement was granted. If you elect to complete the Payment Contract, you must do so within 120 days of the date your disability was granted.

  3. What happens if I die before completing my Payment Contract?

    If you die before paying your contract in full, your eligible surviving spouse or domestic partner (or minor child) would be eligible to complete payment within 120 days after the date of death. If your contract is not paid in full, the continuing benefit will be prorated to include ARC for whole months already paid.

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Section III: Plan E

  1. I have an existing contract to purchase Plan E ARC. If I complete that contract and later transfer to Plan D, can my Plan E ARC be converted to Plan D?

    No. If you transfer to Plan D, your Plan E ARC will remain as Plan E service credit; you will have double accounts. At retirement, you will receive a combined allowance: a Plan E retirement allowance based on your previous period of Plan E service credit (including Plan E ARC) and a Plan D retirement allowance based on your Plan D service credit (including Plan D ARC). Retirement eligibility rules apply.

  2. When I retire, will cost-of-living (COLA) adjustments apply to the Plan E ARC I’ve purchased?

    No. In accordance with law, the annual April 1 COLA percentage does not apply to Plan E ARC service credit.

  3. What happens if I terminate County service prior to becoming vested?

    If you terminate County service before earning ten years of service credit (vested), LACERA will refund the amount you paid on your ARC contract.

  4. What is the maximum percentage of my final compensation that I can receive when I retire?

    The retirement allowance of a Plan E member cannot exceed 80 percent of final compensation, regardless of ARC.

1/19/17