Additional Impacting Factors
California law mandates that each year, prior to April 1, the Board of Retirement 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-Long Beach-Anaheim area.
If the CPI has increased, the Board grants a cost-of-living adjustment (COLA) increase for monthly retirement allowances and continuing benefits to survivors and beneficiaries. The maximum allowable annual increase for Plan E is 2.0 percent.
In the event the CPI has decreased, it is possible for the Board 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. Therefore, only past COLA increases could ever be subject to a decrease.
Plan E COLA (Automatic COLA) applies to service credit earned on and after June 4, 2002. Plan E members with retirement dates after June 4, 2002 are eligible to receive up to a 2.0 percent annual COLA increase on eligible service credit. COLA adjustments for members with service credit earned prior to June 4, 2002 (not including ARC) are based on a ratio of: months of service eligible for Automatic COLA (earned after June 4, 2002) and any months of Elective COLA service purchased, divided by the total months of all service credit.
Members hired on or after June 4, 2002 are eligible to receive a COLA adjustment based on all their earned service credit.
Some Plan E members with service credit earned prior to June 4, 2002 can make a greater portion of their retirement allowance eligible for COLA adjustments through the purchase of Elective COLA.
Elective COLA Eligibility:
- Active Plan E member with service credit earned prior to June 4, 2002
- Vested Plan E member with service credit earned prior to June 4, 2002 who terminated, returned to County employment, and elected Plan E
The Elective COLA benefit is granted by the BOR based on the CPI, in the same manner as Automatic COLA, with the same survivor and beneficiary benefit; it is also subject to the same 2.0 percent maximum allowable adjustment.
Purchasing Elective COLA
The cost to purchase COLA is based on the estimated cost of the future Elective COLA benefit. By law, Elective COLA must not place any additional burden on the retirement system; therefore, the member must pay the entire cost.
At the time of purchase, LACERA will project the cost of your Elective COLA based on:
- Your current compensation earnable
- Your current age
- Years of service (not including ARC purchases)
- Spouse or domestic partner's age (if applicable)
- Actuarial assumptions for:
- Increases to your compensation earnable
- Retirement at age 65
- Life expectancy for member and spouse or domestic partner
- Any years of service covered by Social Security
- Unmodified Retirement Option
A contract to purchase Elective COLA may be paid in a single lump-sum payment or through payroll deductions over a period ranging from two to 240 payroll periods (10 years) or through a combination of both.
At retirement, LACERA will use your actual retirement factors to recalculate the cost of your Elective COLA purchase. Any difference between the final calculation and the initial projection will determine whether you owe a balance to LACERA or LACERA owes you a partial refund.
Note: Elective COLA may not benefit everyone. Since the cost for Elective COLA is based, in part, on actuarial assumptions for life expectancy and annual inflation, if you don't reach the actuarially-projected life expectancy or if inflation is lower than the assumption, you may not recover your total Elective COLA purchase cost. For more details on Elective COLA, call 800-786-6464 or schedule an appointment to meet with a LACERA Retirement Benefits Specialist.
The County withdrew its employees from the federal Social Security program on December 31, 1982. If you became a County employee before January 1983 and/or worked at other jobs where you contributed to Social Security, you may be entitled to a Social Security benefit upon retirement. However, be aware in some cases Social Security can affect your LACERA retirement allowance and vice versa.
Plan E members who worked for the County prior to January 1983 will have a percentage of their estimated Social Security benefit subtracted from their LACERA retirement allowance. The percentage is based on their total number of years and months of pre-1983 County service that was covered by Social Security.
Note: Generally, it is advantageous for a Plan E member who retires at age 62 (or older) to provide LACERA with a copy of his or her actual Social Security benefit within six months following his or her effective retirement date. In such cases, LACERA will adjust the reduction to the member’s allowance to reflect the actual amount of the Social Security benefit. This often results in an increase to the member’s allowance.
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 800-772-1213.
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-4P Tax Withholding Form to LACERA.
The IRS requires LACERA to automatically withhold federal income tax at the married and claiming three exemptions rate from:
- Individuals without a W-4P tax form on file with LACERA
- Individuals who provide a P.O. Box as their home address
- U.S. citizens and resident aliens living outside of the United States
*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. LACERA does not withhold taxes for states other than 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 Should Provide:
- Judgment of Dissolution
- Domestic Relations Order (DRO) or Qualified Domestic Relations Order (QDRO)
- 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 to divide your pension, provide LACERA copies of that document. 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 you are an active member, failure to provide LACERA with your dissolution documents may result in a delay of your retirement benefits.
Upon notice that a member’s benefit is subject to division, 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. The hold will remain on the member’s account until retirement (and will appear on the member’s Annual Benefit Statement), even if LACERA receives a court order directing payment.
LACERA is bound by certain legal restrictions in paying retirement benefits when a divorce is pending. If you divorce after retirement, LACERA may continue paying your full monthly allowance pending receipt of the documents referenced in this section.
Beneficiary Eligibility: Ex-Spouse
It’s Important to Complete a New Beneficiary Form after Your Divorce
Active Plan E members may change their beneficiary designation at any time prior to retirement.
Upon completion of your divorce (Final Judgment), it is important you complete a new Beneficiary Designation form. Under California law, a dissolution cancels a member’s designation of a former spouse as a beneficiary.
If You Divorce During Active Service: Naming Your Ex-Spouse as Beneficiary
- Eligibility of Ex-Spouse as Beneficiary for Continuing Benefits after Retirement
When you decide to apply for retirement, you may elect any numbered Retirement Option and name your ex-spouse as beneficiary. If you elect Option 2, 3, or 4, your “ex” will receive a continuing benefit upon your death. If you had ever been enrolled in a LACERA contributory plan and elect Option 1, your “ex” may receive a lump-sum payment of any remaining portion (not depleted during your lifetime) of your accumulated contributions.
If You Divorce After Retirement: Naming Your Ex-Spouse as Beneficiary
- If you elected the Unmodified or the Unmodified Plus Option at retirement, your ex-spouse is ineligible to receive a continuing benefit from LACERA upon your death. In such case, you may name a new beneficiary after you are divorced.
- Upon your death, LACERA will pay any remaining portion of your accumulated contributions in one lump-sum payment to the beneficiary you designated after your divorce or to your estate. Neither your new beneficiary nor your estate is eligible for a continuing benefit.
- An ex-spouse is not an eligible surviving spouse and is not eligible to receive a monthly continuing benefit under the Unmodified Retirement Option, even if he or she is named as beneficiary after the divorce.
- An ex-spouse may be eligible to receive a community property portion of a lump-sum benefit, or a proportionate share of the eligible surviving spouse’s benefit, if applicable.
- If you named your spouse as a beneficiary at retirement under Option 2, 3, or 4, he or she will receive a monthly continuing benefit after your death.
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.
- If a retired member is convicted in federal court, the court may order the member to pay restitution through a federal garnishment of the member’s monthly LACERA benefit.
Pension Forfeiture Applies to Public Employees Convicted of a Job-Related Felony
PEPRA establishes pension forfeiture, without exception, for all public employees convicted of a job-related felony.
The law calls for forfeiture of “all accrued rights and benefits in any public retirement system” by any public employee convicted of any felony, as of the earliest date of the crime, “for conduct arising out of or in the performance of his or her official duties, in pursuit of the office or appointment, or in connection with obtaining salary, disability retirement, service retirement, or other benefits.”
Your Records Are Subject to Public Disclosure
The California Supreme Court has held the public has a right to know the names and salaries of public officials and employees under the California Public Records Act (CPRA).