Compensation and Benefit Limits

State and federal laws limit the annual benefit that an individual may receive and annual compensation that may be used to calculate retirement benefits, depending on date of LACERA membership.

Compensation Limits

Compensation limits for calculating retirement benefits are mandated by Internal Revenue Code Section 401(a)(17).

General Plan D and E  and Safety Plan B members who first entered LACERA membership on or after July 1, 1996 are subject to a federally mandated annual compensation limit for calculating retirement benefits under 401(a)(17).

LACERA General Plan G and Safety Plan C members are subject to a state-mandated annual compensation limit under PEPRA for calculating retirement benefits, which precludes the federal limits that would otherwise apply.

Benefit Limits

Benefit limits are mandated by Internal Revenue Code Section 415(b) and apply to all plans but only affect a small percentage of retired members.

IRC Section 415(b) sets limits on how much defined benefit plans can pay participants in a given year. 415(b) limits apply to all plans but only affect a small percentage of highly compensated retired members, and vary by age, plan, beneficiary status, and other factors. (Plan A members are exempt from Section 415(b) limits, except in some instances where a domestic partner is treated as a spouse.)

LACERA and its contracted actuary have established a process for identifying and testing retirement benefits that may exceed the 415(b) limit for the year. Since LACERA benefits are promised under the County Employees Retirement Law of 1937, members subject to 415(b) limits will still receive the maximum allowable benefit.

If the testing confirms that any member's benefit paid by LACERA will exceed the annual limit, that member is enrolled in the County-funded and administered Replacement Benefit Plan (RB Plan). The RB Plan pays the portion of the LACERA benefit that exceeds the 415(b) limit.