The County-funded and administered Replacement Benefit (RB) Plan is set up to pay retirees affected by Internal Revenue Code Section 415(b) the total gross amount of the benefit to which they are entitled, according to the provisions of their respective LACERA retirement plans.
Section 415(b) limits the amount an individual can receive from a defined benefit plan such as LACERA’s each year. Section 415(b) applies to legacy members in General Plans B through E and Safety Plan B. Plan A members with membership dates prior to January 1, 1990 are exempt from Section 415(b) limits, except in some instances where a domestic partner is treated as a spouse.
How the Plan Works
LACERA’s actuaries conduct annual testing to identify individuals with LACERA retirement benefits that will exceed the Section 415(b) limit. When the actuaries identify an affected retiree, LACERA sends the individual a Replacement Benefit Plan Package containing County forms to complete and return. When it receives the completed paperwork, LACERA forwards it to the County Auditor-Controller’s office for RB Plan processing.
LACERA pays affected retirees the maximum amount of their monthly benefit permitted under Section 415(b), and the difference is paid through the County-funded and administered Replacement Benefit Plan (RB Plan). Each month, those affected receive the total gross amount of the benefit to which they are entitled according to the provisions of their respective LACERA retirement plans.
Retirees impacted by Section 415(b) receive two separate payments each month, one from LACERA and one from the County RB Plan. The RB Plan payments are issued by the County on the 30th of the month, and include a deduction for the Health Insurance Tax (HIT). The total gross amount of the retiree’s benefit remains unchanged. LACERA income and taxes are reported on a 1099-R while the County reports the RBP income and taxes on a separate document.
For questions regarding your LACERA retirement plan and the County’s RB Plan, contact us to speak with a retirement benefits specialist.