Benefit Limits
To achieve and maintain tax-qualified status, retirement plans such as LACERA’s must meet requirements set forth in the Internal Revenue Code (IRC). Two IRC sections apply to LACERA members’ compensation and benefits, Section 401(a)(17) and Section 415(b).
Section 401(a)(17) does not apply to members of Plans A, B, and C, but Section 415(b) applies to some Plan B and C members as described below.
IRC Section 415(b) applies to General Plan B and C members with membership dates on or after January 1, 1990. Section 415(b) limits the amount an individual can receive from a tax-qualified defined benefit plan (such as LACERA's) each year. Factors that determine if the 415(b) limit applies include income, age, mortality tables, taxable and nontaxable contributions, service credit purchases, marital status, and several other factors.
Members affected by 415(b) limits will be notified and covered by the County's Replacement Benefit (RB) Plan.
Since LACERA benefits are promised under the County Employees Retirement Law of 1937, the County-funded and administered Replacement Benefit (RB) Plan pays the difference if your annual LACERA allowance exceeds the Section 415(b) annual dollar limit. If you are subject to 415(b) limits and are covered under the RB Plan, you will continue to receive your full retirement benefit, except that it will be paid in two separate checks (or direct deposits)—one from LACERA and the other from the County. The County’s RB Plan payment includes a deduction for the Health Insurance Tax (HIT).
How Section 415(b) Is Applied
LACERA's actuary determines whether your benefit exceeds the IRC 415(b) limit and provides the maximum amount of retirement benefit LACERA can pay in a given year. The remaining retirement benefit you are entitled to receive (that LACERA cannot pay) is paid to you separately by the County through the RB Plan.