Plan Book D for General Members

Reciprocity

Reciprocity is a special relationship that exists between LACERA and certain public retirement systems in California. It is designed to protect retirement benefits when public service employees transfer to other public service jobs within a specified time. Under reciprocity there is no transfer of funds or service credit between reciprocal systems.

Reciprocal systems include, but are not limited to, the other 19 county retirement systems in California governed by CERL, the California Public Employees Retirement System (CalPERS), systems with reciprocal agreements with CalPERS, the California State Teachers Retirement System (CalSTRS), and the Judges Retirement System I and II (JRS).

Requirements for establishing reciprocity:

• You must become a member of a reciprocal agency within six months after terminating from LACERA, or vice versa.
• Your employment at one public agency must terminate before employment at the next public agency begins. Overlapping service, including vacation or sick time, may disqualify you for reciprocity.
• You must leave your contributions on deposit with LACERA while your employment is covered by a reciprocal retirement system, or vice versa.
• You must apply, in writing, for retirement from each system separately and retire from each system concurrently (on the same day).

Establishing reciprocity provides the following advantages:*

• Your contribution rate in the new system may be based on your entry age into the first system.
• Your years of service earned under each system may be combined and applied to retirement requirements for vesting and years of service credit.
• When calculating your retirement allowance, each system may use your highest final compensation, regardless of under which system it was earned.

Under reciprocity, each system will provide you with a separate benefit payment, based on your age and years of service credit in that system.

Terminating Service

If you leave County service for any reason prior to retirement, your future eligibility for retirement benefits depends on your vesting status.

Members who leave County service with their contributions on deposit must begin taking required minimum distributions (RMDs) from their LACERA retirement plan once they reach the applicable age.

Federal legislation determines the RMD age threshold, which is subject to change. See Required Minimum Distributions for the current RMD age.

If you are vested and leave County service with your retirement contributions on deposit with LACERA:

• You automatically become a deferred member.
• Your contributions will continue to earn interest.
• Once you meet the minimum age requirement, you become eligible for retirement.
• You must apply to retire or withdraw your contributions before you reach the applicable RMD start date.

If you are not vested and leave County service with your retirement contributions on deposit with LACERA:

• Your contributions will continue to earn interest.
• You will be eligible for a modest retirement benefit at age 70. Contact LACERA three months prior to your 70th birthday and we will calculate the exact amount of any benefit you may be due.
• You may withdraw your accumulated contributions and interest at any time, but note that by doing so, you will forfeit all rights to future benefits from LACERA, including disability and healthcare benefits.
• You must apply to retire or withdraw your contributions before you reach the applicable RMD start date.

Whether vested or not, you may establish reciprocity if you leave County service and:

• Leave your contributions on deposit with LACERA, and
• Enter employment with a reciprocal agency within six months of leaving County service.

If you withdraw your accumulated contributions from LACERA:

Such a withdrawal terminates your membership and forfeits any and all rights to future retirement benefits from LACERA, including disability and healthcare benefits.

If you withdraw, you may elect to either:

• Have LACERA issue a payment directly to you (minus 20 percent mandatory federal withholding tax and any applicable California state tax*), or
• If you are under the RMD age, defer taxes on the funds by rolling them over to an IRA or other tax-qualified plan.

Once the year in which you reach your RMD age arrives, a small portion of your contributions will be considered RMDs and will not be eligible for rollover. LACERA will issue a payment to you minus the mandatory federal withholding tax and any applicable California state tax.

Required Minimum Distribution

Internal Revenue Code (IRC) § 401(a)(9) requires individuals who leave County service with their contributions on deposit to begin taking required minimum distributions (RMDs) from their LACERA retirement plan once they reach the applicable age.

For individuals who are no longer active (working) members of LACERA or a reciprocal retirement system, the RMD beginning date is April 1 of the calendar year after they reach the applicable RMD age.

Federal legislation determines the RMD age threshold, which is subject to change. See Required Minimum Distributions for the current RMD age(s).

Active LACERA and reciprocal members who continue to work after reaching the applicable RMD age are not subject to RMDs until April 1 of the calendar year following their employment termination date.

The method of the distribution depends on the member’s retirement eligibility status. In accordance with IRC requirements and applicable retirement law, this means those individuals must either elect to retire or to withdraw their accumulated contributions.

LACERA must begin paying a retirement allowance to a member who:

• Reaches the RMD age
• Left County service with their accumulated contributions on deposit with LACERA

If a member meeting the above conditions fails to apply for a retirement allowance and elect a Retirement Option, LACERA will calculate and pay a monthly retirement allowance based on the Unmodified Option.

Note: Rather than apply for retirement, a member may elect to withdraw their accumulated contributions. By taking such action, however, the member terminates their membership and forfeits all rights to future retirement benefits from LACERA, including disability and healthcare benefits.

LACERA will refund the accumulated contributions of a nonvested individual who:

• Reaches the RMD age
• Accrued less than five years of service credit
• Left County service with his or her accumulated contributions on deposit with LACERA

LACERA must notify an eligible member or former member two years before their RMD age that they are eligible to apply for a retirement allowance or a refund of accumulated contributions. If the member cannot be located, all of their accumulated contributions will be deposited in the Member Reserve Account.

If you are a member who may be subject to the RMD, make sure that LACERA has your current contact information, either by contacting us or updating your profile on My LACERA.)

Returning to Service*

A deferred member of Plan D who returns to County employment working three-quarter time or more automatically becomes an active Plan D member upon his or her return to service (even if the member entered a reciprocal retirement system after terminating County service). The returning member retains his or her service credit.

A deferred member who returns to a permanent position of less than three-quarter time may file a written election to return to active membership. The written election must specify whether the member also chooses to purchase service credit for any County service not previously credited prior to the date of his or her election. The purchase may begin at any time prior to the member’s effective date of retirement. The election to return to active membership is irrevocable; active membership will remain in effect until the member terminates service.

The contribution rate for a member returning from deferred status is based on the entry age in effect at the time of the member’s most recent election of deferred status.

Restoring to a Prior Plan

A member who previously terminated service, subsequently withdrew his or her accumulated contributions, and later returns to County service may restore to his or her former Plan, provided all his or her withdrawn contributions are redeposited, along with the interest those contributions would have earned had they been left on deposit.

The member will default to Plan G upon returning to service with the same employer. Once restoration is complete, the member’s prior service credit is restored and membership in the prior plan continues as if unbroken.

The returning member will be credited for any excess contributions made prior to completion of the restoration, plus interest. A contribution rate based on the member’s nearest age at the time of reentry into LACERA will apply.

In most situations, Plan E members are not eligible to restore membership in a prior contributory plan. However, certain Plan E members who were not properly informed about restorations and who meet the following specific criteria are permitted to restore:

• Terminated from a contributory Plan
• Withdrew their contributions
• Subsequently returned to County service prior to July 1, 1991 and fulfilled either of the following conditions:
  • Elected Plan E, or
  • Returned to a different contributory plan and later transferred to Plan E

To be eligible, your LACERA record must contain no evidence you were notified of the opportunity to restore membership in your prior contributory Plan by redepositing your accumulated contributions. Each claim will be considered on a case-by-case basis.