Understanding the Variables
In the course of a County career, there are many factors and events that can impact an individual’s retirement benefits. These include circumstances such as leaving and returning to service, prior or future employment with a reciprocal retirement system, transferring retirement plans, prior or future service as a safety member, and prior County and/or other government service, among others.
Let’s explore how these factors can affect your Plan D benefits.
The Importance of Service Credit
Plan D members earn retirement service credit for each payroll period of County employment during which a retirement contribution is made. Since years of service credit is one of the factors that determines the monthly allowance you receive when you retire, the more years of service credit you have, the higher your monthly retirement allowance will be.
Service credit also affects the cost of your LACERA-administered retiree healthcare benefits. The County subsidizes retiree medical/dental insurance based on a member’s years of service credit; the more County service credit you have, the more the County pays toward your premiums.* (See Paying for Coverage.)
*Certain exceptions apply.
Purchasing Service Credit
Service credit may be purchased for certain types of County and non-County government service performed prior to the date you became eligible for LACERA membership (various eligibility requirements apply).
Previous County service may include:
- Temporary County service (Temp Time)
- Permanent County service prior to LACERA membership
- Redeposit of withdrawn contributions
- Sick Without Pay (SWOP)*
Other government service may include employment with:
- United States of America government (federal government)
- State of California
- Any public agency within the State of California
- U.S. military
Purchasing non-County service will increase your total years of service credit and count toward the County subsidy of LACERA-administered retiree medical and dental/vision insurance.
The purchase of non-County service will not count toward meeting the minimum service credit requirement to retire or to qualify for a nonservice-connected disability retirement, pre-retirement continuing benefits, or to defer your retirement.
*Absence due to illness or maternity leave during active membership.
Additional Retirement Credit
Prior to PEPRA taking effect on January 1, 2013, Additional Retirement Credit ARC was credit that could be purchased to increase your service credit total. It was not based on actual employment. Previous law permitted the purchase of up to five years of ARC by active LACERA members with at least five years of actual County service credit.
The following applies to ARC purchased prior to January 1, 2013:
ARC provides a way to increase your years of service credit. The ARC you purchased will increase the total amount of your service credit, which in turn, will increase the amount of the monthly retirement allowance you will be entitled to receive when you retire. Any ARC you purchased is eligible for COLA adjustments as well.
Certain restrictions apply. ARC is applied to your total service credit solely for the purpose of calculating your retirement. It does not apply toward:
- Meeting minimum eligibility requirements for a service or disability retirement, vesting, or retiree healthcare subsidy
- Cancellation of contributions for members who attain 30 years of continuous service
- Calculating additional LACERA-administered retiree healthcare benefits or other benefits based on total years of continuous service
Something to Consider Regarding Service Credit Purchases
The formulas used to calculate the cost of service credit vary according to the category of service credit being purchased. Factors affecting calculations include your current age, retirement plan, salary, and prevailing interest rate.
Timing Matters Most
Generally, it is in your best interest to initiate service credit purchases as early in your career as you can afford.