Additional Impacting Factors
COLA
California law mandates that each year, prior to April 1, the Board of Retirement will determine whether there has been an increase or decrease in the cost of living, as reflected in the Bureau of Labor Statistics Consumer Price Index (CPI) for All Urban Consumers in the Los Angeles-Long Beach-Anaheim area. If the CPI has increased, the Board grants a cost-of-living adjustment (COLA) increase for monthly retirement allowances and continuing benefits to survivors and beneficiaries. The maximum allowable annual increase for Plan G is 2.0 percent.
In the event the CPI has decreased, it is possible for the Board to apply a COLA decrease. However, if a cost-of-living decrease is ever required, it may not reduce a member’s allowance to an amount less than the allowance received at the time of retirement. Therefore, only past COLA increases could ever be subject to a decrease.
Social Security
The County does not participate in the federal Social Security program. However, if you worked at other jobs where you contributed to Social Security, you may be entitled to a Social Security benefit upon retirement. Be aware in some cases your Social Security benefit can be affected by your LACERA retirement allowance.
The Windfall Elimination Provision and the Government Pension Offset are federal laws that impact Social Security benefits for some individuals receiving government pensions.
Windfall Elimination Provision
The Windfall Elimination Provision (WEP) reduces the Social Security benefit for retired and disabled workers receiving government pensions from employment not covered by Social Security. Basically, the Social Security Administration uses a different (less favorable) formula to calculate a worker’s benefit under the WEP than it does to calculate the benefit of a worker who is not affected by the WEP.
The WEP formula includes a sliding scale based on the length of your Social Security-covered employment. If you have 30 or more years of “substantial earnings” under Social Security, you are fully exempt from the WEP.
Government Pension Offset
The Government Pension Offset (GPO) affects spouses, widows, and widowers. Under the GPO, if you receive a LACERA pension (based on work when you did not pay Social Security taxes), your Social Security spouse’s, widow’s, or widower’s benefits may be reduced by an amount equal to two-thirds of your LACERA pension.
For more information and specifics of how the GPO and the WEP may apply to your individual situation, contact the Social Security Administration at 800-772-1213.
Pension Advance Option
The Pension Advance Option is designed to equalize a member’s LACERA income prior to age 62 with the combined LACERA and Social Security income the member will receive after age 62.
Under this option, LACERA adds a percentage of the member’s Social Security benefit (based on the estimate that appears on the member’s Social Security statement) to the member’s LACERA retirement allowance until he or she reaches age 62. At 62, the full Social Security estimate is subtracted from the allowance.
Important Note: To elect the Pension Advance Option, you must present your Social Security statement when you retire. Due to differences between estimated and actual Social Security benefit amounts and reductions due to WEP or GPO, the combined income members receive under this option is often less than they received prior to age 62.
Eligibility Requirements
- Service retirement prior to age 62
- Submit a Social Security statement of benefits to verify eligibility
- Elect one of the following:
- Unmodified Option
- Option 1
If you are considering the Pension Advance Option, we recommend you call 800-786-6464 to consult with a LACERA Retirement Benefits Specialist prior to making your decision.
Taxability
Your LACERA retirement allowance is subject to both federal and California state income tax.* Withholding tax is based on the gross amount of your service retirement allowance.** You may elect to have federal or state tax withheld from your retirement allowance at whatever rate you choose — or to have no tax withheld — by submitting a W-4P/DE-4P Tax Withholding Form to LACERA.
The IRS requires LACERA to automatically withhold federal income tax at the married and claiming three exemptions rate from:
- Individuals without a W-4P tax form on file with LACERA
- Individuals who provide a P.O. Box as their home address
- U.S. citizens and resident aliens living outside of the United States
*Certain exceptions may apply.
**In compliance with federal law, California income tax is not withheld from your retirement allowance if you reside outside of California. LACERA does not withhold taxes for states other than California.
Dissolution of Marriage (Divorce)
Active and Retired Members
If your marriage is dissolved, you must contact LACERA promptly to update your records.
Documents You Should Provide:
- Judgment of Dissolution
- Domestic Relations Order (DRO) or Qualified Domestic Relations Order (QDRO)
- Notice of Entry of Final Judgment (if applicable)
You must provide LACERA with a conformed copy (with the court clerk’s filing date stamp and the judge’s signature) of all the pages of your Judgment of Dissolution. If the judgment states a further order is required, provide LACERA copies of that document. If you are unsure about the need for additional documents, LACERA’s Legal Division will review the judgment to ascertain if an additional order is required.
Active Members
If you are an active member, failure to provide LACERA with your dissolution documents may result in a delay of your retirement benefits.
Upon notice that a member’s benefit is subject to division, LACERA must place a legal hold on the member’s account. A member may not withdraw his or her contributions while a legal hold is in effect. The hold will remain on the member’s account until retirement (and will appear on the member’s Annual Benefit Statement), even if LACERA receives a court order directing payment.
Retired Members
LACERA is bound by certain legal restrictions in paying retirement benefits when a divorce is pending. If you divorce after retirement, LACERA may continue paying your full monthly allowance pending receipt of the documents referenced in this section.
Beneficiary Eligibility: Ex-Spouse
It’s Important to Complete a New Beneficiary Form after Your Divorce
Active Plan G members may change their beneficiary designation at any time prior to retirement.
Upon completion of your divorce (Final Judgment), it is important you complete a new Beneficiary Designation form. Under California Probate Code, a dissolution cancels a member’s designation of a former spouse as a beneficiary.
If You Divorce During Active Service: Naming Your Ex-Spouse as Beneficiary
- Should You Die In Active Service LACERA will pay applicable death benefits to your ex-spouse only if you named that individual on a LACERA Beneficiary Designation form (or equivalent document) subsequent to your divorce or in accordance with a court order. Otherwise, LACERA will pay applicable death benefits to your estate. Your estate is not eligible for continuing benefits.
- Eligibility of Ex-Spouse as Beneficiary for Continuing Benefits after Retirement When you decide to apply for retirement, you may elect any numbered Retirement Option and name your ex-spouse as beneficiary. If you elect Option 2, 3, or 4, your “ex” will receive a continuing benefit upon your death. If you elect Option 1, your “ex” will receive a lump-sum payment of any remaining portion (not depleted during your lifetime) of your accumulated contributions.
If You Divorce After Retirement: Naming Your Ex-Spouse as Beneficiary
- If you elected the Unmodified or the Unmodified Plus Option at retirement, your ex-spouse is ineligible to receive a continuing benefit from LACERA upon your death. In such case, you may name a new beneficiary after you are divorced.
- Upon your death, LACERA will pay any remaining portion of your accumulated contributions in one lump-sum payment to the beneficiary you designated after your divorce or to your estate. Neither your new beneficiary nor your estate is eligible for a continuing benefit.
- An ex-spouse is not an eligible surviving spouse and is not eligible to receive a monthly continuing benefit under the Unmodified Retirement Option, even if he or she is named as beneficiary after the divorce.
- An ex-spouse may be eligible to receive a community property portion of a lump-sum benefit, or a proportionate share of the eligible surviving spouse’s benefit, if applicable.
- If you named your spouse as a beneficiary at retirement under Option 2, 3, or 4, he or she will receive a monthly continuing benefit after your death.
Garnishment
In general, a member’s retirement allowance is not subject to garnishment or other levies except as follows:
- A court may order LACERA to pay a portion of a member’s retirement allowance to satisfy a judgment for spousal or child support or a division of community property.
- A member’s retirement allowance is subject to a tax levy by the IRS or the California Franchise Tax Board for payment of delinquent federal or state income tax.
- If a retired member is convicted in federal court, the court may order the member to pay restitution through a federal garnishment of the member’s monthly LACERA benefit.
Pension Forfeiture Applies to Public Employees Convicted of a Job-Related Felony
PEPRA establishes pension forfeiture, without exception, for all public employees convicted of a job-related felony.
The law calls for forfeiture of “all accrued rights and benefits in any public retirement system” by any public employee convicted of any felony, as of the earliest date of the crime, “for conduct arising out of or in the performance of his or her official duties, in pursuit of the office or appointment, or in connection with obtaining salary, disability retirement, service retirement, or other benefits.”
Your Records Are Subject to Public Disclosure
The California Supreme Court has held the public has a right to know the names and salaries of public officials and employees under the California Public Records Act (CPRA).