Effective July 1, 2017, both the employer’s and employees’ contributions to LACERA for your pension have increased, resulting in a small decrease in your take home paycheck. LACERA has advised the unions that this increase is necessary to assure the soundness of your LACERA pension benefit upon retirement, and we took the precautionary step of having LACERA’s data analyzed by an outside expert who has confirmed that the rate increase – though unfortunate – is necessary and in your best interest.
“We have reviewed the proposed new member contribution rates for the Los Angeles County Employees Retirement Association (LACERA). We find the new rates reasonable and developed in accordance with Actuarial Standards of Practice.” – William B. Fornia, FSA, President, Pension Trustee Advisors, Inc.
LACERA Retirement Rates
SAMPLE RATE CHART
Effective July 1, 2017
For Entry Age of 25
Plan 7/1/14 Rate 7/1/17 Rate
Safety
Plan B 7.71% 8.00%
Plan C 13.44% 14.00%
General
Plan A 4.59% 4.62%
Plan B 7.08% 7.35%
Plan C 6.03% 6.32%
Plan D 4.90% 6.27%
Plan G 7.58% 8.31%
TO FIND YOUR NEW RETIREMENT RATE, CLICK HERE.
Why now?
LACERA deemed the rate increase necessary because:
• The “assumed rate of investment return” – the amount the plan expects to earn each year investing your money – has been decreased from 7.5% per year to 7.25% per year to be more in line with the investment return expectations of other plans. Simply put, when the expected return is lowered, more money needs to be infused into the system by increasing contributions into the plan.
• Life expectancies are increasing, and are expected to continue to increase. This means that pension benefits must be paid for more years as people live longer! The recession, and the overall slowdown of growth in America, has put tremendous pressure on public sector pension plans. Many plans across America are severely underfunded (i.e., there may not be enough money in the plan to pay benefits to retirees in the future), both because of poor investment returns and employers’ unwise decisions to stop making their contributions during the boom years. (Read more here.)
However, your union – working together with other employee groups through the Coalition of County Unions – has held the line to assure that the County did NOT reduce or eliminate their contribution to LACERA like the State of California and other public agencies have done. (Note that under the California Public Employees' Pension Reform Act of 2013 (PEPRA), the practice of employers taking a “pension holiday” is now illegal, an element of the law that we entirely support.) Also, we have been actively involved with the LACERA Board of Investments to assure a sound, safe investment strategy. Our attention has paid off – LACERA is one of the soundest pension plans in America.
If you have any questions or feel that there may be an error in the new calculation of your pension contribution, please contact LACERA at (800) 786-6464 (M-F 7 a.m. - 5:30 p.m.).