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This Page Describes

• Planning Your Retirement
• Types of Retirement Pensions
• Definition of "Eligible Spouse"
• Definition of "Domestic Partner"
• Terminating a "Domestic Partner"
• When You Can Retire
• The Formula Pension
• Minimum Pension C
• Definition of Minimum Pension C Service Credit
• How to Estimate Your Full Minimum Pension C
• Early Retirement Factors
• Retirement Allowance Options
• Summary of Options
• Option Full Allowance
• Option A Allowance
• Option B Allowance
• Option C Allowance
• Option D Allowance
• Option E Allowance
• Choosing an Option
• Retiring from Permanent Total Disability
• Limitations on Allowances
• Lump-Sum Settlement
• Adjustments to Your Retirement Allowance
• Delayed or "Vested" Retirement Rights
• Divorce/Dissolution
• Additional Annuity
• Applying for Your Retirement
• Federal & California State Income Taxes
• Benefit Limits

Planning Your Retirement

Establishing overall financial and social goals is key to a successful retirement.  Starting to plan for your retirement, especially how your income requirements will be met, should start early in your career.  To assist you, the Retirement Office offers Early/Mid-career and Pre-retirement seminars.

The Early/Mid-career retirement class provides an overview of Plan benefits and information on financial and estate planning.  This 4-hour class is available to members with 5 or more years of Department or City service.

The Pre-retirement seminar is a full day class with presentations from a variety of experts who cover topics including: Plan and retiree health benefits, Social Security and Medicare; and Deferred Compensation. This 7-hour class is available to members within 3 years of retirement eligibility.

If you are interested in attending either of these seminars, contact your Division Training Coordinator to be enrolled.

Types of Retirement Pensions

The Plan offers retirement benefits to both active members (the "Formula" Pension) and terminated employees (the "Vested Right" Pension); both provide a monthly allowance that will be paid to you each month for the rest of your life. The Formula Pension includes an Eligible Spouse/Domestic Partner Allowance after your death.  The monthly allowance for a Formula Pension is composed of the three elements described below.  The Vested Right Pension does not include "The Minimum Element".

• The Annuity Element - This is the amount provided by your contributions to the Retirement Fund, plus earned interest.

• The Current Service Element - This is the amount provided by the Department's matching contributions to the Retirement Fund, which, at present, are equal to 110 % of your contributions, plus earned interest.

• The Minimum Element - This is the difference between the total of the first two elements and the Formula Pension amount.  This element is also funded entirely by Department contributions.

If you leave Department service after you have qualified for a Formula Pension, you remain qualified for the Formula Pension as long as your retirement contributions are left in the Retirement Fund.

Definition of "Eligible Spouse"

An Eligible Spouse is one who is married to you for at least one year prior to your retirement, on the date of your retirement, and is still married to you at the time of your death.  If your Eligible Spouse dies or if you divorce, the right to an Eligible Spouse allowance will stop.

Definition of "Domestic Partner"

To meet the definition of Domestic Partner, a plan member and his or her partner must be registered with the Retirement Plan Office or the State of California for at least one year prior to retirement, on the date of the member’s retirement and on the date of the member’s death.  The member must certify that the partners share the same principal residence, each partner is the sole partner of the other and each is responsible for the partnership’s common welfare.  Both partners must be 18 years of age or older, neither partner can be married to another person and the partners may not be related by blood to any degree that would bar marriage in the State of California.  Each partner must be mentally competent to consent to contract. The plan member must provide the  non-member partner’s name, date and location of birth, taxpayer identification number and the inception date of the Domestic Partnership.  If your Domestic Partner dies or the partnership is terminated, the right to an Eligible Spouse/Domestic Partner allowance will stop.

Terminating a "Domestic Partner"

A member must file a Notice of Termination of Domestic Partnership with the Retirement Plan Office in order to terminate a Domestic Partnership.  The member then must wait 12 months after a Notice of Termination of Domestic Partnership has been filed with the Retirement Plan Office before a new Domestic Partnership may be registered.

When You Can Retire

Normal retirement is the first day of the month after you reach age 60.  You can retire early under specific circumstances.  (For these circumstances, see "The Formula Pension", next.)

The Formula Pension

The Plan provides for a retirement allowance based on a formula. You qualify for a Formula Pension if either:

• You are at least 60 years old, and

• You were employed by the Department for at least five years before your retirement, and

• You were a contributing member for at least four of the five years immediately preceding retirement or while eligible to retire (or during any of those four years were receiving either Plan disability benefits or Workers' Compensation for a Department-related injury).

or

• You are at least 55 years old, and

• You receive Department approval, and

• You have been with the Department for 10 out of the 12 years immediately before your retirement (or your termination if you no longer work for the Department), and

• You were a contributing member for at least four of the five years immediately preceding retirement or while eligible to retire (or during any of those four years were receiving either Plan disability benefits or Workers' Compensation for a Department-related injury).

or

• You have 30 years of service with the Department, regardless of your age, and

• You receive Department approval, and

• You were a contributing member for at least four of the five years immediately preceding retirement or while eligible to retire (or during any of those four years were receiving either Plan disability benefits or Workers' Compensation for a Department-related injury).

or

• You are receiving Permanent Total Disability benefits from the Plan, regardless of your age.

Other Government Service can be used to meet the 10 out of the 12 years requirement described above but not the five years or four out of five years requirement.

Two Formula Pensions are available: Minimum A and Minimum C.  Most members receive the Minimum C pension.  Some members who have very little Department service receive a higher pension under Minimum A.  Under each of the Formula pensions you may select from five options that affect how much you, your Eligible Spouse, Domestic Partner and/or your beneficiary will receive each month.  (See "Retirement Allowance Options")

Minimum Pension C

This is the pension used by most members retiring from Department Service. Your Full Minimum Pension C consists of 2.1% of the average monthly equivalent of your highest one year's salary multiplied by your years of service credit.  Your monthly allowance may not exceed 100% of that salary.  If you retire at age 55 or older with at least 30 years of service credit, 2.3% is used instead of 2.1% to calculate your Full Minimum Pension C.

If you retire before age 60, there may be a reduction in the amount of your retirement allowance, as indicated on the table Early Retirement Factors. If you have 30 or more years of service credit you may retire between ages 55 and 60 without a reduction. (See "Definition of Minimum Pension C Service Credit", next.)

Definition of Minimum Pension C Service Credit

Your service credit for the purpose of calculating your Full Minimum Pension C includes the following:

• Biweekly payroll periods you were a member of the Plan for which you received a paycheck and had a retirement contribution deducted from that pay.  (Half-Time Civil Service Employees accrue service credit at half the rate as full-time employees.)

• Service in other City departments for which your LACERS retirement service credit was transferred to the DWP Plan under the Reciprocity Program. (See "Reciprocity Between the Plan and LACERS”)

• Credited military leaves.

• Other Governmental Service (OGS) purchased in accordance with the Plan.

• Any portion of your first continuous 26 weeks of Department service service before July 1, 1991 which you have purchased.

• Service you have purchased for periods of Department Employment when you were not a member of the Plan (including part-time, exempt time, unpaid time and maternity leaves).

• Service with other City departments which you have purchased.

• Service for which you have re-deposited previously withdrawn contributions.

• Periods during which you have received Plan disability benefits or Workers' Compensation benefits for a Department work-related illness or injury, but only to the extent of the allowable maximum shown below:

Do not include the following in your service credit:

• Any biweekly payroll period for which you received Plan disability benefits or Department Worker's Compensation benefits which exceeded the allowable maximums shown above.

• Any biweekly payroll period you were on leave without pay (except for allowable military credit).

How to Estimate Your Full Minimum Pension C

   The Full Minimum Pension C Formula:

2.1 % x Years of Service x Average Salary

• Years of Service - (See "Definition of Minimum Pension C Service Credit")

• Average Salary - The base salary you were paid for the last 26 payroll periods, or any other period of 26 successive payroll periods if your base pay was higher. Count only payroll periods when you received a paycheck; do not count periods in between when you did not get a paycheck. The total of the 26 payroll periods is changed to the monthly equivalent as shown in the example of an Average Salary Calculation.  (If you are a Half-Time Civil Service Employee at the time of retirement, your average salary will be based on the full-time equivalent of what you were paid.)

Example of an Average Salary Calculation for a member who is 60 years old with 25 years of service:

1. Determine the total pay for the highest 26 payroll periods:
   

   Number of Pay Periods	X	Base Pay Amount	=	Total Pay
   5	X	$2,000.00	=	$10,000.00
   21	X	$2,056.00	=	$43,176.00
   26		TOTAL	=	$53,176.00

2. Change the total pay to its monthly equivalent:
   

   $53,176

   ÷

   26

   =

   $2,045.23

   ×

   2.175

   =

   $4,448.38

3. Insert the monthly equivalent into the formula:
   

   .021

   ×

   25 Years of Service

   ×

   $4,448.38

   =

   $2,335.40

4. The estimated Full retirement allowance is $2,335.40 per month.

To calculate your own average salary:

1. Determine the total pay for the highest 26 payroll periods:
   

   Number of Pay Periods	X	Base Pay Amount	=	Total Pay
   	X		=
   	X		=
   		TOTAL	=

2. Change the total pay to its monthly equivalent:
   

   ÷

   =

   ×

   =

3. Insert the monthly equivalent into the formula:
   

   ×

   ×

   =

4. The estimated Full retirement allowance is $________ per month.

Early Retirement Factors

   If you retire before age 60 and if you do not qualify for "55/30" (age 55 to 59 and at least 30 years of credited service at retirement), your Full Retirement Allowance must be reduced. This reduction is based on your age at retirement, to the last attained quarter year. For example, if the member in the above example was 55 years and 3 months at retirement, the Full Retirement Allowance would be $2,169.00 ($2,335.40 X .92875).

Note: If you retire with 30 or more years of service credit (see “Definition of Minimum Pension C Service Credit”), you may retire between ages 55 and 60 without a reduction in your retirement allowance.

Retirement Allowance Options

When you retire, you may choose from the following options, the one that best fits your personal needs and the needs of your family.

Summary of Options

Retirement Option Allowance Details

NOTE:  Formula pensions, regardless of the option chosen, provide your Eligible Spouse/Domestic Partner a continuance of your monthly allowance after your death.  The amount of the continuance depends on the option elected and the age difference between you and your spouse or Domestic Partner.  Vested Right pensions and other annuities provided for in the Plan do not include this continuance.  All retirement options are subject to IRS limits.

Option Full Allowance

The Full Retirement Allowance is available to members retiring with either a Formula Pension  or a Vested Right Pension.  It provides thelargest monthly allowance available to you under the Formula Pension.

Option A Allowance

This option is also available to members retiring with either a Formula Pension or a Vested Right Pension.

It provides a monthly allowance that is less than the Option Full Retirement Allowance but, unlike the Option Full, your beneficiary will receive a refund of any unused portion of your contributions upon your death.  Your contributions are reduced every month that you receive a retirement allowance and become zero about 10 years after you retire.  Any refund will be paid in a lump sum to your named beneficiary, and will include your remaining contributions plus interest accrued to the date of your retirement, less the sum of the annuity elements of all the monthly allowances you received before your death.

Option B Allowance

This Option is available to members retiring under either a Formula Pension or a Vested Right Pension.  If you select it you will receive less than the Full Retirement Allowance (the reduction depends on your nearest age and the nearest age of your beneficiary at the time you retire).  It provides a monthly continuance after your death to a beneficiary other than your Eligible Spouse/Domestic Partner.  The amount of the continuance will be the same as the amount you had been receiving.

Once you have designated a beneficiary, you cannot make a change in that designation, regardless of change in status, including divorce or the death of your Eligible Spouse/Domestic Partner or beneficiary.

Option C Allowance

This Option is available to members retiring under either a Formula Pension or a Vested Right Pension.  If you choose it, you will receive less than a Full Retirement Allowance, but more than under Option B.  The reduction depends on your nearest age and the nearest age of your beneficiary at the time you retire.  It provides a monthly continuance after your death to a beneficiary other than your Eligible Spouse/Domestic Partner.  The amount of the continuance will be between 1-99%, subject to IRS limits, of the amount you had been receiving.  You will choose the percentage you want to provide for a continuance.  (The greater the percentage to be provided to your beneficiary as a continuance, the more your allowance will be reduced).

Once you have designated a beneficiary, you cannot make a change in that designation, regardless of change in status, including divorce or the death of your Eligible Spouse/Domestic Partner or beneficiary.

Option D Allowance

Option D is available only to members who have an Eligible Spouse/Domestic Partner and who are entitled to a Formula Pension.  The allowance under this option is less than the Full Retirement Allowance, but it provides for the highest possible continuance benefit:  after your death, your Eligible Spouse/Domestic Partner will receive the same monthly allowance you were receiving subject to IRS limits.

Option E Allowance

Option E is available only to members who have an Eligible Spouse/Domestic Partner and who are entitled to a Formula Pension.  The allowance under this option is less than the Full Retirement Allowance, but more than under Option D.  It provides a monthly continuance after your death to your Eligible Spouse/Domestic Partner.  The amount of the continuance will be between 51-99%, subject to IRS limits, of the amount you had been receiving.  You will choose the percentage you want to provide for a continuance.  (The greater the percentage to be provided to your beneficiary as a continuance, the more your allowance will be reduced).

Choosing An Option

You choose your option shortly before you retire; however, you can still change your selection up to ten days after your retirement.

Retiring from Permanent Total Disability

If you retire from Permanent Total Disability, your retirement allowance will be based on your years of service as a contributing employee and your highest average one year salary before you became disabled, or  the balance of your retirement contributions and Department matching contributions, plus interest, as of your retirement date.

Limitations On Allowances

All Plan benefits are calculated in compliance with provisions of the Internal Revenue Code.  These provisions limit the amount of benefit that can be paid to you or your Eligible Spouse/Domestic Partner and beneficiaries, from the Retirement Fund.  In some cases, the excess benefit can be paid from the Excess Benefit Fund instead.

Lump-Sum Settlement

If your Full Retirement Allowance amounts to less than $75 a month, you may choose to receive a lump-sum settlement.  This payment includes your contributions as well as the contributions made by the Department for your benefit, plus interest accrued on those amounts.

Adjustments to Your Retirement Allowance

Annual adjustments to your retirement allowance help your retirement allowance keep pace with inflation.  You will receive these adjustments only if you are eligible for a Formula Pension.  Adjustments are made each July 1 based on the percentage change in the average of the Consumer Price Index for the Los Angeles-Riverside-Orange County Area--All Items For All Urban Consumers.

The maximum adjustment--up or down--is 3% in any one year.  However, your retirement allowance may never be less than your basic allowance at the time of your retirement.  If there is a change of more than 3% in a year, the excess will be applied to later years when the Index has declined or has advanced less than 3%.

Historical Change in Consumer Price Index

The Plan also provides for a special review not less than every third calendar year.  If the Board of Administration determines that the annual adjustments of up to 3% have not been adequate, it may grant a special increase to partially offset the effects of inflation.

The adjustment to your retirement allowance is paid entirely by the Department, and is prorated for members who retire after July 1.

Delayed or "Vested" Retirement Rights

A valuable feature of your Retirement Plan is the provision for "vesting".  This feature provides that, even if you leave the Department before retirement, you may leave your contributions in the Retirement Fund and receive a "Vested Right" Allowance, if: 

You have been a Plan member for 12 or more consecutive months, except if you are discharged for cause,

or

You have been employed for 10 or more years, regardless of the reason your employment was terminated.

As it is for a Formula Pension, the normal retirement age for a "Vested Right" Allowance is 60, but you can start receiving the allowance as early as age 55, subject to Department approval, if for 10 years of the 12 years immediately prior to your termination you were an employee of the Department.

This type of allowance is not a Formula Pension, and does not include post-retirement adjustments, health or dental insurance benefits, or an Eligible Spouse/Domestic Partner Allowance.  However, a Full Retirement Allowance, or Options A, B, or C are available. (See "Retirement Allowance Options")

Divorce / Dissolution

Since California is a community property state, a former spouse is entitled to a percentage (usually 50%) of your Retirement Plan benefits that are attributable to the time you were married.  If you are considering dissolving your marriage, you should contact the Retirement Plan Office for clarification of your benefits.  The Retirement Plan Office will follow the division of Plan benefits that is ordered by the Court, consistent with the terms of the Plan.  It is recommended that the Retirement Plan Office review the property settlement dividing your retirement benefits before it is filed with the Court.  The Retirement Plan Office has drafted sample provisions of this Order.

Most of the time, a calculation known as the Time-Rule Formula is used to determine the community property interest in the retirement benefit.  The community property portion is determined by dividing the period of time that the member was an active member of the Plan while married to the spouse by the total period of time that the member was an active member of the Plan.  The percentage of benefits owed to the spouse is half of the community property portion.

The Retirement Plan Office will require a copy of your dissolution judgment and/or property settlement dividing your retirement benefits to comply with the Order.

Additional Annuity Available

The Plan can provide you with an Additional Annuity after retirement if you make Additional Contributions to the Retirement Fund.  Unlike your Retirement Allowance, the resulting annuity will not be subject to adjustments based on the Consumer Price Index after you retire.

At retirement, you will be required to select how to receive your Additional Annuity benefit.  There are three forms of payment as described below, each of which impacts your taxable income at retirement.  You may elect to receive payment in any or all of the forms by designating the amount of your Additional Contributions to be allocated to each.  You will sign an election form specifying your choice(s).

MONTHLY ANNUITY:  Provides a monthly allowance in addition to your normal retirement.  The allowance is paid for life.  As with the Normal Retirement, you may choose from several payment Options:

 Additional Annuity Options

Notes:
1. The amount that your allowance is reduced depends on the option you select and your nearest age and the nearest age of your beneficiary at the time you retire.

Option Full  Option Full provides you the largest monthly allowance available.

Option A  Option A is a reduced monthly allowance, but upon your death provides your beneficiary with a refund of any unused portion of your contributions plus interest.

Option B Option B provides a reduced monthly allowance which continues to your beneficiary  upon your death. The respective ages of you and your beneficiary determine how much your allowance is reduced. Once you name your beneficiary, the designation cannot be changed. Your beneficiary will receive the same monthly allowance you were receiving (subject to IRS limitations).

Option C  Option C also provides a reduced monthly allowance; however, you may specify any  whole percentage from 1% to 99% as the portion of the monthly allowance to be paid to your beneficiary as a monthly continuance upon your death. Once you name your beneficiary, the designation cannot be changed regardless of change in status, including divorce or death.  If your designated beneficiary predeceases you, the reduction in your monthly allowance will not be eliminated.  The continuance percentage (subject to IRS limitations) specified by you, along with the respective ages of you and your beneficiary, determine how much your allowance is reduced.

LUMP SUM PAYMENT: You may choose to receive a lump sum settlement for some or all of your accumulated Additional Contributions plus accrued interest. The Plan will withhold a mandatory 20% of the taxable portion of the refund for federal tax.  There may also be additional state and/or federal tax penalties for the taxable portion of the refund.

ROLLOVER TO TAX-QUALIFIED INSTRUMENT:  You may choose to rollover some or all of your accumulated Additional Contributions plus accrued interest (subject to IRS limitations) to an IRA or other tax qualified instrument.  No taxes will be withheld on these funds; however, the IRA or other tax qualified instrument must accept pre- and post-tax contributions and interest.

Applying for Your Retirement

When you decide to retire, advise your Division Head through your normal line of supervision at least 60 days prior to your desired retirement date.  Your Division will prepare the appropriate (Normal or Early Retirement) letter for your signature and send it to the Retirement Plan Office.  If your letter requests Early Retirement, it must be approved by your Division Head on behalf of the General Manager and the Board of Water and Power Commissioners.

IMPORTANT:  Your letter of application for retirement must be received by the Retirement Plan Office not less than 30 calendar days prior to your effective retirement date.

Your application for retirement may be withdrawn at any time up to seven calendar days before the effective date of retirement.

During the month immediately prior to your retirement date, the Retirement Plan Office will notify you of your estimated retirement allowance under the various Retirement Allowance Options, ask you to select an Option, and arrange for you to sign the necessary papers.  Also, the Retirement Plan Office will refer you to the Health Plans Office to arrange your health care and dental care coverage, send you to the Credit Union and to the Employees' Association if you have mutual insurance, and refer you to the Identification Unit to receive your retiree ID badge.

IMPORTANT:  Because of Plan benefits which are based on age and marital status, prior to retirement you will be asked to submit your birth certificate, your spouse's or registered Domestic Partner’s birth certificate, and your marriage certificate.  Birth certificates will also be required for beneficiaries named under Options B or C.

Federal and California State Income Taxes

The Retirement Plan Office is required by law to withhold federal and California state Income Taxes from your pension to the extent it is taxable, unless you elect in writing not to have taxes withheld.  Under current tax law your monthly retirement allowance is taxable starting with the first month of your retirement. Further information is available from the Retirement Plan Office.

  Note:  The tax laws and regulations of both the federal government and the State of California are in a constant state of amendment and interpretation, and may change at any time.

Benefit Limits

If you exceed certain IRS benefit limits, excess benefits will be paid directly by the Department.

• On to Disability