Limitations on Your Benefits
The calculation of your lifetime monthly retirement allowance from ACERA may be limited by one or more of the following:
1. Your Retirement Allowance is Capped at 100% of Your Highest Average Monthly Salary
Your monthly retirement allowance cannot be more than your Highest Average Monthly Salary.
2. Your Retirement Allowance is Capped at the IRS 415(b) Limit
Section 415(b) of the Internal Revenue Code limits the benefit amount qualified pension plans, including ACERA, may pay their retirees. The IRS periodically announces adjustments to the limit, which is currently a maximum of $225,000.
For members who entered ACERA between January 1, 1990 and December 31, 2012, or those who receive a benefit enhancement on or after this date, ACERA cannot pay out more than the limit in retirement allowance payments. (A benefit enhancement can occur when a member whose position was general is changed to safety (Probation Officers), or for members retiring with a benefit enhancement such as the 3% at 50 safety member benefit formula. The limit is set by federal law and is periodically adjusted for inflation.) Lower limits may apply to general members who retire under age 65.
Because ACERA is a qualified retirement plan, it is required to impose the limitations contained in Section 415. However, Section 415(m) of the Internal Revenue Code allows members subject to the 415(b) limit to receive a separate benefit payment directly from the employer for the difference between the member’s calculated benefit amount and the 415(b) limit.
This cap does apply to Tier 4 members. See #4 at the bottom for the the Tier 4 cap.
3. Your Highest Average Monthly Salary Calculation is Capped at the IRS 401(a)17 Limit
Section 401(a)(17) of the Internal Revenue Code limits the salary base that qualified pension plans, including ACERA, may use in the calculation of benefits. This means that ACERA caps your highest average monthly salary that we use in your retirement calculation at the 401(a)(17). This affects members with an entry date in ACERA membership between July 1, 1996 and December 31, 2012. Those with an entry date prior to July 1, 1996 are “grandfathered” and their final average salary will not be subject to this limit.The limit is set by federal law and the IRS periodically announces inflation adjustments to the limit, which is currently $280,000 annual salary.
4. Tier 4 Members’ Highest Average Monthly Salary Calculations are Capped
For Tier 4 general and safety members (ACERA entry dates on or after January 1, 2013), your highest average monthly salary that we use in your retirement calculation is capped at the Social Security Wage Index Limit as calculated by the California Actuarial Advisory Panel. The cap is as follows:
$124,180 for tier 4 general members (participating in Social Security)
$149,016 for tier 4 safety members (not covered by Social Security)