Simplified Guide to Dividing the Los Angeles City Employees’ Retirement System (LACERS) Benefits Before Retirement

This guide aims to provide a clearer understanding of how to approach dividing LACERS benefits in the context of a divorce or legal separation, tailored to personal circumstances and future needs. LACERS provides lifetime retirement benefits to city employees, funded by contributions from employees, employers, and investment earnings.

When a LACERS member is not yet retired, the retirement benefits can be divided between the member and their ex-spouse (nonmember) in two ways: 

Model A - Segregation Division 

How It Works: The ex-spouse receives a fixed percentage (usually 50%) of the retirement benefits earned during the marriage. This portion is segregated and managed independently from the member’s account. 

Benefits Start: The ex-spouse can access these benefits once the ex-spouse is age 55 , or earlier if the member isn't fully vested (has less than five years of service) or just wants a refund of contributions with interest. If the ex-spouse withdraws a refund of contributions with interest, the member is allowed to redeposit those contributions to increase the member’s monthly benefit. 

Calculation Details: The benefits are based on the ex-spouse's awarded service years, their age at retirement, and the member’s highest average salary earned during any 12-or 36-month period before the date of separation. The payments include cost-of-living adjustments (COLAs). 

Model B - Shared Interest Division 

How It Works: The ex-spouse is awarded a percentage (almost always 50%) of the marital interest for the DBP account. The marital interest is determined by the "Martial Fraction" (also known as the "Time Rule formula"). The Marital Fraction is generally the credits accrued from the date of marriage up to the date of separation over the total credits at retirement.  

Benefits Start: Payments to the ex-spouse begin when the member retires and starts receiving their pension. Ex-spouse’s monthly benefit includes any cost-of-living-adjustments (COLAs). In most cases the ex-spouse will receive ex-spouse’s monthly benefit over ex-spouse’s lifetime if he or she qualifies and a timely election is made. 

Legal Framework 

Ex-spouses have the right to decide between these models based on California Family Law and specific legal precedents. [CA Family Law Code 2610(a)(3)(B) and In re Marriage of Colvin (1992) 2 Cal.App.4th 1570, 4 Cal.Rptr.2d 690]. This choice should be informed by the circumstances of their divorce and financial needs. 

Tips for Choosing the Division Method 

Segregation Division - Consider If: 

  • You seek simplicity and independence in managing retirement benefits. 
  • The member has left their employment with the City and won't return, fixing the salary at the time of departure. 
  • You are near or above 55 years old at the time of divorce, and you want to start receiving benefits soon. 
  • The marriage duration contributing to LACERS is short, and you prefer to manage your funds separately. 
  • If you are in poor health and need to access funds sooner. 

Shared Interest Division - Consider If: 

  • You prefer to wait for the member to retire to potentially receive a larger benefit reflecting salary increases. 
  • You are under age 55 and the member is over age 55 and about to retire so the ex-spouse can start receiving a share of the member’s monthly benefit and not have to wait until the ex-spouse reaches age 55. 
  • If you are in poor health and want your share to revert back to the member. 

QDROCounsel can provide benefit estimates for both methods, crucial for informed decision-making. Consider factors such as employment duration, health conditions, and anticipated retirement plans. For help obtaining a LACERS estimate and/or to speak with a QDRO Expert regarding the two division methods, contact QDROCounsel at (833) 355-7376.  

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