The better the returns on LACERS’ Investment portfolio, the less the City will need to contribute to pay for the benefits and expenses of the system.
The graph below illustrates this concept.
- The whole pie represents the entire amount it takes to fund retirement benefits, health benefits, survivor benefits, and the cost of administering the system.
- The size of the pie varies annually depending on the total amount of benefits that need to be paid.
- The slices of the pie represent the three sources of funding for retirement benefits.
- Employee contributions – After June 30, 2011 Members will either contribute 7% or 11% of each member’s gross pay which is deposited into the LACERS trust for investing until the member retires. The contribution rate is determined by the Member’s bargaining unit agreement or non-represented status.
- Investment returns –The LACERS assets are invested and subject to market conditions.
- City contributions – A percentage of the total City payroll is paid each year to the LACERS trust fund. The percentage is determined by the System’s actuary as the appropriate amount to cover benefits for the current employees when they retire in the future.
The employee contributions and investment returns/losses are slices of the pie which are cut first; whatever remains is the responsibility of the employer. Each year these percentages change reflecting the City employment size, payroll costs, as well as what is occurring with our investments in the markets.