To ensure LAGERS does not duplicate or impair retirement benefits earned by an employee prior to an employer joining the system, LAGERS reviews all prior retirement plans before an employer elects to add LAGERS benefits to determine if the employer’s prior plan is similar in purpose to LAGERS.
If your employer had a retirement plan prior to joining LAGERS that was determined to be ‘Similar in Purpose’, employees’ previous service may be handled differently than those employers who either had no retirement plan or had a prior benefit that was not similar to LAGERS. There are several factors affecting the calculation of benefits that may be impacted by this unique determination.
If an employer elects less than 100% of prior service credit when they join LAGERS, only the portion of service elected to be covered will count towards an employee's vesting.
In some cases when a plan is found to be similar in purpose and no prior service may be elected by the employer, LAGERS may grant 'vesting only service.' Vesting only service would count employees' previous employment towards an employee's vesting, but that time would not be used in the calculation of benefits or final average salary.
Credited service is the sum of membership and prior service. If an employer has a retirement plan that is similar in purpose, they cannot give prior service for that period of time.
Time that is not eligible for prior service coverage could be eligible for individual purchase. If a vested member individually elects to purchase service, purchased time would be in addition to credited service but would not be considered in the calculation of final average salary.
A final average salary is calculated as an average of either the highest 36 or 60 consecutive months of an employee’s gross wages within the last 120 months of credited service. Vesting only service and purchased service are not considered credited service and so wages from those periods are not a part of the final average salary calculation.
Because each employer's prior plan is unique, LAGERS individually evaluates each plan at the time the member joins. These issues will particularly affect individuals retiring within 5 years of their employer joining LAGERS. Because calculating a member's benefits can be complex when there is a period of time affected by special treatment of previous service, any member with questions about how their benefit could be impacted should contact the LAGERS office for more information.