Public Service Purchase

Public Service Purchase

What is the Public Service Purchase (PSP) Program?

PSP is a voluntary program that allows members of the Los Angeles Fire and Police Pension (LAFPP) Plan who served in the military or were employed by other public agencies to purchase service credit in the pension plan, subject to requirements and limitations established by ordinance.

Can I use my DROP money to purchase service credit?

No, you cannot use your DROP money to purchase service credit. Service credit must be purchased prior to DROP entry or service retirement.

What types of funds can I use to make a purchase?

A Trustee-to-Trustee Transfer/Direct Rollover from another eligible retirement plan is acceptable, provided the funds are pre-tax, from a different California public pension plan, and you will not be entitled to any non-LAFPP retirement benefits based on the contributions you have rolled over.

What is the advantage of purchasing service credit?

The service credit you purchase will count towards increasing the monthly pension allowance that you and your qualified survivors would receive from LAFPP.

How do I apply for PSP?

Fill out either the Application to Purchase Military Service or the Application to Purchase Public Service.

Or follow our How To Guide page by clicking here for more information.

Will the time I purchase count toward DROP or health subsidy eligibility requirements or other plan benefits?

No. Purchased service credit will not count toward years of service credit for health subsidy credit, eligibility for service retirement or eligibility to enter DROP. It also does not count toward years of service for ceasing your employee pension contributions. It will only count toward increasing your monthly pension allowance and any survivorship benefits.

Who do I contact to apply for PSP?

Contact the Active Member Services Section at (213) 279-3140 or (844) 88-LAFPP.

What types of service can I purchase?

Eligible types of service that can be purchased include service with:

  • a branch of the United States military, but only if the member was honorably discharged;
  • a bonafide police agency or fire suppression agency, but only if the member was not terminated for cause; and
  • any agency of the United States Government: Federal, State or local, or Postal Service.

The eligible service must be a minimum of six months of full-time, uninterrupted service with an eligible public entity.

How many years can I purchase?

If you purchase PSP time, you must purchase a minimum of six (6) months and may purchase up to a maximum of four (4) years of service.

How much will it cost?

You will pay the full actuarial cost determined by our actuary. Factors that will be considered in the actuarial assumptions include:

  • member’s age;
  • date benefits will first become payable;
  • number of possible beneficiaries;
  • ages of survivors;
  • member’s pension base;
  • investment earnings rate assumed by the plan;
  • and any other factors that are relevant to cost neutrality.

The PSP ordinance requires that the program be cost-neutral. Therefore, the member will be required to pay the full cost of the benefit. The purchased service includes your contribution plus the City’s cost. All purchases completed more than 180 days prior to a member’s entry into DROP or their retirement date will be trued up. An actuarial calculation will be performed to determine the change in the total purchase amount.

The following is an example of a comparison of pension benefits for a Tier 5 member with a final average salary of $8,000 per month and 25 years of service, who purchases four years under the PSP program:

Pension Benefits Without PSPPension Benefits With PSP
FAS – $8,000FAS – $8,000
25 YOS – 65%29 YOS – 77%
Pension – $5,200Pension – $6,160 ($960 more per month)
Survivor – $3,120Survivor – $3,696 ($576 more per month)

In the above example, under the PSP Program the member is responsible for paying the full cost of the increased pension and survivor benefits gained from the additional years of service purchased. A PSP calculator is available when you log in to MyLAFPP to provide an estimate of the cost of the additional service credit based on the above factors.

What does “cost neutral” mean in relation to the PSP Program?

One of the key provisions of the PSP program is that it must be cost-neutral. This means that in addition to the normal member pension contribution rate of 8, 9 or 11%, the member is responsible for paying the full cost of each additional year of service that is purchased. For example, Tier 5 members currently pay 9% of salary in pension contributions, while the City contributes approximately 21% of sworn payroll toward the pension system (does not account for the City’s additional contributions to pay down any unfunded liability or retiree health benefits). Combined they represent approximately 30% per year to fund the pension system. However, the individual cost factors used to determine your cost for each year of service purchased may increase the combined cost. The cost factors used to establish the actuarial cost for PSP include:

  • member’s age;
  • date benefits will first become payable;
  • number of survivors;
  • ages of survivors;
  • member’s pension base;
  • investment earnings rate assumed by the plan; and
  • any other factors that are relevant to cost neutrality for the pension plan.

Why is it so much more costly than purchasing my recruit training time?

There is no cost neutrality provision for purchasing City of Los Angeles training time which is provided for under a different section of the Charter. Therefore, you only pay your pension contributions plus any applicable interest.

Is there a way to determine if this purchase will benefit me?

You may log in to MyLAFPP and use the Public Service Purchase Estimate calculator to get an estimated cost of the additional service credit and the additional monthly amount it would provide. We strongly recommend that you discuss this option with your financial advisor to determine if this purchase would be beneficial for you. Consider your overall financial situation and retirement needs very carefully before making this decision.

What payment options are available?

You have a choice of the following payment options (may combine) subject to applicable IRS provisions:

  • Lump sum payment – a single payment for the total projected cost;
  • Payroll deduction – automatic monthly deductions from your paycheck (maximum of 780 payments); and
  • Trustee-to-Trustee Transfer from the City’s Deferred Compensation Plan or another eligible retirement plan within the state of California