Your pension — LACERS for civilian employees, LAFPP for sworn fire and police — is not rollover money; leaving triggers pension elections governed by that system’s rules. Your deferred compensation 457(b) is where the four options live, with a warning attached: rolling a governmental 457(b) into an IRA permanently gives up penalty-free access before 59½.
Two systems, one paycheque
The City of Los Angeles maintains separate retirement systems by role: the Los Angeles City Employees’ Retirement System (LACERS) covers most civilian workers, while the Los Angeles Fire and Police Pensions system (LAFPP) covers sworn personnel. Alongside either pension, employees can save through the City of Los Angeles Deferred Compensation Plan (DCP), a governmental 457(b). The official plan site is 457.lacity.gov.
The two halves obey different laws. Pension rights follow the system’s charter and rules — start with our LACERS and LAFPP guides — while the 457(b) follows the portable-account rules covered on this page and in our 457(b) guide.
The four options for your deferred compensation 457(b)
This table is about the 457(b) alone. Pension money never passes through it.
| Option | Good when | Watch out for |
|---|---|---|
| Leave it | The current plan is cheap, well run, and you may return someday | Forced cash-outs of small balances; one more account to forget |
| Roll to new employer | A single consolidated plan balance is simpler to manage | Read the new plan’s fees before assuming it is an upgrade |
| Roll to an IRA | Maximum control over investments, beneficiaries, and advice | Mixing pre-tax IRA dollars complicates future Roth conversion planning |
| Cash out | No other option exists and the need is immediate | Ordinary income tax, usually a 10% penalty under 59½, and the money never compounds again |
Before you roll a governmental 457(b) to an IRA. A governmental 457(b) lets you take withdrawals after separation at any age with no 10% early-distribution penalty — a feature police officers, firefighters and early retirees in particular should hesitate to give up. Roll the balance to an IRA and withdrawals before 59½ generally face the penalty again. Weigh that against whatever the IRA offers before signing.
Things to check before your last day with the City
- Which pension system you belong to. Civilian roles sit in LACERS, sworn roles in LAFPP — and each has its own elections, deadlines and service rules.
- Your pension options on separation. Vesting, deferred retirement, refunds and reciprocity with other California public systems are all questions for your system, answered in writing.
- DROP status, if you are sworn. LAFPP publishes current DROP terms at lafpp.lacity.gov/members/drop.
- The 457(b) recordkeeper and forms. The official DCP contact page names Voya as running the DCP service center and Local Retirement Counselors.
- Loans and Roth 457 balances. Check your SPD and statement for loan and Roth provisions before requesting a rollover.
Reciprocity: leaving without really leaving
If your next job is with another California public employer, ask both systems about reciprocity before taking any refund. Linked service between systems can preserve benefits that a refund would destroy — and the paperwork generally has to happen in the right order. It is one of the few situations where doing nothing with the pension while you investigate is exactly right.
Always transfer directly. Whatever you decide on the 457(b), execute it as a direct transfer between custodians. A distribution cheque in your name loses 20% to mandatory withholding under IRC § 3405(c) and opens a 60-day window you must close using your own cash for the withheld piece.
Common questions
Why would I not roll my City 457(b) into an IRA?
Because the 457(b)’s signature feature — penalty-free withdrawals at any age once you separate — does not survive the move. An IRA reimposes the pre-59½ penalty regime. If early access matters even a little, keeping the 457(b) intact, or rolling only part, is often smarter.
Does my LACERS or LAFPP pension come with me to a new employer?
Not as a transfer of money — defined-benefit rights stay with the system. What may exist is reciprocity with other California public systems, which links service without moving dollars. Ask both systems before electing anything.
What is your role, since you do not administer any of this?
Independent analysis. The systems explain their own rules accurately, but no one there models how the pension, the 457(b), Social Security and your other savings interact. That modelling — for a published fee and nothing else — is what we do.
Before you sign anything at the City, get the order of operations right
Refunds, reciprocity, DROP and the 457(b) each have a right sequence — we will lay yours out in one session.