FAQs: Pension Reform Act of 2013
These frequently asked questions reflect CalPERS preliminary interpretation of the complex changes brought about by the Public Employees' Pension Reform Act of 2013 (PEPRA) and related Public Employees’ Retirement Law (PERL) changes. Positions taken in these FAQs may change as additional review and analysis continue, or as a result of any follow-up "clean-up" legislation.
Most recent FAQs will appear at the top of each subject area below. Submit a Question online with additional questions or comments about PEPRA.
- New Members
- New Retirement Formulas
- Defined Contribution Plans
- Employer and Member Contributions
- Health Vesting Changes
- Industrial Disability Retirement
- Pensionable Compensation
- Working After Retirement
- Retroactive Benefit Enhancements
- Alternate Retirement Program
- Felony Forfeiture
- Additional Retirement Service Credit
- AB 1222 - Transit Employees
- MOU Impairment
- Cost Sharing
Are full-time or part-time currently employed miscellaneous staff who were not eligible for CalPERS membership until 2013, and were not members of any other public retirement system, subject to the 2% at age 62 formula for new members?(updated 4/9/2013)
Yes. PEPRA requires that the new pension formula be provided to all new members. A new member includes an individual who becomes a member of a public retirement system for the first time on or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and who is not subject to reciprocity with another public retirement system. For example, a part-time employee, who is hired prior to January 1, 2013, but does not become a member of CalPERS until after January 1, 2013, would be considered a new member for the purposes of PEPRA.
If a member of a reciprocal system is hired to a part-time position at a CalPERS-covered employer, once the member qualifies for membership after January 1, 2013, would they be a classic or new member?(added 2/7/2013)
To determine whether a member is subject to reciprocity, CalPERS reviews both the member's hire date and membership date with the CalPERS covered employer. Generally, CalPERS will find reciprocity is established for individuals if they are hired as a "part-time employee" of a CalPERS-covered employer within six months of permanently separating from the employer in the other retirement system. This is true even where the individual may not attain membership until after the six months has passed. These situations are reviewed on a case-by-case basis because this part-time employment must be the type of employment that results in CalPERS membership.
In order for the member to be considered a classic member in CalPERS, they would have needed to be a member of the reciprocal system prior to January 1, 2013.
Will CalPERS develop a list of all public retirement systems in the state for purposes of determining if reciprocity has been established?(added 2/7/2013)
CalPERS currently maintains a list of public retirement systems, counties and public agencies who have a reciprocal relationship (by statute or agreement) with CalPERS. This list can be found in the publication, When You Change Retirement Systems (PDF) , and on the Member Reciprocal Self Certification Form (PDF). CalPERS does not maintain a list of all public retirement systems in the State.
When adding a new member appointment in my|CalPERS, the list of reciprocal systems can be found on the my|CalPERS Appointment Detail page. To view the Reciprocal Agency field, expand the Reciprocity panel on the page and enter "Yes" for the Reciprocal Member Indicator.
If a classic member terminates membership and accepts a refund from CalPERS, then later returns to a CalPERS covered employer, is that employee considered a new member under PEPRA? What if the member who took a refund returned to a non-qualifying, part-time position?(updated 4/18/2014)
The decision by a member whether or not to take a refund of contributions when he or she leaves CalPERS covered employment does not impact how the individual’s future membership status is determined. The same criteria to determine whether a member is a classic or new member will be used regardless of whether the individual took a refund of their contributions. For an explanation of the criteria, please see FAQ "What are the conditions in which an employee would be considered a new member under PEPRA?"
Regarding the non-qualifying position, the member would need to qualify for CalPERS membership before a determination of the membership and at that time membership status is determined.
What are the conditions in which an employee would be considered a new member under PEPRA?(updated 2/7/2013)
If a member's original membership date (with CalPERS or any California public retirement system) is prior to January 1, 2013, they would be considered a classic member. If a member's original membership date is on or after January 1, 2013, they would be considered a new member under PEPRA. In addition, if a member has a break in service of greater than six months and does not return to the same employer where the member was previously employed, they would be considered a new member with respect to the new employment. Most CalPERS employers are considered unique employers for purposes of determining whether a break of six months or more has occurred, with the following exceptions:
- State to State (including CSU, as referenced in Circular Letter 200-055-12 (PDF)) - Same employer
- School to School - Same employer
Are leaves of absence considered a break in service?(added 10/24/2012)
No. Leaves of absence (e.g., maternity leave, military leave) are not considered a break in service. A termination of employment must occur for there to be a break in service.
How will CalPERS determine if a new employee is eligible for reciprocity?(updated 4/18/2014)
As provided by CalPERS Regulation section 579.3 (Subject to Reciprocity Defined), it is the responsibility of the employer to obtain the necessary information from the new employee so CalPERS may determine whether the individual is eligible for reciprocity. When processing enrollments in my|CalPERS, employers need to identify if a new employee is coming from a reciprocal agency. The Member Reciprocal Self Certification Form (PDF) will help employers obtain the necessary information that the new employee must provide for the purpose of determining eligibility for reciprocity. Based on the enrollment information entered into my|CalPERS by the employer, CalPERS will determine the proper benefit group for the new employee.
Does purchasing Service Prior to Membership change an employee's membership date and exempt the employee from being classified as a new member if the Service Prior to Membership was before January 1, 2013? Can arrears affect the new member definition?(added 4/18/2014)
Purchasing Service Prior to Membership does not change a member's membership date. Therefore, the employee would be classified as a new member. However, mandatory arrears (based on GC20283) may back date an employee's membership date and could cause an employee to be classified as a classic member, if the service was prior to January 1, 2013.
Will CalPERS require separate pay schedules and pay rates for classic and PEPRA members?(added 4/18/2014)
CalPERS will require different pay schedules if an agency is paying different pay rates for their classic and new members. Additionally, new members’ pensionable compensation must be determined under PEPRA statutes and must be included in a publicly available pay schedule. Existing members’ compensation earnable must be determined under the PERL and also must be included in a publicly available pay schedule as required by the PERL statutes and regulations.
After January 1, 2013, can an agency amend a retirement contract pursuant to GC Section 20475 applicable to new hires who meet the classic member definition under CalPERS Regulation section 579.1?(added 4/18/2014)
No. Members hired after January 1, 2013, who meet the definition of classic member will receive the benefits available to classic members of the particular agency on December 31, 2012. An employer may still amend for GC 20475 (Different Level of Benefits) for all new members (PEPRA) hired after the contract amendment effective date.
If a new agency contract becomes effective after the implementation of PEPRA (January 1, 2013) and the agency has 100 percent prior service credit, will the employees hired prior to January 1, 2013, be subject to PEPRA?(added 4/18/2014)
Prior service credit for employees of a new agency hired prior to January 1, 2013, will be calculated based on an applicable benefit formula at the time the contract becomes effective.
What are the eligibility requirements for a new member under the Second Tier (1.25% at 67)?(added 2/7/2013)
For Service Retirement, the new member is eligible to retire at age 55 if he or she has 10 years of state service credit. For Disability Retirement, the new member is eligible to retire if he or she has 10 years of state service credit.
What are the retirement eligibility requirements for a member who has service under both the First Tier and new member Second Tier (1.25% at 67)?(added 2/7/2013)
For Service Retirement, a member that has First Tier service is eligible to receive a retirement allowance if he or she has attained age 52 and has a total of 5 years state service. No benefit is payable for the 2nd tier service unless the member has at least 10 years of state service credit. For Disability Retirement, a member that has First Tier service is eligible to receive a retirement allowance if he or she has a total of 5 years state service. No benefit is payable for the 2nd tier service unless the member has a total of 10 years of state service.
Did PEPRA change the mandatory retirement age for Patrol, Local Safety and State Safety Members?(added 2/7/2013)
No, PEPRA did not change the laws pertaining to mandatory retirement age.
Will the new member safety formulas have retirement formula caps (e.g. 90 percent for CHP)?(added 2/7/2013)
No, the new member safety formulas are not subject to a retirement formula cap.
Will we need to amend our contract to reflect the formulas being imposed by PEPRA? If yes, when must this be completed?(added 11/15/2012)
The contracts automatically incorporate all of the PEPRA provisions and do not need to be updated by January 1, 2013. CalPERS will automatically create new benefit packages for new members that reflect the new rules under PEPRA. CalPERS will carry forward the existing optional benefits and exclusions to the extent that these provisions remain available for new members under PEPRA. Although the contracts are automatically amended to reflect PEPRA’s requirements, CalPERS will be updating these public agency contracts to reflect the changes over the next two years or when an employer amends their contract.
Is CalPERS recognizing ratified collective bargaining agreements that offer a lower retirement formula prior to December 31, 2012, even if the employer has not been able to complete the formal contract amendment process?(added 10/24/2012)
No. If an employer would like to adopt a lower benefit formula prior to January 1, 2013, the employer must complete the contract amendment process in accordance with all applicable requirements (the effective date is the date of final action of governing body) prior to December 31, 2012. CalPERS will work with employers to expedite the contract amendment process to the extent possible, but CalPERS cannot retroactively implement contract amendments that are completed after January 1, 2013.
PEPRA requires all new members to go into one of the lower retirement formulas and 3-year final compensation, but what about the other optional benefit provisions?(added 10/24/2012)
CalPERS will automatically provide all of the same optional benefit provisions provided to the latest active benefit group effective on December 31, 2012, to all new members, except to the extent an optional benefit is not permitted for new members.
Which new formulas should be applied to new PEPRA members hired on or after January 1, 2013?(updated 4/18/2014)
Refer to the new formula that most closely matches the lowest amount of the existing formula below:
|Existing Safety Formula||New Safety Formula|
|3% at Age 50; 3% at Age 55; 2% at Age 50||2.7% at Age 57|
|2.5% at Age 55||2.5% at Age 57|
|2% at Age 55; 2.5% at Age 60; ½ at Age 55||2% at Age 57|
|Classic Miscellaneous Formula||New Miscellaneous Formula|
|1.5% at Age 65||1.5% at Age 65|
|1.25% at Age 65||1.25% at Age 67|
|All Others||2% at Age 62|
What is the minimum retirement age for the new 2% at age 62 retirement formula?(added 10/24/2012)
The minimum retirement age is 52 with 5 years of service.
What happens to prior State service after January 1, 2013, when an existing employee who previously retired reinstates to work with a public employer?(added 10/24/2012)
PEPRA does not change how prior State service would be treated upon reinstatement. The prior State service would remain at the same retirement formula that was applied to it at the time of initial retirement.
Which retirement formula will be applied to employees who reinstate from retirement to accept a full-time position in January 2013 with the same employer they retired from?(added 10/24/2012)
A person who reinstates from retirement and returns to the same employer would be entitled to the same retirement formula they had at the time of the initial retirement.
Which benefit retirement formula will be applied to employees who reinstate from retirement to accept a full-time position on or after January 1, 2013, with a different employer from whom they retired? What if they returned to the same employer?(updated 4/18/2014)
A retirement is considered a break in service. The retirement formula for a retiree who reinstates and accepts employment with a different employer will depend on whether the retiree meets the definition of new member under PEPRA. If upon reinstatement the retiree meets the definition of new member, they will be enrolled in the retirement formula under PEPRA applicable to the employer’s new members.
If the employee is rehired by their previous employer, the employee will receive the benefits available to classic members of the particular agency on December 31, 2012, unless the employer is one of the following:
A State employer (including California State University (CSU), as referred to in Circular Letter 200-055-12 (PDF)) since State employers are considered the same employer
A school employer since school employers are considered the same employer.
In either of these exceptions, the returning employee will receive the benefits available to classic members of the particular agency on December 31, 2012.
If a police cadet who is already enrolled in a retirement system with a 2% at age 55 retirement formula is later reclassified to a police officer in 2013, will that cadet be transferred to the new 3% at age 50 formula under PEPRA? Or can the reclassification be retroactive?(added 10/24/2012)
An individual who is a member of a retirement system as a police cadet in a miscellaneous formula and subsequently transfers to a safety formula will not be considered a new member under PEPRA and will therefore be entitled to the safety formula in effect on December 31, 2012. However, PEPRA prohibits retroactive benefit increases that include formula enhancements stemming from reclassifications from miscellaneous to safety, therefore, the service time accrued as a cadet will remain under the miscellaneous formula.
my|CalPERS includes fields on the enrollment page where employers identify if the new hire is coming from a reciprocal agency and prompts the employer for the necessary data elements which subject them to reciprocity. How will this be done for State agencies since State agencies do not enter information in my|CalPERS?(added 4/18/2014)
The State agency will have the employee complete the Member Reciprocal Self Certification Form (MRSC). The State agency will fax the form to the State Controller's Office (SCO). The SCO staff will update the my|CalPERS Reciprocal Section of the Retirement Enrollment Web page. my|CalPERS will validate the reciprocal data to provide the necessary classic or PEPRA new member benefit status.
If an employer enhanced its retirement formula prior to January 1, 2013, will the classic member retain service credit under the enhanced retirement formula?(added 4/18/2014)
Yes, the classic member will retain their service credit under the enhanced retirement formula and will accrue future service credit under the enhanced retirement formula if the classic member continues employment with that employer. PEPRA does not impact a classic member's retirement formula and service credit.
May a public employer continue to maintain an existing defined contribution plan after December 31, 2012?(updated 2/22/2013)
Yes. New members (defined in 7522.02(f)) may only participate in a defined contribution plan that was in place prior to January 1, 2013.
May a public employer adopt a new defined contribution plan on or after January 1, 2013?(added 1/22/2013)
If a public employer adopts a new defined contribution plan on or after January 1, 2013, the new plan must conform to the requirements of PEPRA (discussed below).
May a public employer provide contributions to a defined contribution plan for compensation above the pensionable compensation limit in 7522.02(c)?(added 1/22/2013)
Yes, but such contributions, when combined with the employer’s contributions for compensation up to the pensionable compensation limit, may not exceed the employer’s contribution (expressed as a percentage of pay) required to fund retirement benefits on compensation up to the pensionable compensation limit.
In addition, a defined contribution plan must meet the requirements and applicable limits under federal law. Internal Revenue Code section 401(a)(17) limits compensation that may be taken into account for retirement plan contributions. For 2013, the maximum compensation that may be counted for retirement plan contributions is $255,000. This limit is indexed and may change from year to year.
Public employees have no vested right to continue receiving contributions with respect to compensation above the pensionable compensation limits in the future.
Can a new member employed by a contracting agency, school employer, the judicial branch, CSU and the Legislature contribute something over and above the required member contribution rate under PEPRA?(added 4/18/2014)
Yes. Member contributions may be more than the required statutory member contribution rate if the increase has been agreed to through the collective bargaining process and meets the conditions specified in the statute. If a contracting agency amends its contract pursuant to Section 20516, these additional contributions must be reported to CalPERS and will be treated as member contributions.
What is the minimum employee contribution rate for new members employed by a contracting agency, school employer, the judicial branch, CSU and the Legislature?(added 4/18/2014)
For new members of these employers, PEPRA requires employees to pay at least 50 percent of the total normal cost unless this amount would impair an existing MOU. For example, if a new member’s benefit has a normal cost of 12 percent of salary, then the new member’s contribution must be at least 6 percent, except where to do so would impair an existing MOU. PEPRA allows employee contributions to exceed one-half of the normal cost rate if the increase has been agreed upon through the collective bargaining process and meets the conditions set forth in the statute.
Will employees hired on or after January 1, 2013 be allowed to participate in a legacy 401(a) supplemental defined benefit plan?(added 4/18/2014)
No. If the employer did not offer a supplemental defined benefit plan prior to January 1, 2013, PEPRA prohibits employers from offering a supplemental defined benefit plan to any employee on or after January 1, 2013. PEPRA also prohibits employers from offering a supplemental defined benefit plan to any employee hired on or after January 1, 2013, and prohibits employers from providing a supplemental defined benefit plan to any additional employee group that was not provided this benefit prior to January 1, 2013.
How does equal cost sharing of normal cost impact current and future State Second Tier members?(added 4/9/2013)
On July 1, 2013, all State Second Tier members, including classic members, will begin paying a 1.5 percent contribution rate. On July 1, 2014, the contribution rate will increase another 1.5 percent to 3 percent. Pursuant to statute, the contribution rate is scheduled to increase by 1.5 percent each fiscal year until 50 percent of the normal cost of the plan is reached.
Does PEPRA prohibit employers from paying Employer Paid Member Contributions (EPMC) for new members hired after December 31, 2012?(updated 4/9/2013)
Yes. EPMC is generally prohibited for new members, unless an existing MOU will be impaired. However, once the impaired MOU expires, or is amended, renewed or extended, EPMC is prohibited for new members. In addition, PEPRA prohibits the reporting of EPMC as pensionable compensation and further prohibits the conversion of EPMC to final compensation for new members.
If the employer determines that an existing MOU is impaired pursuant to G.C. section 7522.30(c), and any stated EPMC agreements will apply to new members through the duration of the MOU, will CalPERS implement a manual validation procedure to ensure EPMC is not being reported on payroll for new members?(added 2/7/2013)
Yes, CalPERS will validate to ensure that EPMC is not being reported for new members.
If employers must notify CalPERS in writing if they determine that their MOU is impaired and provide a certification signed by the agency’s presiding officer, confirming that application of Section 7522.30(c) of PEPRA would cause an existing MOU to be impaired, when will CalPERS provide employers with access to the certification form? When does the certification form need to be turned in to CalPERS?(added 2/7/2013)
The Certification of MOU Impairment (PDF) form is currently available to employers and is also attached to Circular Letter 200-063-12 (PDF). The certification form should be submitted prior to submission of payroll for a new member. In 2013, CalPERS intends to propose regulations regarding the MOU impairment process, and it is important to note that as the proposed regulations proceed through the regulatory process, some changes to this employer certification form may be required.
Will employers need to differentiate between classic and PEPRA new members in their payroll? Is there a way for employers to determine whether members are classic or PEPRA?(added 2/7/2013)
No. When submitting payroll, employers do not need to identify whether a member is classic or a new PEPRA member. However, employers will be required to report contributions at the appropriate rate.
A my|CalPERS report is available to identify any new members enrolled under PEPRA. Employers may access the report, identified as the Participant Pension Enrollment Data Report, through the Cognos application in my|CalPERS.
What is the member contribution rate for new members employed by a contracting agency, school employer, the judicial branch, CSU and the Legislature?(updated 4/18/2014)
Generally, under PEPRA, new members employed by these employers must contribute at least 50 percent of the total normal cost. The member contribution rate may be higher than the statutorily required member contribution rate if the increase has been agreed to through the collective bargaining process and meets the conditions specified in the applicable statute.
What is the contribution rate for new members employed by contracting agencies, school employers, the judicial branch and CSU?(added 11/15/2012)
The law requires these new members contribute at least 50 percent of the total normal cost or the same contribution rate as “similarly situated” employees, whichever is higher. CalPERS will promulgate a regulation to clarify that “similarly situated” will be defined by the retirement formula to which the member is subject, meaning the new member will pay the same rate as other members in the same formula. Therefore, for new members, the initial contribution rate will be set at 50 percent of the total normal cost of whatever new retirement formula applies according to PEPRA.
Do existing non-represented employees of contracting agencies have to start paying half the normal cost on January 1, 2013?(added 11/15/2012)
Existing employees, both represented and non-represented, are not required to start paying half the normal cost on January 1, 2013. After January 1, 2013, employers continue to have the same authority to increase non-represented employees’ contributions as under current law. In general, PEPRA does not change existing non-represented employees’ contribution rates nor an employer’s authority to alter those contribution rates.
If an employer currently pays all or a portion of their members’ normal contributions (EPMC) for existing employees, does the employer have the option to discontinue this practice?(added 11/15/2012)
Yes. Sections 20961 and 20693 allow the employer to reduce or eliminate employer paid member contributions.
PEPRA provides that beginning in 2018 an employer may require employees to pay 50 percent of the total annual normal cost up to an 8 percent contribution rate for miscellaneous employees, and an 11 percent or 12 percent contribution rate for safety employees. Does this provision apply to all public employers?(added 10/24/2012)
No. This provision only applies to contracting agencies and school districts. Once it is operable in 2018, PEPRA does not require any employer to implement the change discussed in the statute, rather the statute says that an employer may do so where all other statutory requirements are met.
How should State and school employers (including CSU, the judicial branch, legislative branch and school districts) determine the “50 percent of the total normal cost” for current members?(added 10/24/2012)
The total normal cost for current members is available online in the State and Schools June 30, 2011 Actuarial Valuation Report (PDF, 4.38 MB).
How should State and school employers (including CSU, the judicial branch, legislative branch and school districts) determine the “50 percent of the total normal cost” for new members?(added 10/24/2012)
The total normal cost for new members under the State and school plans will vary depending on the benefit formula applicable to the new member. The table below provides the total normal cost for new members for some State plans:
|Plan||Total Normal Cost for New Members|
|State Miscellaneous – 2% at Age 62||12.1%|
|State Industrial – 2% at Age 62||14.4%|
|State Safety – 2% at Age 57||18.1%|
|POFF – 2.5% at Age 57||20.8%|
|POFF – 2.7% at Age 57||21.8%|
|CHP – 2.7% at Age 57||19.4%|
|Schools – 2% at Age 62||11.9%|
For employers with multiple retirement formulas, will CalPERS provide multiple employer contribution rates, or one combined rate?(added 10/24/2012)
CalPERS will look to its existing practice related to two tiers of benefits when providing employer contribution rates for new members. For State and school employers, a single combined employer rate per plan will continue to be used. For public agency plans in a risk pool, a separate employer rate will be provided for the new PEPRA benefit formula. For public agency plans that do not participate in a risk pool, a combined rate will be provided.
Does PEPRA change employee contribution rates for existing State employees (those hired prior to January 1, 2013)?(added 4/18/2014)
PEPRA did not address classic State members’ contributions. However, AB 340 did identify certain increases for classic State members. For more detailed information on these employee contribution increases, please refer to the Proposed Changes in Employee Contribution Rates for State Employees (PDF).
Does PEPRA increase employee contribution rates for new State employees (those hired after January 1, 2013)?(added 4/18/2014)
PEPRA did not increase employee contributions for new State members except CSU. New State employees will pay the same statutory rates as existing employees as provided for in PERL. For more detailed information on these employee contribution increases, please refer to the Proposed Changes in Employee Contribution Rates for State Employees (PDF).
If the employer contribution rate changes, when will employees see a change in the member contribution rates? How will the change be communicated?(added 4/18/2014)
Member and employer rates will be examined every year in the fall. If there is a change in the rates, they will be updated the following summer. Changes will be communicated through the Annual Valuation Report provided to each employer.
Under the new legislation, is it possible to cost share (i.e., member pays a portion of the employer contribution) for more than just benefit improvements?(added 4/18/2014)
Yes, employers can cost share through the contract amendment process provided for in Section 20516. In addition, employers have the ability to cost share by bargaining group where the statutory requirements are met.
Does PEPRA prohibit employers from paying EPMC or reporting it as special compensation for classic members?(added 4/18/2014)
No. PEPRA does not prohibit employers from paying the classic members' contributions or converting these contributions to pay rate in the final compensation period (if applicable) and where statutory and regulatory requirements have been met.
For health vesting, will eligibility be based on first hire date?(added 4/9/2013)
Yes. The first hire date with the applicable employer is used for health vesting eligibility.
Will there be clarification regarding the Health Benefit Vesting Schedule?(added 2/7/2013)
In the clean-up bill, the Legislature plans to clarify that the health vesting provision will only apply to new members hired after January 1, 2013.
Will PEPRA’s retiree health vesting equity provision require the Legislature and/or CSU to conform their vesting schedules to the vesting schedules for other State employees?(added 4/18/2014)
No. The Legislature and CSU do not have to adopt retiree health vesting schedules that are equitable with other State agencies. However, the Legislature and CSU must comply separately with the health vesting equity requirement and cannot provide their exempt and management employees with a more advantageous retiree health vesting schedule than their represented and rank-and-file employees.
In addition, the retiree health vesting equity requirement in PEPRA does not require vesting schedules that existed prior to January 1, 2013, to be changed for employees who had a contractual agreement with an employer prior to January 1, 2013.
What changes were made by the pension reform statutes to Industrial Disability Retirement (IDR) benefits?(added 6/6/2013)
In addition to the current basic calculation options previously offered as an IDR benefit for a safety member (50 percent of final compensation plus an annuity purchased pursuant to the terms of the statute, if any, or a service retirement if he/she is qualified for service retirement), pension reform changes added a provision that provides a calculation for: 1) a safety member; 2) who qualifies for an IDR; and 3) is under age 50. This new benefit may result in a benefit that is higher than 50 percent of final compensation. An actuarially reduced factor will be used, for each quarter year of service at an age less than 50, to determine the new IDR benefit. If this calculation results in an amount that is greater than 50 percent of final compensation for the safety member, it will be paid instead of the amounts that result from the other statutory options.
Does the new IDR benefit replace the previously existing IDR benefits provided in the PERL?(added 6/6/2013)
No. The new benefit offered is in addition to the existing benefit options established in IDR provisions of the PERL. For each safety industrial disability retirement, all statutory IDR benefit options will be compared and the one that provides the highest benefit will be provided to the retiree.
Does this new provision apply to miscellaneous employees whose employer contracts for an IDR benefit?(added 6/6/2013)
No. The law specifically states that this benefit only applies to safety employees.
For the 3%@55 safety formula, for example, does this new IDR benefit apply to ages 50 through 54?(added 6/6/2013)
No. The law states the factors apply for ages less than 50.
Does this new benefit apply only to new members hired after January 1, 2013?(added 6/6/2013)
No. This benefit applies to all safety members, both new and classic who are under age 50 and retire on industrial disability effective on or after January 1, 2013 and before January 1, 2018.
The new IDR provisions provide benefit factors similar to service retirement. What are some examples of these factors?(updated 3/17/2014)
Examples are provided below of whole age benefit factors for ages 40-49 for some of the major safety formulas. Keep in mind that this benefit will only be used where all statutory requirements are met and where it will provide the highest benefit amount for the IDR.
Effective dates January 1, 2013 through February 18, 2014:
|Age||2% @ 50||3% @ 55||3% @ 50|
Effective date from February 19, 2014:
|Age||2% @ 50||3% @ 55||3% @ 50|
Since these factors are similar to service retirement benefit factors, they will not change based on an individual’s demographics except age, right?(added 6/6/2013)
Correct, the only item that affects the selection of these factors is an individual’s age. Amount of service, salary, or any other relevant retirement information will not change the base benefit factor to be applied when calculating the value of this IDR benefit.
Are the examples above, as well as all factors, unchangeable in the future?(added 6/6/2013)
No. These factors are subject to change anytime new actuarial assumptions are adopted by the CalPERS Board.
Does the cap on pensionable compensation affect how a Service Credit Purchase costing is calculated?(added 4/9/2013)
Yes, but only for Service Credit Purchase cost calculations where pay rate is a factor (e.g., present value costings such as military). In those cases, the member’s pay rate is limited in order to calculate the cost.
If the agency attempts to report special compensation for new members, will my|CalPERS generate an error that prevents the record from being processed?(updated 4/18/2014)
For Public Agencies and Schools - In Circular Letter 200-062-12 (PDF) CalPERS identified the compensation items that meet the definition of pensionable compensation for new members under PEPRA. The pensionable compensation items identified in the Circular Letter are considered reportable to CalPERS. If an employer attempts to report compensation for a new member that is not identified in the Circular Letter as a pensionable compensation item, the employer will receive an error in my|CalPERS. All pensionable compensation items identified in the Circular Letter should be accepted in my|CalPERS. Pending any legislative or regulatory action regarding pensionable compensation, this information is subject to change.
For State - SCO combines all pensionable compensation into a single line item. CalPERS and SCO will work together to ensure that this line item is reported in a way that complies with the intent of PEPRA.
When will “pensionable compensation” be defined in terms of clearly identifying which forms of pay fall within the scope of reportable compensation?(added 2/7/2013)
The following is based on existing statutory language but is subject to change if the statute is amended with clean-up legislation.
- For public agency and school employers, pensionable compensation was defined in Circular Letter 200-062-12 (PDF). In 2013, CalPERS intends to propose regulations to clarify its interpretation of the items that may be reported as “pensionable compensation,” and it is important to note that as the proposed regulations proceed through the regulatory process, some changes to the items listed as pensionable compensation in the Circular Letter 200-062-12 may be required.
- For State employers, pensionable compensation is still in the process of being defined by CalHR and CalPERS.
- For California State University employers, pensionable compensation is still under review.
Are employers able to report items of special compensation for new members or has that been eliminated for new members?(added 2/7/2013)
The following is based on existing statutory language but is subject to change if the statute is amended with clean-up legislation.
Yes, some items of special compensation can be reported for new members so long as the items meet the definitional requirements of pensionable compensation and are not excluded by the pensionable compensation statute. Further information is provided in Circular Letter 200-062-12 (PDF). In 2013, CalPERS intends to propose regulations to clarify its interpretation of the items that may be reported as “pensionable compensation,” and it is important to note that as the proposed regulations proceed through the regulatory process, some changes to the items listed as pensionable compensation in the Circular Letter 200-062-12 may be required.
Is Longevity Pay excluded from pensionable compensation under PEPRA?(added 2/7/2013)
The following is based on existing statutory language but is subject to change if the statute is amended with clean-up legislation.
No, Longevity Pay is still reportable as provided in Circular Letter 200-062-12 (PDF) so long as it meets the definitional requirements for pensionable compensation. In 2013, CalPERS intends to propose regulations to clarify its interpretation of the items that may be reported as “pensionable compensation,” and it is important to note that as the proposed regulations proceed through the regulatory process, some changes to the items listed as pensionable compensation in the Circular Letter 200-062-12 may be required.
What is the limit on pensionable compensation for 2013?(added 1/22/2013)
For members who participate in Social Security, compensation is capped at the Social Security Wage Base ($113,700 for 2013; with annual increases based on increases to the Consumer Price Index).
For members who do not participate in Social Security, compensation is capped at 120 percent of the Social Security Wage Base ($136,440 for 2013; with annual increases based on increases to the Consumer Price Index).
Does Assembly Bill (AB) 340 (PEPRA) change how CalPERS treats special compensation for current employees?(added 11/15/2012)
No. AB 340 does not change how public employers treat special compensation for current employees. However, PEPRA does establish a definition of pensionable compensation for new members, and that definition is different from compensation earnable, which applies to current employees.
How will CalPERS treat pensionable compensation if the individual is not in a group or class?(added 10/24/2012)
The Public Employees’ Retirement Law addresses how an individual’s compensation earnable is determined when the individual is not in a group or class. CalPERS plans to work with Legislative staff and will seek statutory amendments to clarify that these rules apply to determining pensionable compensation when a new member is not in a group or class.
In the past, CalPERS has not capped employer contributions for earnings over the 401(a)(17) limit. Will the same practice continue for new members for earnings above the PEPRA compensation cap?(added 4/18/2014)
No. As a result of changes to my|CalPERS, employers no longer contribute on earnings in excess of the Internal Revenue Code section 401(a)(17) limit for classic members, nor do they contribute on earnings in excess of the pensionable compensation limit set forth in PEPRA for new members.
What does the term "Limit Post Retirement Public Employment" mean?(added 4/9/2013)
The term "Limit Post Retirement Public Employment" is a broad term used to describe two sections of the PEPRA Legislation (G.C. sections 7522.56 and 7522.57). Generally speaking, section 7522.56 places specific limits on the number of hours a retiree may work, as well as the amount of compensation a retiree may be paid, for employment after retirement within the public retirement system from which he or she retired. This provision also requires a 180-day wait period after retirement before a retiree can commence post-retirement employment, unless one of the statutory exceptions applies. Section 7522.57 defines the conditions and limitations for retirees who serve on State Boards or Commissions.
Does the 180-day wait period apply to all retirees regardless of full retirement age?(added 4/9/2013)
Yes, unless a specific statutory exception to the 180-day wait period applies.
Related to working after retirement, is the hours limitation based on a fiscal year?(added 4/9/2013)
Yes. CalPERS will apply the 960-hour limit for each fiscal year. Other retirement systems may apply the limitation differently, as PEPRA allows for the retirement systems to choose between a fiscal or calendar year.
Once the 960-hour limitation has been met, can a retired annuitant work for the same employer for 960 hours the next year (or subsequent years) with no break?(added 4/9/2013)
Section 7522.56 provides that appointments of retired annuitants may be made, “either during an emergency to prevent stoppage of public business or because the retired person has skills needed to perform work of limited duration.” Therefore, while retired annuitants could conceivably work more than one fiscal year for the same employer, the limited duration requirement does not permit indefinite, year-after-year employment with no break. Further, retired annuitants appointed to permanent or regular staff positions would be in violation of the limited duration restriction even if the hours worked did not exceed 960 per fiscal year, and the compensation paid did not exceed the allowable pay rate.
In the context of working after retirement, when does the 180-day wait period apply?(updated 4/9/2013)
The 180-day waiting period only applies to retirees who seek employment and begin working as a retired annuitant on or after January 1, 2013. Members who retired and began working as a retired annuitant prior to January 1, 2013, are not subject to the wait period.
However, a bona fide break in service would still be required, even where an exception to the 180-day waiting period applies, where a member has not reached the normal retirement age.
If members retire from a reciprocal or non-reciprocal public retirement system, do they have to wait 180 days to work for a CalPERS employer?(added 2/7/2013)
No. The 180-day wait period applies only where the post-retirement employment occurs with an employer in the same public retirement system from which the retiree retired.
If a retiree qualifies for an exception to the 180-day wait period does he or she still need to meet the bona fide separation in service requirement?(added 2/7/2013)
Yes. If the retiree is under the normal retirement age (as defined in Chapter 2 of Division 1 of Title 2 of the California Code of Regulations section 586.1) and service retired, he or she must meet the bona fide separation in service requirement regardless of whether the retiree qualifies for an exception to the 180-day wait period.
If members violate the 180-day wait period are they subject to mandatory reinstatement?(added 2/7/2013)
Yes. As with other post-retirement employment violations, mandatory reinstatement is the consequence for violating the 180-day wait period. Until there is functionality in my|CalPERS to detect a potential violation at the time the retiree is enrolled, employers should exercise due diligence to ensure every retiree who is subject to the 180-day wait period completes the wait period before beginning the post-retirement employment.
PEPRA exempts “public safety officers” from the 180-day waiting period. How will CalPERS define a public safety officer?(added 1/11/2013)
For the purpose of the 180-day waiting period, CalPERS defines public safety officer to be the same as the term is defined in G.C. section 3301. G.C. section 3301 defines public safety officer to mean "peace officer” as defined in certain specified sections of the Penal Code. A regulation will be promulgated accordingly.
If an employee’s first day of retirement is prior to December 31, 2012, is that employee exempt from the working after retirement limitations in PEPRA?(added 11/15/2012)
No. The post-employment provisions apply to any person receiving a pension from a public retirement system regardless of their retirement date. There are two exceptions to this rule: 1) A retiree that is appointed to a State board or commission; and 2) The 180-day waiting period for a retiree that is already working as a retired annuitant.
Can employees work in the private sector after retiring from a public employer on or after January 1, 2013, without jeopardizing their retirement benefits or waiting 180 days?(added 10/24/2012)
Generally, a retiree can work in the private sector (meaning he or she is not providing services directly to a public employer), or with a public employer that is not in the same retirement system the individual retired from, without waiting 180 days or being limited to 960 hours. Other restrictions could apply if the person retired on an industrial disability retirement.
Will CalPERS provide a sample certification resolution for exceptions to the 180-day rule?(added 4/18/2014)
Do PEPRA requirements for working after retirement also apply to independent contractors? If yes, how are employers required to track hours and pay rate?(added 4/18/2014)
Retirees engaged as independent contractors, consultants, or hired through third party employers (e.g., temp agency), whose employment does not meet the California common law employment test, are not subject to the PERL or PEPRA requirements. If, however, the employment constitutes a California common law employment (employer-employee) relationship, the employment is subject to the applicable PERL and PEPRA requirements regardless of the employment’s characterization. If the retiree’s employment is subject to the PERL and PEPRA requirements, employers need to enroll the retiree into mylCalPERS as they would any other retired annuitant, and also report hours and pay rate through my|CalPERS.
Will the prohibition of retroactive contract benefit increases apply to employees that reinstate?(updated 4/9/2013)
PEPRA generally prohibits retroactive benefit improvement for both new and classic members, including employees who reinstate.
What are the benefit enhancements subject to the new prohibition under PEPRA regarding retroactive contract benefit increases?(updated 2/6/2013)
CalPERS is in the process of determining which optional benefits fall under this prohibition. In 2013, CalPERS intends to pursue legislative changes that will define what benefits or optional benefits are, or are not, subject to the retroactivity prohibition.
The following optional benefit provisions, which are described in Circular Letter 200-062-12 (PDF), have currently been identified as being affected by the new prohibition of retroactive contract benefit increases:
- G.C. section 21427 – Improved Nonindustrial Disability Allowance
- G.C. section 21547.7 – Alternate Death Benefit for Local Fire Members Credited with 20 or More Years of Service
- G.C. section 21548 – Pre-Retirement Option 2W Death Benefit
- G.C. sections 21624, 21626, 21628 – Post-Retirement Survivor Allowance
- Miscellaneous Member Classifications Optionally Reclassified to Safety by Amendment to the Contract
Does the prohibition apply to retroactive salary increases?(added 10/24/2012)
The prohibition on retroactive benefit increases do not impact salary increases. This is because retirement formulas already contemplate future salary increases. However, any increases must meet the definition of compensation earnable for existing members and pensionable compensation for new members in order to be used when calculating a retirement benefit.
As a result of PEPRA, will there be any changes to how unused sick time will be applied for service credit at retirement?(added 10/24/2012)
No. PEPRA does not change the provision that allows a member to convert sick leave to service credit. However, sick leave payouts would not count toward pensionable compensation for new members.
Does the prohibition of retroactive contract benefit increases eliminate Tier Conversion for State classic members (e.g., converting from First Tier to Second Tier)?(added 4/18/2014)
No. The Tier Conversion process for State members will remain unchanged provided that the Tier Conversion process was available prior to January 1, 2013.
I have first time State miscellaneous or industrial employees that qualify for membership and were hired after June 30, 2013. Is it true they no longer are automatically enrolled in the Alternate Retirement Program (ARP), and will now start accumulating State service credit with their membership enrollment?(added 1/30/2014)
Yes, as of July 1, 2013, new State miscellaneous or industrial employees are no longer enrolled into ARP, based on the PEPRA provisions, which ended ARP enrollments for new first-time State hires.
For further ARP information, contact CalHR as administrators of ARP.
Did ARP sunset based on the introduction of PEPRA? How will PEPRA affect members who are currently participating in ARP?(added 4/18/2014)
ARP sunsetted on July 1, 2013.
Members currently participating in ARP are required to participate for the entire 49-month process, and once the election is made, members will be placed into the applicable formula to which they were entitled as of their hire (classic) or membership (new) date.
Will employees enrolled in ARP be able to convert their ARP service credit to CalPERS service credit? Does the decision to convert or not convert ARP service credit to CalPERS service credit change an employee's membership date?(added 4/18/2014)
Yes. Employees enrolled in ARP will be able to convert their ARP service credit to CalPERS service credit.
No. The decision to convert ARP service credit, or to not convert ARP service credit, will not change the employee's membership date.
Does the PEPRA felony forfeiture of pension benefit law apply to all employees?(added 2/7/2013)
Yes. PEPRA makes former G.C. section 1243 (now G.C. section 7522.70) inoperative as of January 1, 2013, and the PEPRA forfeiture statutes (sections 7522.72 and 7522.74) apply to all employees including those hired before January 1, 2013. Any current or future public official or public employee convicted while carrying out their official duties, in seeking an elected office or appointment or in connection with obtaining salary or pension benefits, will be required to forfeit any pension or related benefits earned from earliest date of the commission of the felony to the forfeiture date (the date of the conviction.)
If a current or future public official or employee convicted of a felony while carrying out their official duties will be required to forfeit certain pension benefits, does the felony conviction need to be committed during work hours to require forfeiture of benefits?(added 4/18/2014)
The law states the felony must arise out of conduct or in the performance of their official duties, but does not require it occur during normal work hours.
What if the felony conviction involved a crime against a child?(added 4/18/2014)
The law states if the public employee has contact with children as part of their official duties and is convicted of a felony that was committed within the scope of their official duties against or involving a child who they have had contact with as part of their official duties, they are subject to the forfeiture provision.
If an employee is convicted of a felony prior to January 1, 2013, PEPRA states that the forfeiture of pension benefits would be effective the date of the commission of the crime. What if the exact date the felony is unknown, but the employer has evidence that the felony started sometime within a specific fiscal year? Would the employee continue to receive service retirement for years prior to that fiscal year and be refunded contributions after that fiscal year?(added 4/18/2014)
If convicted, CalPERS would use the information and evidence available to determine the commission date of the felony. All service accrued for time after the commission date would be forfeited and not used in a retirement calculation. The law does allow for contributions to be returned to the employee without interest. PEPRA requires contributions be returned to the employee upon the occurrence of a distribution event unless otherwise ordered by a court or determined by CalPERS.
Will CalPERS accept applications to purchase Additional Retirement Service Credit (ARSC) from members if the service credit requirement will not be met until after January 1, 2013?(added 11/15/2012)
In order to be eligible to purchase ARSC, a person must have five years of credited state service, and their application must be received by CalPERS prior to January 1, 2013. A person that does not have five years of service credit prior to January 1, 2013, will not be eligible to make the purchase, and therefore will be prohibited by law from purchasing ARSC.
What is Assembly Bill (AB) 1222 and when did it become effective?
AB 1222 (Chapter 527, Statutes 2013) was an urgency bill that became law on October 4, 2013. This bill exempts California public transit employees, whose interests are protected under Section 13(c) of the Federal Transit Act, from PEPRA until the court ended the exemption effective December 30, 2014.
As an employer, are we subject to AB 1222?
If your agency is receiving federal transit funds, and employs transit employees affected by that assistance, you will be required to submit a written letter indicating that your agency has qualified transit employees. CalPERS released Circular Letter 200-75-13 (PDF) detailing information about the employer identification process, including sample language an employer may include in a letter to CalPERS requesting identification.
Will CalPERS develop a list of AB 1222 eligible agencies?
No. CalPERS will rely on each employer to self-identify that it is impacted by AB 1222 and notify CalPERS in accordance with Circular Letter 200-75-13 (PDF).
As an employer, will we need to re-negotiate the Collective Bargaining Unit (CBU) MOU if we employ eligible transit employees?
No. Negotiated benefits will remain for those transit employees impacted by AB 1222.
How does the December 30, 2014 court decision affect my employees?
If a transit employee first became a member of CalPERS or any public retirement system on or after January 1, 2013 to December 29, 2014, they will now be subject to the PEPRA retirement benefit formula effective December 30, 2014. CalPERS will create a new appointment placing them into PEPRA effective December 30, 2014.
What happens to service credit earned during the exemption period, January 1, 2013 to December 29, 2014?
All service credit earned during the time frame between January 1, 2013 and December 29, 2014, will remain in the classic retirement benefit formula.
Can the Department of Labor appeal?
There was no appeal submitted to the federal court within the time allocated so the decision can no longer be appealed.
We have an employee who qualified for membership before court decision – How do I enroll them?
To enroll them in membership during period of January 1, 2013 – December 29, 2014, you must select yes to the transit worker question, “Is employee subject to Section 13 (c) of the Federal Transit Act?” that is listed under their new appointment event.
Will CalPERS notify employees affected?
Yes, notification will be sent to employees affected.
When will the new appointment change be made to our employee’s account in my|CalPERS?
CalPERS is currently working on an implementation strategy that will least impact our Business Partners and anticipates changes made by the end of April 2015.
How should I be enrolling new members from December 30, 2014 forward?
To enroll new members from December 30, 2014 forward, you will select no to the transit worker question, “Is employee subject to Section 13 (c) of the Federal Transit Act?” that is listed under their new appointment event. Employers are no longer required to have employees complete the Transit Employer Certification Form (PDF) or to update the my|CalPERS enrollment to reflect the employee’s exempt status.
If I determine my employee is enrolled incorrectly…
Be sure to obtain necessary enrollment information, such as the Member Reciprocal Self Certification Form (PDF), to ensure employee is enrolled correctly. Contact CalPERS Customer Contact Center if you feel their membership enrollment level is not correct.
How do I report payroll?
Continue reporting payroll as you normally do. CalPERS will be in contact with agencies that have payroll corrections to be made.
Who’s going to collect difference in contributions?
Each agency is responsible for obtaining additional contributions from a participant or refunding contributions to a participant. CalPERS will be able to assist with any billing questions that arise due to necessary payroll corrections.
Do I need to change the employee’s appointment to PEPRA effective December 30, 2014? Do I need to do a new appointment for those exempted transit workers that should be new members?
No, CalPERS will apply the new appointment once payrolls been corrected and the Classic appointment will be separated.
Will the service credit purchase deductions be impacted?
No, they will not be impacted.
Will there be any retirement adjustments if someone retires on or after December 30, 2014?
Yes, if a member were to retire prior to their appointment change from all Classic to Classic/PEPRA, an adjustment to their retirement benefit would need to be processed.
Reports have been requested that will identify all retired members as well as members that have submitted a retirement application to assist in proactively identifying these members at receipt of application to avoid the need for an adjustment. Currently there are no impacted retired members.
How long will the agency's eligible transit employees be exempt from PEPRA as a result of AB 1222?
AB 1222 exempts California transit employees of public employers from PEPRA until December 29, 2014.
Can I apply the AB 1222 PEPRA exemption to all my employees or organization, or must it just be applied to the transit employees impacted by AB 1222?
The AB 1222 PEPRA exemption only applies to transit employees whose interests are protected under Section 13(c) of the Federal Transit Act, regardless of whether they are union or non-represented employees. These members were eligible to receive the level of benefit(s) existing prior to the implementation of PEPRA.
What if I have transit employees who are not currently paid via a federal grant, but may be subject to Section 13(c) grant compensation in the future?
Section 13(c) transit employees compensated under the Federal Transit grants (Act 49 USC 5333 (b)) are exempt from PEPRA benefits and are subject to AB 1222.
Do we apply the AB 1222 PEPRA exemption to supporting staff, such as managers and administrators?
The AB 1222 PEPRA exemption applies to all eligible transit employees in the service area of the federally funded project.
As an employer, how long do we have to update each qualified member in my|CalPERS?
Within 30 days of receiving the certification form and instructions from CalPERS, employers should remit their list (identifying qualified employees) and update member records in my|CalPERS after having completed the form for the employee’s file.
What is the liability to the employer if a transit employee is not correctly placed into the appropriate member classification?
The process for handling incorrect membership classifications is the same for all employees, regardless of their status.
If we hired a qualified transit employee after January 1, 2013, but the employee no longer works for our agency, do we need to update that member’s record?
Yes. If you hired a qualified transit employee between January 1, 2013 and December 29, 2014, you will need to update that member’s record to classic, regardless of whether the employee still works for your agency. The employee’s record will need to be updated again to reflect PEPRA effective December 30, 2014.
If an employee is hired as a qualified transportation employee under AB 1222, and then the employee transfers to a non-exempt position within our agency, should that employee be placed in the PEPRA new member classification?
If the employee was identified as a classic member because of their employment as a qualified transit employee, and then subsequently transfers to a non-exempt position with your agency, the member will be subject to the provisions of PEPRA if he or she has no other protection under Section 13(c) of the Federal Transit Act.
When we hire a new employee from a previous employer, how do we know if the employee was certified under AB 1222 with their previous employer?
Employers are not required to identify whether their new employees were previously non-exempt from PEPRA. If the new employee is no longer a transit worker, and consequently not exempt from PEPRA, my|CalPERS will automatically identify the employee as being subject to the provisions of PEPRA, if hired on or after January 1, 2013, as a new member.
How can an agency confirm CalPERS received a completed Certification of MOU Impairment?(added 4/18/2014)
To confirm CalPERS received your agency’s Certification of MOU Impairment, please follow the steps provided below:
- Log in to my|CalPERS as a Business Partner.
- Select Common Tasks located on the left side navigation area.
- Select Document History.
- In Document History, enter “1420” in the Document Number field.
- Select Search.
- To obtain the document, select my|CalPERS1420 or Print Locally.
If an agency has GC Section 20516 (Employees Sharing Additional Cost) in their retirement contract or MOU, does that portion count towards the member contribution rate (50 percent of normal cost) or is it in addition to the required member contribution rate?(added 4/18/2014)
Cost sharing is in addition to the required member contribution rate. Under PEPRA, the required member contribution rate for new members is at least 50 percent of the total normal cost.
Is the PEPRA compensation cap based on a fiscal or calendar year?(added 4/18/2014)
The PEPRA compensation cap is based on a calendar year.