CalPERS

FAQs - Service Credit Payment Changes

What will happen if my pay drops to federal minimum wage and my check no longer covers my service credit payment amount?

In the event that you begin receiving minimum wage as a result of the state budget impasse and you have a service credit purchase installment payment plan, the monthly payroll deductions are expected to continue. Both pre-tax and after-tax payroll deductions will be deducted after all mandatory deductions (taxes, health insurance, etc.) have been taken. However, if your minimum wage earnings after all mandatory deductions are less than your service credit payment amount, the State Controller's Office will stop the payroll deductions until your earnings are restored to the pre-minimum wage amount. During the period when no payments are received, interest will continue to accrue on the unpaid balance. If the payroll deductions do not resume once the earnings are restored, please contact us at 888 CalPERS (or 888-225-7377).

Visit the California Department of Human Resources' website for more information on how the minimum wage order may impact health and other deductions on your paycheck.

What if there is no longer enough money in my paycheck to make my payments?

If your paycheck is not sufficient to cover your deduction, your service credit purchase and/or tier conversion account will be delinquent and interest will continue to accrue on the unpaid balance.

When your paycheck is again sufficient to cover your payments, your employer will automatically resume payments.

CalPERS will recalculate your payment plan taking into consideration the following:

  • The number of payments already received
  • The minimums and maximums allowed by law
  • The additional interest that accrued during the lapse

What happens to my service credit purchase or tier conversion payment plan if I retire?

Once we receive your application for retirement, you may contact us to request the payoff amount. This option applies to all members, regardless if your payroll payments were pre-tax or after-tax.

If you do not contact us, payments are automatically authorized from your retirement benefit on an after-tax basis.

Can I change my service credit purchase and/or tier conversion payment plan?

AFTER-TAX INSTALLMENT PAYMENTS:

You can request a recalculation of your payment plan if you elected less than the maximum number of installment payments allowed by law.

The recalculation of a payment plan must take into consideration the following:

  • The number of payments already received
  • The maximum number of monthly payments (180 months)
  • The minimum payment amount of $15 per month

If you have already elected the maximum number of installment payments, the following options are available:

  • You can lower your payments by paying a portion of your account balance with a partial lump sum payment. The new payment plan will then be recalculated based on the remaining balance, taking into consideration the number of payments already received.
  • You can submit a lump sum payment to pay your account in full.

The partial or lump sum payment can be made with a personal check, money order, cashier's check, plan-to-plan transfer and/or rollover funds from a qualified plan.

If you are making after-tax installment payments for a tier conversion, you may request a change to an Actuarial Equivalent Reduction (AER) plan.

To request a change, submit a letter to the address below or Submit a Question online. If you are paying for more than one service credit purchase, please include the payment type(s), approximate start date of payments and installment payment amount(s) you want to change.

Mail written requests to:

CalPERS Member Services Division
P.O. Box 942704
Sacramento, CA 94229-2704

Requests are reviewed on a case-by-case basis and responded to in the order they were received.

PRE-TAX INSTALLMENT PAYMENTS:

No changes to the service credit purchase payment plan or tier conversion election can be made in accordance with Internal Revenue Code 414(h)(2).

Can I suspend payments for my service credit purchase?

AFTER-TAX INSTALLMENT PAYMENTS:

You may be eligible for a 12-month suspension if you selected after-tax installment payments for service credit purchase(s) and have not suspended your payments within the last three years.

Facts about suspensions:

  • Interest continues to accrue on the unpaid balance during the suspension period.
  • Suspension requests are reviewed and may be approved for a 12-month period of time. Payments automatically resume at the end of the suspension period.
  • At the end of the suspension, payments will be recalculated to include the additional interest.
  • The recalculated payment plan will take into consideration payments made to date and will not exceed the maximum payment plan allowed by law.

Suspensions are not available for the following:

  • Retirees
  • Tier conversion. Alternatively, for tier conversions only, you may request to change after-tax payments to an Actuarial Equivalent Reduction (AER) plan
  • Contributions or service credit adjustments required by law or agreement
  • A service credit purchase subject to a community property division by way of court judgment, domestic relations or other court order or settlement agreement

To request a suspension, you submit a letter to the address below or Submit a Question online. If you are paying for more than one service credit purchase, please include the payment type(s) and installment payment amount(s) you want to suspend.

Mail written requests to:

CalPERS Member Services Division
P.O. Box 942704
Sacramento, CA 94229-2704

Requests are reviewed on a case-by-case basis and responded to in the order they were received.

PRE-TAX INSTALLMENT PAYMENTS:

No changes (including suspension or cancellation) to pre-tax service credit purchase payment plans can be made in accordance with Internal Revenue Code 414 (h) (2).

Can I cancel my service credit purchase installment payments?

You may be eligible to elect to cancel any remaining installment payments under specific conditions. A cancellation is effective the month after it is approved. The original election remains in effect for payments already made.

Payments may not be cancelled for any of the following:

  • Payments submitted on a pre-tax basis
  • Contributions or service credit adjustments required by law or agreement
  • A tier conversion election
  • A service credit purchase subject to community property division by way of court judgment, domestic relations or other court order or settlement agreement

If your cancellation of remaining payments is approved, the service credit purchased by your original election will be reduced in proportion to the balance of the total amount remaining unpaid.

To request a cancellation, you must submit a letter or Submit a Question online. If you are paying for more than one service credit purchase, or a purchase and a tier conversion, please include the payment type(s), the approximate start date of payments and the installment payment amount(s) that you want to cancel.

Mail written requests to:

CalPERS Member Services Division
P.O. Box 942704
Sacramento, CA 94229-2704

Requests are reviewed on a case-by-case basis and responded to in the order they were received.

What happens to my service credit purchase or tier conversion payment plan if I separate from employment?

The payment obligation must be continued. You must contact us to arrange to make payments directly to CalPERS. Note: Interest continues to accrue on the unpaid balance of your service credit purchase or tier conversion plan.

Call us at 888 CalPERS (or 888-225-7377).

Dated: 09-25-2013