Pension Contract Agency Eligibility
Overview
Agency eligibility to contract with CalPERS is defined by California Public Employees’ Retirement Law (PERL) sections 20056 and 20057. Additionally, Internal Revenue Service (IRS) Code section 414(d) contains a ‘facts and circumstances test’ that applies a range of factors to determine whether an entity is an agency, instrument of the state, or a political subdivision of the state. Most commonly these are counties, cities, special districts, joint powers authorities, and quasi-governmental non-profits, but a variety of entities are legally eligible. The Pension Contracts Management Program evaluates potential new agencies for eligibility prior to initiating a new contract. Below are general eligibility criteria for informational purposes. For eligibility determinations, complete and return to us the appropriate questionnaire as outlined in the General Contracting Process section of the New Pension Contracts page.
Public Agencies
An agency wanting to contract with CalPERS for pension benefits must meet a majority of the following factors demonstrating it is an “agency or instrumentality of a state or political subdivision of a state.”
- Your governing board or body is controlled by a state or political subdivision of a state.
- Members of your governing board or body are publicly nominated and elected.
- The State or political subdivision has fiscal responsibility for the general debts and other liabilities, including funding employee benefits under its plan.
- Your employees are treated in same manner as employees of the state or political subdivision for purposes other than providing employee benefits, for example having civil service protections.
- If you aren't a state or political subdivision, the entity is delegated by law to exercise sovereign powers of the state or political subdivision, for example the power of taxation.
Charter Schools
An independent charter school wanting to contract with CalPERS for pension benefits must meet the below requirements.
- Is a non-sectarian independent public school serving a governmental purpose by providing tuition-free elementary or secondary education, or both.
- Is established and operated in accordance with a specific state statute authorizing the granting of charters to create independent public schools or authorizing the establishment of independent public schools.
- Participation in the state or local retirement system by the charter school’s employees is expressly required and permitted under applicable laws.
- The charter school’s governing board or body is controlled by another governmental entity that has the power to nominate, appoint, remove, and replace a majority of the governing body’s members. Or majority of the governing body or board is publicly nominated and elected.
- The primary source of the charter school’s funding is from another governmental entity.
- The requirement of financial interests of ownership in the charter school must be held by another governmental entity that upon dissolution or final liquidation, the charter school’s net assets will be distributed to another qualifying public school.
Note that the IRC Section 414(d) regulations as described above are only proposed and not yet final. Some agencies’ eligibility to participate in the CalPERS Plans may be impacted once the regulations are finalized. CalPERS determines eligibility based upon a good faith interpretation of existing IRS guidance, and in the event of an agency’s eligibility being impacted by finalized regulations, CalPERS is obligated to comply with the IRC and will be required to terminate the agency’s participation in CalPERS, including cancellation of all benefits for employees and retirees.
Additional Resources
The CalPERS Pension Contracts Management Program and Actuarial Office are available to discuss and inform all CalPERS contracted agencies on their pension contracting and funding options. Additionally, links to relevant and important resources for all our contracting agencies are found in this section, and in Resources.