Purchasing Power Protection Allowance (PPPA) is a benefit designed to restore the original purchasing power of CalPERS retirees to a predetermined limit. The PPPA is part of the Cost of Living section of law and is governed by 21337 and 21337.1.

Under the retirement law, retirees may receive an annual PPPA paid in the May 1 warrant each year. PPPA is only payable if a benefit falls below the minimum threshold of the rate of inflation, and it is made after the cost-of-living adjustment (COLA).

PPPA is calculated for each service type, and is dependent on four factors:

  • Consumer Price Index for All Urban Consumers (CPI, 1967), published by the Bureau of Labor Statistics (BLS).
  • COLA factor, determined by CPI and your employer contracted COLA Provision
  • Purchasing power threshold
    • 75 percent for state and school members
    • 80 percent for local and public agencies
  • The year you retired

How is PPPA Calculated

CalPERS uses the following process to calculate your PPPA amount:

Step 1

Calculates inflation factor, based on retirement year

  • Current CPI / Retirement CPI = Inflation Factor

Step 2

Calculates the new allowance after COLA has been applied

Step 3

Determines if the new allowance meets the minimum threshold

  • Base Allowance x Inflation Factor x Threshold % = PPPA Threshold
    • If the allowance is less than the minimum threshold, PPPA is payable.
    • If the allowance is greater than or equal to the minimum threshold, no PPPA is payable.

Step 4

Calculates the amount of PPPA payable, if applicable

  • PPPA Threshold – (base + COLA) = PPPA

PPPA Calculation Examples

State Agency or School

Example 1

The example will use the following data to calculate the 2017 payable PPPA:

  • Retirement year: 1980
  • Employer: State agency or school
  • Purchasing power percent: 75
  • COLA factor: 1.0399
  • Base allowance: $1,000.00
  • 1980 CPI: 246.80
  • 2016 CPI: 718.955
Process Calculation
Step 1:
Calculate the inflation factor.

Calculate the inflation factor for the benefit effective year by dividing the current CPI by the retirement year CPI. This represents the maximum amount of inflation that has occurred since retirement.

  • 718.955 / 246.80 = 2.9131

The 2017 inflation factor is 291.31 percent.

Step 2:
Calculate the new allowance after COLA has been applied.

Multiply the Base Allowance by the COLA Factor to calculate the COLA amount.

  • $1,000.00 x 1.0399 = $1,039.90

The 2017 COLA is $1,039.90.

We add these together to get the new allowance after the COLA has been applied.

  • $1,000.00 + $1,039.90 = $2,039.90

The new allowance is $2,039.90.

Step 3:
Determine if the new allowance meets the PPPA threshold.

Multiply the base allowance by the inflation factor from Step 1 and the threshold (75 percent) to obtain the PPPA threshold.

  • $1,000.00 x 2.9131 x 75% = $2,184.83

The 2017 PPPA threshold is $2,184.83.

Determine if the new allowance meets the PPPA threshold.

  • $2,039.90 < $2,184.83

Since the new allowance is less than the PPPA threshold, PPPA is payable.

Step 4:
Calculate the amount of PPPA payable.

Calculate the PPPA amount by subtracting the new allowance from the PPPA threshold.

  • $2,184.83- $2,039.90 = $144.93

The 2017 payable PPPA amount is $144.93.

Example 2

The example will use the following data to calculate the 2017 payable PPPA:

  • Retirement year: 1981
  • Employer: State agency or school
  • Purchasing power percent: 75
  • COLA factor: .9999
  • Base allowance: $1,000.00
  • 1981 CPI: 272.40
  • 2016 CPI: 718.955
Process Calculation
Step 1:
Calculate the inflation factor.

Calculate the inflation factor for the benefit effective year by dividing the current CPI by the retirement year CPI. This represents the maximum amount of inflation that has occurred since retirement..

  • 718.955 / 272.40 = 2.6393

The 2017 inflation factor is 263.93 percent.

Step 2:
Calculate the new allowance after COLA has been applied.

Multiply the Base Allowance by the COLA Factor to calculate the COLA amount. 

  • $1,000.00 x .9999 = $999.90

The 2017 COLA is $999.90.

We add these together to get the new allowance after the COLA has been applied.

  • $1,000.00 + $ 999.90= $1,999.90

The new allowance is $1,999.90.

Step 3:
Determine if the new allowance meets the PPPA threshold.

Multiply the base allowance by the inflation factor from Step 1 and the threshold (75 percent) to obtain the PPPA threshold.

  • $1000 x 2.6393 x 75% = $1,979.48

The 2017 PPPA threshold is $1,979.48.

Determine if the new allowance meets the PPPA threshold.

  • $1,999.90 > $1,979.48

Since the new allowance is greater than the threshold, PPPA is not payable.

Public Agency

Example 1

The example will use the following data to calculate the 2017 payable PPPA:

  • Retirement year: 1983
  • Employer: Public agency
  • Purchasing power percent: 80
  • COLA factor: .9222
  • Base allowance: $1,000.00
  • 1983 CPI: 298.40
  • 2016 CPI: 718.955
Process Calculation
Step 1:
Calculate the inflation factor.

Calculate the inflation factor for the benefit effective year by dividing the current CPI by the retirement year CPI. This represents the maximum amount of inflation that has occurred since retirement.

  • 718.955 / 298.40 = 2.4094

The 2017 inflation factor is 240.94 percent.

Step 2:
Calculate the new allowance after COLA has been applied.

Multiply the Base Allowance by the COLA Factor to calculate the COLA amount. 

  • $1,000.00 x .9222 = $922.20

The 2017 COLA is $922.20.

We add these together to get the new allowance after the COLA has been applied.

  • $1,000.00 + $922.20= $1,922.20

The new allowance is $1,922.20.

Step 3:
Determine if the allowance meets the PPPA threshold.

Multiply the base allowance by the inflation factor from Step 1 and the threshold (80 percent) to obtain the PPPA threshold.

  • $1,000.00 x 2.4094 x 80% = $1,927.52

The 2017 PPPA threshold is $1,927.52.

Determine if the new allowance meets the PPPA threshold.

  • $1,922.20 < $1,927.52

Since the new allowance is less than the PPPA threshold, PPPA is payable.

Step 4:
Calculate the amount of PPPA payable.

Calculate the PPPA amount by subtracting the new allowance from the PPPA threshold.

  • $1,927.52 - $1,922.20 = $5.32

The 2017 payable PPPA amount is $5.32.

Example 2

The example will use the following data to calculate the 2017 payable PPPA:

  • Retirement year: 1984
  • Employer: Public agency
  • Purchasing power percent: 80
  • COLA factor: .8845
  • Base allowance: $1,000.00
  • 1984 CPI: 311.10
  • 2016 CPI: 718.955
Process Calculation
Step 1:
Calculate the inflation factor.

Calculate the inflation factor for the benefit effective year by dividing the current CPI by the retirement year CPI. This represents the maximum amount of inflation that has occurred since retirement.

  • 718.955 / 311.10 = 2.3110

The 2017 inflation factor is 231.10 percent.

Step 2:
Calculate the new allowance after COLA has been applied.

Multiply the Base Allowance by the COLA Factor to calculate the COLA amount

  • $1,000.00 x .8845 = $884.50

The 2017 COLA is $884.50.

We add these together to get the new allowance after the COLA has been applied.

  • $1,000.00 + $ 884.50= $1,884.50

The new allowance is $1,884.50.

Step 3:
Determine if the new allowance meets the PPPA threshold.

Multiply the base allowance by the inflation factor from Step 1 and the threshold (80 percent) to obtain the PPPA threshold.

  • $1,000.00 x 2.3110 x 80% = $1,848.80

The PPPA threshold is $1,848.80.

Determine if the new allowance meets the PPPA threshold.

  • $1,884.50 > $1,848.80

Since the new allowance is greater than the threshold, PPPA is not payable.

If you have any questions, contact us at 888-CalPERS (or 888-225-7337).



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