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CalPERS webinar explains service credit purchase options, costs and payment choices
Summary
A California Public Employees Retirement System presenter reviewed types of service credit members can buy, eligibility rules, payment methods including actuarial equivalent reduction (AER), timing and documentation requirements, and how to submit requests via myCalPERS.
A California Public Employees Retirement System presenter outlined how members can purchase service credit to increase retirement benefits, what documentation and timing are required, and the payment options available.
The presenter said service credit is “one of the three factors used to calculate your retirement pension,” and explained that buying service credit can increase a retiree’s monthly allowance depending on membership type and the specific service being purchased.
CalPERS’ presentation summarized common purchase categories, including leave of absence (for parental, educational or medical reasons), redeposit of withdrawn contributions, service prior to membership (temporary, part-time or seasonal work), military service, Comprehensive Employment and Training Act (CETA) service, fellowship service, Peace Corps/AmeriCorps/AmeriCorps VISTA service, optional member service for exempt appointees, and the alternate retirement program (ARP) for certain state hires.
The presenter described eligibility limits and special rules: members may purchase up to one year of CalPERS service credit for each year of active military service, up to four years; military leave posted at no cost is possible if the member returns to CalPERS-covered employment within six months of discharge; ARP applies to state miscellaneous or industrial employees hired between Aug. 11, 2004, and June 30, 2013, with a three-month election window at hire but the option remains before retirement.
CalPERS also explained procedural steps and timelines. Members should review the relevant CalPERS publications and the service credit purchase handout on the CalPERS website, then log in to myCalPERS to select “Make a service credit purchase,” answer eligibility questions, and request a cost. CalPERS said cost details will be available in myCalPERS within 60 days after receiving all required documentation.
On payment methods, the presenter described lump-sum payments (after-tax checks or rollovers from pretax accounts such as IRAs, 401(k)s or 457 plans), installment plans via payroll deduction while active, and the actuarial equivalent reduction (AER). The AER converts unpaid balances into a permanent reduction in monthly pension benefits so a member need not pay the full balance upfront; CalPERS used a $10,000 example to illustrate the effect of AER on monthly payments.
The presentation noted restrictions and timing: rollovers require forms and completion time, and CalPERS’ 60-day time frame for processing cannot be extended; installment pretax deductions are available only if an employer has contracted for pretax payroll deduction; if a member leaves employment without retiring, any outstanding balance generally must be paid in full. Members who purchase service credit on or after Jan. 1, 2020, must pay any remaining balance at retirement unless they elect AER, which converts unpaid balances to monthly reductions.
The presenter urged members to compare the purchase cost with the estimated future benefit shown in myCalPERS, and to consider caps that affect classic safety members (80% or 90% benefit caps) and situations where extra service credit may not increase benefits, such as disability retirement. The presenter recommended consulting a financial or tax adviser for individual guidance.
Finally, the presenter reviewed how to submit and track requests: submit the election and required documents through myCalPERS before the expiration date on the cost estimate (an election is final once submitted); after submission, members can track status in myCalPERS; a retired payoff packet is mailed about 60 days before the member’s retirement date showing remaining balance and options.
CalPERS closed by reminding attendees that the Public Employees’ Retirement Law governs decisions if presented information conflicts with statute, and provided contact options including secure messaging in myCalPERS, virtual or in-person appointments, and a phone line (888-225-7377). The video and presentation materials remain available on CalPERS’ YouTube channel and website.
