CalPERS describes how pension benefits are calculated and funded

A CalPERS staff member outlined how the California Public Employees Retirement System calculates and funds pension benefits, saying the pension is a defined benefit plan and that benefits are payable for life.

The presentation said CalPERS pension benefits come from three sources: investment returns, employer contributions and member contributions. As of June 30, 2024, investment returns paid about $0.55 for every pension dollar, employer contributions about $0.34 and member contributions about $0.11, the presenter said.

The system uses a formula to calculate an unmodified allowance that becomes a retiree's basic pension. The presenter described three formula components: service credit (total years of service with CalPERS employers), the benefit factor (a percentage of pay per year of service determined by the employer's retirement formula and the retiree's age) and final compensation (an average of the highest 12 or 36 consecutive months of full‑time pay). CalPERS multiplies years of service by the benefit factor and then by final compensation to determine the unmodified allowance. The presenter said members may accept a reduced allowance to provide a lump sum or ongoing payments to a beneficiary.

Eligibility rules for service retirement were summarized. The presenter said most members qualify for service retirement at age 50, but members first hired on or after Jan. 1, 2013, need to be at least 52. State employees in the state's “second tier” were said to need to be at least 55 to be eligible for service retirement. The presenter said members generally must have at least five years of service credit, except that second‑tier state members generally need 10 years; exceptions such as reciprocity or certain part‑time rules require case-by-case review.

The presenter also noted disability retirement options: normal disability retirement generally requires at least five years of service credit and no minimum age; industrial disability retirement is generally available to safety members (police and firefighters) and requires the disability be job related.

CalPERS resources mentioned included the myCalPERS account for personalized estimates, instructor‑led classes (virtual and in person) such as Your CalPERS and Planning Your Retirement, and phone service at 888‑225‑7377. The presenter said the slides and the recorded presentation are available on the CalPERS YouTube channel.

This presentation was informational and did not propose or adopt policy changes.