The California Public Employees Retirement System Board of Administration voted to sponsor legislation to discontinue the Actuarially Equivalent Reduction (AER) option for new service‑credit purchases, tier conversions and redeposits, after a staff presentation and extended board discussion.

Danny Brown, a CalPERS staff member who presented the item, told the board the proposal would “eliminate the AER option and instead at the time of retirement, the member can either pay off the outstanding balance with a lump sum or receive prorated service credit based on the amount paid,” and that the change would apply to new elections after the date included in the board motion. Brown said the AER option was added in 2020 to replace installment payments into retirement but has produced calculation complexities and manual processing burdens for staff.

Board members raised concerns on both sides. Several members said the option created administrative complexity, splitting reductions across multiple beneficiaries and delaying other benefit processing; others said removing a payment‑flexibility option could harm members who lack cash flow. Scott Turandno (CalPERS staff) and Kelly Aoki (staff) answered questions about actuarial assumptions and impact estimates. Aoki reported that over the last 10 years CalPERS recorded about 88,000 service‑credit purchase elections, roughly 51,000 of which have retirement dates, and only about 11% of those retirees elected AER; she said more analysis would be needed to quantify the monetary risk the benefit presents to the fund.

Public commenters addressed practical consequences and process. A retired member, Wylene Davis, detailed an old buyback and urged care for members who already paid under different rules. JJ Jelencik argued actuarial reductions should be a neutral actuarial calculation rather than a fiscal excuse to eliminate a benefit. Steven O’Leary asked the board to adopt a longer runway for affected members; SEIU’s Bobby Roy said labor representatives had not yet had a full meeting with staff and requested further engagement.

There was procedural confusion in the meeting about the effective date: staff described a January 1, 2027 start in the presentation, while the motion text read a July 1 enactment date. Staff reiterated deadlines for bill introduction and clarified timing for legislative language. After discussion the board called the motion and approved it by voice vote; the board chair announced the motion “carries as is.” The motion was moved and seconded in the meeting record and recorded as approved by the board.

Next steps: staff said it will work through bill language, stakeholder outreach and member education ahead of the effective date and return with implementation details and calculations as requested by board members.