CalPERS presenter outlines key differences between first‑ and second‑tier state retirement plans

Raquel, a CalPERS presenter, summarized the differences between first‑ and second‑tier state membership for California miscellaneous and industrial employees, including contribution rates, retirement formulas, eligibility ages, election deadlines and how to convert prior service.

The presentation matters because the tier a member is in affects retirement benefit size, contribution obligations and options to change tiers. CalPERS staff provided numerical examples to show how formulas and final compensation interact and walked through the forms and timelines members must follow to elect or convert tiers.

CalPERS explained member contributions vary by tier and Social Security coordination. "With first tier, if you were coordinated with Social Security ... your contribution rate is typically 8 to 10% of your salary," Raquel said, adding that non‑coordinated first‑tier rates are generally 9–11% and are set by collective bargaining agreements. She said second‑tier members now pay a lower contribution (currently 3.75%) after a statutory change effective July 1, 2013, and that the second‑tier rate may adjust annually until it reaches half the normal cost to fund benefits.

The agency spelled out eligibility and benefit differences. For first tier, minimum retirement age is 50 with five years of CalPERS service for classic members or age 52 for PEPRA members; for second tier, the minimum is generally 55 with 10 years of service, or age 50 with five years of service credit earned before Jan. 1, 1985. Disability retirement service minimums differ as well: five years for first tier and 10 years (or five years with pre‑1985 credit) for second tier.

CalPERS contrasted benefit calculations and COLAs. Raquel reviewed the basic formula (service credit × benefit factor × final compensation) and ran examples: under a 2% at 55 first‑tier formula a sample member's calculated unmodified allowance was $1,500 per month; under a 1.25% at 65 second‑tier formula the same sample produced $587.50, a difference the presenter described as substantial. She also said first‑tier COLA could be up to 2% compounded and may be tied to the CPI, while second‑tier COLA is a fixed 3% compounded annually, not CPI‑based.

On elections and conversions, Raquel said members need takeaways: there is no action required to remain in first tier; to elect second tier a member must submit the state second tier retirement formula election form within 180 days of beginning CalPERS contributions — the deadline is firm and failure to submit results in a permanent election to remain in first tier. The election form is included in "Publication 52, Second Tier Benefit Election Package," and the presenter said the law requires a spouse or domestic partner to sign the form.

Converting past second‑tier service to first tier involves eligibility checks and a two‑step process, Raquel explained. Members must be active (not retired), have second‑tier service credit and have elected first tier for future service while still holding past service that has not been converted. Step one is making a permanent election to have future service under first tier via myCalPERS (Retirement → Service Credit Purchase → Convert to First Tier); CalPERS will notify the employer to report first‑tier contributions. Step two is optionally purchasing past second‑tier service (also initiated in myCalPERS). She said cost and election details are provided in myCalPERS within 60 days after CalPERS receives required documents.

Raquel closed by directing members to myCalPERS and CalPERS publications for next steps (Publication 52 for the election form and Publication 12 for service credit purchase options), and noted the presentation is governed by the Public Employees Retirement Law; where the law conflicts with presentation material, the law controls. She encouraged members to run personalized estimates through myCalPERS and to register for member education classes.

The presentation concluded with information on where to find the recorded video (CalPERS' YouTube channel and calpers.ca.gov) and an invitation to complete a follow‑up evaluation email that attendees would receive later that day.