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What is CalPERS?

California Public Employees' Retirement System (CalPERS)

The California Public Employees' Retirement System (CalPERS) is the pension fund for employees of the State of California. CalPERS also administers health benefits for active and retired State employees as well as their dependents. At the time of this writing there was almost $350 billion dollars in the fund and nearly 2 million members. CalPERS investments are vast. The fund invests in domestic and foreign stocks, bonds and real estate. It is the largest pension fund in the United States, and among the largest in the world.

A pension fund is a type of investment plan that provides income during retirement. Members contribute a percent of their income during their working years and then collect a “salary” after they retire. The contributions of the members are invested and grow over time. CalPERS is a Defined Benefit Plan. This means there is a set formula for determining how much you will contribute, and how much you will collect in retirement. As a State employee, you will begin contributing immediately. The amount deducted from your paycheck will depend on a couple of factors.

Your classification makes a difference in determining your CalPERS contribution. The majority of office jobs with the State are classified as “Miscellaneous.” Those working as firefighters and police officers are categorized differently and use a different formula to calculate contributions. Employees working for State prisons or hospitals also have different contribution formulas. Teachers in California contribute to a completely different fund, CalSTRS. Generally, you can expect that about 8% of your salary will be going towards your retirement.

If you leave State service before you retire you will get all the money you contributed back, plus the interest that it earned. Additionally, CalPERS contributions are pre-tax, so it’ll help lower how much you have deducted in taxes from your paycheck each month. 8% may seem like a lot to have deducted every month, but in retirement you can expect to earn about twice as much as you contribute over a career. As the amount that workers contribute each month in defined, there is a formula for how much will be earned in retirement.

With each month’s contribution, CalPERS members earn Service Credit. If you work at least 10 months in the year, you earn a year of Service Credit. After you’ve earned 5 years of Service Credit, you are guaranteed to receive a monthly pension payment for the rest of your life after you retire. But, greater number of years you work, the more you’ll earn each month in retirement. The formula changes over time, but somebody beginning with the State in 2018 will be in the 2% at 62 benefit formula.

Roughly, the 2% formula means that for each year an employee works for the State of California, they will earn 2% of their yearly salary each month. If you work for the State for 50 years, you will get 100% of your salary. If you work for the State for 25 years, you will get 50% of your Salary. CalPERS defines your salary as the average of the 3 years you made the most money. So, when it comes time to retire, CalPERS will look at how much money you made each year you worked for the State. They will pick out the 3 years that you made the most money and find the average. They will then apply the 2% formula to the average.

The formula is confusing. But the bottom line is the benefit is amazing. Pensions are disappearing, and one of the best reasons to go to work for the State of California is the retirement benefits. Research consistently shows that people with defined benefit retirement plans like CalPERS retire younger and have more financial freedom in retirement. It’s also why people tend to stay with in State jobs for longer than private sector equivalents.

The State Of California offers its employees additional retirement benefits in form of 401(k) and 457 savings accounts. They are a great way to supplement the retirement income you'll get from CalPERS.

The CalPERS pension plan is one of many reasons to look for a job with the State of California. Check out our post for more great reasons to start your job search today. CalPERS is considered to be one of the premier State Of California employers, and we also have an article on how to get a job in that specific department.

State of California employees that have retired and are collecting a pension from CalPERS have options if they decide they'd like to work after retirement. Members can go to work in the private sector and work as much as they want without it affecting their retirement payments. They also have the option to return to State service and work part-time as a Retired Annuitant. Retired annuitant can return to a classification they worked in during their career for up to 960 hours per year.

Health Benefits

CalPERS is also the entity in charge of administering health benefits for State of California employees. All State employees have great health insurance options to enroll in. Kaiser, Blue Shield, Anthem and United are among the plans available to employees and their dependents.

New employees have 60 days from the time they are appointed to enroll in a health plan. There is an open enrollment period every year around late summer and early fall in which employees can make changes to their current enrollment or add coverage. In 2019 open enrollment is September 9 through October 4 with changes becoming effective on January 1, 2020.

Thanks for reading!

Related Articles:

How To Get a Job with CalPERS
State Pay and Taxes
State of California Retired Annuitants


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