Pension Reform Impacts
The California Public Employees' Pension Reform Act (PEPRA) was approved in 2012 and took effect January 1, 2013. Review the Summary of PEPRA (PDF) for CalPERS' interpretations on key areas of PEPRA and related changes to the California Public Employees' Retirement Law (PERL).
For additional information, visit PEPRA or Circular Letters.
Below are key areas that impact employers:
For enrollment into CalPERS membership, CalPERS requires that employers obtain a Reciprocal Self-Certification Form (CalPERS-1187) (PDF) from all employees hired on or after January 1, 2013. On this form, members provide essential information regarding their reciprocal membership to be used for every enrollment in CalPERS to determine their retirement enrollment level.
For more information regarding the Reciprocal Self-Certification Form (CalPERS-1187) (PDF), visit PEPRA.
Employer and member rates will be examined every year in the fall. If there is a change in the rates, they'll be updated the following summer. Changes will be communicated through the Annual Valuation Report provided to each employer.
Contracting Agencies & School Districts
PEPRA provides that employees of contracting agencies and school districts hired on or after January 1, 2013, contribute 50% of the total normal cost rate, rounded to the nearest quarter percent. PEPRA member contribution rates are subject to increases or decreases each fiscal year based on CalPERS annual actuarial valuations. They are only adjusted when the total normal cost rate changes by more than 1% since the last time the member rates were adjusted.
Access the Public Agency PEPRA Member Contributions webpage for more information.
Employer Paid Member Contributions (EPMC)
Employer Paid Member Contributions (EPMC) are generally prohibited for new members, unless an existing memorandum of understanding (MOU), effective January 1, 2013, or prior, will be impaired. However, EPMC are prohibited for new members once the MOU is amended, extended, renewed, or expires. In addition, PEPRA prohibits the reporting of EPMC as pensionable compensation and further prohibits the conversion of EPMC to final compensation for new members, regardless of impairment.
Multiple Retirement Formulas
For employers with multiple retirement formulas, CalPERS will look to its existing practice related to two tiers of benefits when providing employer contribution rates for new members.
- For public agency plans in a risk pool, a separate employer rate will be provided for the new PEPRA benefit formula.
- For public agency plans that do not participate in a risk pool, a combined rate will be provided.
- For state and school employers, a single combined employer rate per plan will continue to be used.
Payroll
When submitting payroll, employers don't need to identify whether a member is classic or a new PEPRA member. However, employers will be required to report contributions at the appropriate rate. The Participant Pension Enrollment Data Report identifies any new members enrolled under PEPRA. Employers may access the report through the Cognos application in myCalPERS.
State Employees
PEPRA did not address state members' contributions. Contribution rates for state employees are subject to bargaining and are put into statue following the conclusion of the bargaining process. Refer to the State Member Contribution Rates (PDF) for current information.
Employers can report some items of special compensation for new members so long as the items meet the definitional requirements of pensionable compensation and are not excluded by the pensionable compensation statute. Further information is provided in Circular Letter 200-064-17 (PDF).
As a result of changes to myCalPERS, employers no longer contribute on earnings in excess of the Internal Revenue Code section 401(a)(17) limit for classic members, nor do they contribute on earnings in excess of the pensionable compensation limit set forth in PEPRA for new members. Further information is provided in Circular Letter 200-007-14 (PDF).
Retirees engaged as independent contractors, consultants, or hired through third-party employers (e.g., temp agency), whose employment does not meet the California common law employment test, are not subject to PERL or PEPRA requirements.
If, however, the employment constitutes a California common law employment (employer-employee) relationship, the employment is subject to the applicable PERL and PEPRA requirements regardless of the employment's characterization.
If the retiree's employment is subject to the PERL and PEPRA requirements, employers are required to enter the retiree appointment into myCalPERS and report hours and pay rate.
The court decision State of California v. United States Department of Labor ended the Assembly Bill 1222 PEPRA exemption for California transit employees who became new members on or after January 1, 2013.
Beginning April 20, 2015, CalPERS sent notifications to the impacted employers and employees and began creating new appointments placing members into the PEPRA retirement benefit formula effective December 30, 2014. CalPERS applied a new appointment effective December 30, 2014. Also, once payroll was corrected CalPERS applied a permanent separation, effective December 29, 2014, to the classic retirement benefit formula appointment.
Effective December 30, 2014, when enrolling new members, employers are no longer required to have employees complete the Transit Employer Certification Form or to update the myCalPERS enrollment to reflect employees' exempt statuses. Employers must continue to obtain all necessary enrollment information, such as the Reciprocal Self-Certification Form (CalPERS-1187) (PDF), to ensure employee is enrolled correctly. Contact CalPERS Customer Contact Center at 888 CalPERS (or 888-225-7377) if you feel their membership enrollment level is not correct.