Purchasing Power Protection Allowance (PPPA) is a benefit designed to maintain the original purchasing power of CalPERS retirees to a predetermined limit when accumulated Cost of Living Adjustment (COLA) has not maintained pace with inflation. For example, if your benefit stayed the same over a period of time but prices doubled, your purchasing power would only be 50% of its original value. The PPPA would bring your retirement benefit up to the predetermined limit thresholds, 75% (state and schools) or 80% (public agencies). The PPPA is part of the COLA section of law and is governed by 21337 and 21337.1.

Under the retirement law, retirees may receive an annual PPPA paid in the May 1 warrant each year. PPPA is only payable if a benefit falls below the minimum threshold of the rate of inflation, and it is made after COLA.

Since PPPA is only paid when the gross benefit drops below the threshold, it can take several years of retirement to become eligible as your annual COLA benefit should help retain your purchasing power. PPPA is not guaranteed each year and it is possible that one year you could receive PPPA benefits but depending on the rate of inflation, PPPA benefits could be reduced or removed the next. If there is a net decrease to PPPA benefits or it has been removed, it is because your current COLA benefit is keeping your purchasing power at or above the threshold.

PPPA is calculated for each service type, and is dependent on four factors:

• Consumer Price Index for All Urban Consumers (CPI, 1967), published by the Bureau of Labor Statistics (BLS).
• COLA factor, determined by CPI and your employer contracted COLA percentage
• Purchasing power threshold
• 75 percent for state and school members
• 80 percent for local and public agencies
• The year you retired and the base allowance at retirement. The base allowance is the allowance you received when you retired.

Retirees who have service with agencies that contract for 4 or 5 percent COLAs will generally not receive the PPPA benefit since the higher COLA percentage will keep them above the 75 or 80 percent purchasing power threshold.

How is PPPA Calculated

CalPERS uses the following process to calculate your PPPA amount:

Step 1:

Calculates inflation factor, based on retirement year

• Current Year CPI / Retirement Year CPI = Inflation Factor

Step 2:

Calculates the new allowance after COLA has been applied

Step 3:

Determines if the new allowance meets the minimum threshold

• Base Allowance x Inflation Factor x Threshold % = PPPA Threshold
  • If the allowance is less than the minimum threshold, PPPA is payable.
  • If the allowance is greater than or equal to the minimum threshold, no PPPA is payable.

Step 4

Calculates the amount of PPPA payable, if applicable

• PPPA Threshold – (base + COLA) = PPPA

PPPA Calculation Examples

State Agency or School

• Example 1
• Example 2

Public Agency

• Example 1
• Example 2

If you have any questions, contact us at 888-CalPERS (or 888-225-7377).