2007/08 Support Budget

Budget Proposal: Compensation

2006/07 Employer-Paid Retirement Adjustment

The California Public Employees’ Retirement System (CalPERS) defined benefit pension plan is funded by employer-paid contributions, employee contributions, and the plan’s investment earnings. Employer-paid contribution rates are adjusted each year in order to meet defined pension benefit obligations. After a slight decrease in employer retirement rates for 2005/06, there was an increase in the 2006/07 employer-paid retirement rates. The CalPERS Board felt an increase was needed in order to cover future benefit payouts to retired employees.

The CSU 2006/07 employer-paid retirement adjustment is equivalent to $23.3 million. The state Department of Finance processes state agency retirement adjustments during the fiscal year. The following table provides CalPERS employer-paid retirement contribution rates and adjustments from 1997/98 through 2006/07:

  CalPERS Employer-Paid Retirement Rates  
Fiscal
Year
Miscellaneous
Tier 1
Peace Officer/
Firefighter
CSU Employer-
Paid Retirement
Adjustments
(General Fund only)
1997/98 12.721% 15.270%  
1998/99 8.541% 9.591% (60,861,000)
1999/00 1.491% 0.000% (104,155,000)
2000/01 0.000% 2.729% (26,297,000)
2001/02 4.166% 9.638% 84,244,945
2002/03 7.413% 13.925% 68,074,445
2003/04 14.843% 20.325% 155,112,444
2004/05 17.022% 23.841% 44,418,397
2005/06 15.942% 23.563% (22,490,000)
2006/07 16.997% 24.505% 23,284,000

California Government Code Section 20814 requires the state to include in the annual budget funding to support the employer-paid retirement contribution rates established by the actuary, and requires the legislature to adopt the rates and authorize the appropriation in the Budget Act.

For reference regarding 2006/07 employer-paid retirement rates, see CSU Human Resources Administration, 2006 coded memorandum, Benefits Administration, 2006-07.

Employee Retirement Contributions

The miscellaneous tier 1 employee contribution rate has remained constant since July 1, 1976. Government Code Section 20677 (b)(1) provides that employee retirement contribution rates for state Miscellaneous Tier 1 members employed by the CSU who are in the federal system (Social Security) shall be 5 percent of compensation in excess of $513 per month. Most CSU employees (approximately 98 percent) with CalPERS retirement benefits fall within the CalPERS Miscellaneous Tier 1 category. Retirement benefit formulas were enhanced for employees in the state miscellaneous tier 1 category to 2 percent of final compensation at age 55 for those who retire on or after January 1, 2000.

The remaining CSU employees with CalPERS retirement benefits have designated CalPERS Peace Officer/Firefighter category benefit levels. The employee contribution rate for this group is subject to Government Code Section 20687, which provides that employee retirement contribution rates shall be 8 percent of compensation in excess of $238 per month. Pursuant to a collective bargaining agreement for the represented employees, the CSU pays the full employee contribution. Retirement benefit formulas were enhanced for employees in the Peace Officer/Firefighter category to 3 percent of final compensation at age 50 for those who retire on or after January 1, 2002.


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Last Updated: January 26, 2007