Budget Proposal: Compensation
2007/08 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 an increase in employer retirement rates for 2006/07, there was a slight decrease in the 2007/08 employer-paid rates. The 2007/08 employer-paid retirement adjustment is equivalent to -$8.6 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 1998/99 through 2007/08:
|CalPERS Employer-Paid Retirement Rates
(General Fund only)
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 2007/08 employer-paid retirement rates, see CSU Human Resources Administration,
Technical Letter HR/Benefits 2007-07.
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 2 percent of CSU employees with CalPERS retirement benefits have designated CalPERS
Peace Officer/Firefighter 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
eligible CSU Public Safety (R08) employees, the CSU pays both the employer and employee contributions.
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.