Uses of Revenue
2008/09 Employer-Paid Retirement Adjustment
The 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. Fiscal Year 2008/09 is the second year in a row to see a decrease in employer retirement rates for the Miscellaneous Tier 1 category. The 2008/09 employer-paid retirement adjustment is equivalent to a reduction of $1.35 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 1999/00 through 2008/09:
Caplers Employer-Paid Retirement Rates
| Fiscal Year |
Miscellaneous Tier 1 |
Peace Officer/ Firefighter |
CSU Employer- Paid Retirement Adjustments (General Fund only) |
|---|---|---|---|
| 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 |
| 2007/08 | 16.633% | 25.552% | ($8,587,000) |
| 2008/09 | 16.574% | 26.064% | ($1,350,000) |
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 2008/09 employer-paid retirement rates, see CSU Human Resources Administration, Technical Letter HR/Benefits 2008-03.
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 peace officers, and 3 percent of final compensation at age 55 for firefighters who retire on or after January 1, 2002.