2013/14 Supplemental Documentation

Retirement

Employer-Paid Retirement Adjustment, $51,449,000

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. In Fiscal Year 2012/13 the employer retirement rates for the Miscellaneous Tier 1 and Peace Officer/Firefighter increased by 2.328% and 2.882% respectively from fiscal year 2011/12 composite retirement rates. The 2012/13 employer-paid retirement adjustment is equivalent to an increase of $51.5 million. The state Department of Finance processes state agency retirement adjustments during the fiscal year. The following table provides a ten-year overview of CalPERS employer-paid retirement contribution rates and adjustments from 2003/04 through 2012/13:

CalPERS Employer-Paid Retirement Rates
Fiscal
Year
Miscellaneous
Tier 1
Peace Officer/
Firefighter
CSU Employer-
Paid Retirement
Adjustments
(General Fund only)
2003/04 14.843% 20.325% $155,112,000
2004/05 17.022% 23.841% $44,418,000
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)
2009/10 16.917% 25.848% $7,446,000
2010/11 18.725% 28.722% $44,810,000
2011/12 18.175% 27.415% ($12,338,000)
2012/13 20.503% 30.297% $51,449,000

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

For reference regarding 2012/13 employer-paid retirement rates, see CSU Human Resources Administration, Technical Letter HR/Benefits 2012-06.

Employee Retirement Contributions (for informational purposes only)

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.

The majority of 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 times years of service for final salary benefits at age 55 for those who retired on or after January 1, 2000. This number will gradually change as the CSU experiences more employee transitions and additional employees fall into the new structure of retirement formulas. For the time being, 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 times years of service at age 50 for peace officers, and 3 percent times years of service at age 55 for firefighters who retired on or after January 1, 2002, for final salary benefits.

The Public Employee Pension Reform Act of 2012 was signed by the governor in September, 2012 and will become law on January 1, 2013.  Among some of the changes will be additional (tiered) retirement formulas for CSU Employees hired after January 15, 2011, and January 1, 2013.  These new defined benefit retirement formulas will apply to all CSU employees and are listed below:

State Miscellaneous Tier 1
("Non-Public")

Retirement Hired prior to
1-15-11
Hired on or after
1-15-11
Hired on or after
1-11-13
State Misc. Tier 1 (all eligible employees except public safety) 2% at 55 (one year highest compensation) 2% at 60 (36 month average compensation) 2% at 62 (consecutive 36 month subject to cap)

Public Safety

Retirement Hired prior to
1-15-11
Hired on or after
1-15-11
Hired on or after
1-11-13
PO/FF (MPP Public Safety) 3% at 50 (one year highest compensation) 2.5% at 55 (36 month average compensation) 2.5% at 57 (consecutive 36 month subject to cap)
State Safety (limited to Intermittent Peace Officer) 2.5% at 55 (one year of highest compensation 2% at 55 (36 month average compensation 2% at 57 (consecutive 36 month subject to cap)
  Hired prior to
7-1-11
Hired on or after
7-1-11
Hired on or after
1-1-13
PO/FF (Unit 8) 3% at 50 (one year highest compensation) 2.5% at 55 (36 month average compensation) 2.5% at 57 (consecutive 36 month subject to cap)