Whether you’re early in your career or planning to retire within the year, understanding service credit, or time worked, will help inform your decision making. Here are three important facts to know:
1. You accrue service credit on a fiscal year basis (July 1 through June 30) and according to how you’re paid.
To earn a full year of service credit you must work for a CalPERS-covered employer for at least:
- 1,720 hours (hourly pay employees)
- 215 days (daily pay employees)
- 10 months full-time (monthly pay employees)
Even if you’re an hourly or part-time employee, you still earn service credit in direct proportion to the number of hours worked but it will take longer to accrue if you work less than eight hours per day.
2. Service credit is part of your retirement formula that determines your retirement benefits.
Your CalPERS retirement benefits are based on:
- Age at retirement
- Highest average compensation for either a 1-year or 3-year consecutive period of employment, depending on your employer’s contract
- Years of service credit
Use the Retirement Estimate Calculator to get an idea of your monthly retirement benefit. The more service credit you have at retirement, the better your retirement benefit may be.
3. There are three ways you can increase your service credit.
- Working for a CalPERS-covered employer longer
- Converting unused sick leave
- Purchasing service credit (if eligible)
A service credit purchase is the purchase of additional time to increase your CalPERS service credit. We offer a variety of service credit purchase options to eligible members. Check out this Service Credit Purchase Handout (PDF) for more details on why and how to purchase service credit.
And, for more retirement financial planning assistance, check out our Retirement Planning Checklist.
Important Update: Beginning January 1, 2028, the Actuarial Equivalent Reduction (AER) payment option will no longer be available for new service credit purchases. This means members who purchase service credit on or after that date are expected to pay the full amount of their service credit purchase before retirement, and if actively employed, using installment payments through payroll deductions to satisfy the balance.