Retirement Benefits

7 Common Questions from New Members

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If you are a new CalPERS member, you may have questions about how your pension benefit works. These are some of your most frequently asked questions.

I’m a PEPRA member. What does that mean?

The California Public Employees’ Pension Reform Act (PEPRA) changed the way CalPERS retirement benefits are applied, and placed compensation limits on CalPERS members hired on or after January 1, 2013. Learn more on our PEPRA page.

How will my pension be calculated?

Your pension is calculated using your years of service, benefit factor, and final compensation.

  • Service credit is earned on a fiscal year basis, which is July 1 through June 30. You can earn up to a year of service credit in a fiscal year.
  • A benefit factor, or “age factor,” is the percentage of pay you’ll receive for each year of service credit. Your benefit factor is based on your retirement formula.
  • Final compensation for PEPRA members is your highest average annual compensation during any consecutive 36-month period of employment. We use a monthly full-time pay rate equivalent, not your earnings.

What is the meaning of “2% at 62”?

This is a retirement benefit formula and means that at age 62 you will get 2 percent of your pay for each year of service credit you have. You can find your retirement formula by logging in to your my|CalPERS account.

How will my pension be funded?

You pension is funded by your employee contributions, employer contributions, and earnings from CalPERS investments. Investments contribute the largest portion.

How are pensions taxed in California?

Regular service and disability pensions are taxable. CalPERS participates in the Combined Federal/State Filing Program, which means your retirement income is reported to the California Franchise Tax Board.

Will my pension increase with inflation?

Cost-of-living adjustments (COLA) are currently provided by law. Added protection against inflation is provided by the Purchasing Power Protection Account (PPPA), which restores your monthly allowance to either 75 or 80 percent of its original purchasing power.

Can I withdraw funds from my pension?

You may choose to withdraw your contributions and interest if you no longer work for a CalPERS-covered employer. This will terminate your CalPERS membership and forfeit your right to future retirement, disability, or death benefits. Contributions left on deposit with CalPERS will continue to accrue interest, and you will be an inactive CalPERS member. Employer contributions cannot be refunded.

You can find detailed answers to all of these questions in our member publications on our Forms & Publications page.

You may also want to review our video “Planning Your Financial Future, Episode 1 – Your CalPERS Pension,” which gives a quick overview of how your pension works. Find the video on our YouTube channel.