More than 12 years have passed since the California Public Employees’ Pension Reform Act (PEPRA) took effect and changed the way CalPERS retirement benefits are applied. Today, nearly 64% of CalPERS active members are PEPRA members, with a projection of 90% in a decade.
PEPRA, enacted in January 2013, was designed to enhance the long-term stability of the CalPERS retirement fund by implementing changes to the following pension benefit provisions:
- Reduced retirement formulas
- Increased retirement ages
- Caps the annual salary that can used for final compensation calculations
- Creates equal sharing of the employee contribution rate
There is a lot of information — and misinformation — about PEPRA. That’s why we’ve answered some of your top questions for both employees and employers.
Key Questions Asked by PEPRA Members
Q: As a PEPRA member, do I need to work longer and save more?
A: It depends on what your individual financial goals are, but regardless, you will receive a lifetime pension benefit. Although PEPRA members receive lower retirement income compared to classic members retiring at the same age with equivalent service credit, careful planning can enable you to build a financial future that is comparable to the benefits of classic members.
- Tip: Consider supplementing your pension with a deferred compensation plan, an IRA, or other investment vehicle, as early as possible. The earlier you start, the sooner you can take advantage of interest income that helps your retirement savings grow. Check out what plan may be the best fit depending on who your employer is.
Q: As a PEPRA member, my benefit formula as a miscellaneous member is 2% at age 62. Does that mean I can’t retire until I’m age 62?
A: No, while PEPRA introduced a new benefit formula of 2% at age 62, you can still retire earlier if you meet the eligibility criteria. Generally, if you are age 52 as a PEPRA member with five years of service, you meet the requirements, but check the Planning Your Service Retirement (PDF) publication eligibility requirements or your myCalPERS account to confirm. Retiring before age 62 may reduce your benefits, however, since the pension calculation uses your age at retirement, years of service, and your final compensation.
- Tip: Remember that the earlier you retire, the longer you will enjoy your retirement benefits, but your monthly payment may be lower. The later you retire, the higher your monthly payment might be, but the shorter your retirement period will be.
Q: How does the pension compensation cap impact me as a PEPRA member?
A: The law doesn’t place a limit on what you can earn. It only places a limit on what compensation can be used for your retirement calculation. Once your earnings reach the compensation limit for the year, your employer continues to report your compensation as earned. However, you and your employer will no longer make contributions to CalPERS for the remainder of the calendar year.
- Tip: Once your contributions to CalPERS stop, consider putting those contributions into another savings vehicle toward your retirement goals. For the 2025 calendar year, the compensation limit for PEPRA members who coordinate with Social Security is $155,081, and $186,096 for those who don’t coordinate with Social Security.
Q: How do PEPRA employee contribution rates work, and where can I find my contribution amount?
A: All employees, whether PEPRA or classic members, are required to contribute toward their pension benefits, just like their employers do. For PEPRA members, the law states that contributions are set at 50% of the “annual normal cost” — the estimated cost of pension benefits earned during the upcoming fiscal year. These rates can fluctuate annually, either increasing, decreasing, or remaining unchanged in any given year.
For PEPRA public agency and classified school employees: PEPRA mandates that employees pay half of their plan’s total normal cost.
For state employees: Most state employees are not subject to PEPRA’s statutory contribution rates because their rates are determined through collective bargaining, except for employees of the legislature, California State University, and the judicial branch. In some bargaining units, classic and PEPRA members contribute the same rate.
- Tip: Public agency PEPRA employees can access their contribution rate by visiting our website. Classified PEPRA school employees should contact their human resources office for specific details. State PEPRA employees are encouraged to consult their bargaining unit to determine their employee contribution rate.
Do You Want to Know More About PEPRA?
More information about PEPRA, what defines a PEPRA member, and some of the key areas affected by PEPRA can be found on our PEPRA webpage.