Employee Relations 05/31/2013
CalPERS Issues Update to Implementation of Pension Reform
On May 28, the California Public Employees’ Retirement System
(CalPERS) issued a circular
letter to inform all employers about an upcoming system
change related to the implementation of the Public Employees’
Pension Reform Act (PEPRA) of 2013.
The current pension contribution rates under PEPRA are calculated based on a percentage of pay less a “contribution offset.” Counties whose employees are members of the Federal Social Security system do not generally collect employee contributions on the first third of member’s payroll up to $400 per month. The offset is an historical relic from a time when social security benefits were first coordinated with public pensions and is authorized in both the CalPERS and 1937 Act County retirement laws, but is not carried forward in PEPRA. CalPERS has determined that the new PEPRA contribution rates should not have included the offset.
The circular letter describes the process for counties to make the necessary changes in payroll reporting beginning in July. This change will affect the take-home pay of any new members you have hired since Jan 1, 2013. It is a small amount, CalPERS estimates $7 to $8 per month per employee. CalPERS is silent as to whether the change needs to be made retroactively. The circular letter can be found here.