State Safety - 3% @ 50

Destination | RetirementLearn about retirement planning

tools & resources

Cal Poly PomonaBenefit ServicesDecember 2009

Your Retirement

In order to plan your retirementeffectively, you need tounderstand:

• what it is,• how it’s calculated, and• how much it will provide for you.

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CalPERS Member?

First things first…• This presentation is designed for Cal Poly

Pomona Unit 8 – Police Officers who are CalPERS members (State Safety – 3% @ 50).

• To determine your eligibility for CalPERS membership, visit the following link at the California State University website, regarding Eligibility – CalPERS Retirement Program.

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Understanding CalPERS

• CalPERS is the California Public Employees’ Retirement System.

• The largest public pension plan in the nation, CalPERS has more than 1.4 million members.

• CalPERS is a defined benefit retirement plan for State employees, classified school employees, and employees of local public agencies that contract with CalPERS for retirement plan administration.

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Defined Benefit Plan• In a defined-benefit plan, such as CalPERS, you

receive a lifetime benefit determined by a set formula.

• This contrasts with other pensions that are defined contribution plans, in which the benefits are determined not by a formula. With defined contribution plans, the employer/ employee makes predefined contributions, but the final amount of benefit received by the employee depends on the investment's performance.

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How Your CalPERS Retirement is FundedThree sources fund a defined benefit plan such as

CalPERS:

1. Employee contributions to the system. The employee contribution is 8% in excess of $238 per month. However, the CSU currently pays this contribution on behalf of police officer/Unit 8 employees.

2. The earnings from the investment of System assets in stocks, bonds, real estate, and other investment vehicles—this source fluctuates year to year.

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How Your CalPERS Retirement is Funded

3. The balance of the funding is provided by employer contributions. Employer contributions decline when investment returns rise. When investment returns decline, employer contributions increase.

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Membership & Formulas• CSU employee membership is mandatory for those who

qualify. If you are not sure if you qualify, visit the CSU web page regarding Eligibility – CalPERS Retirement Program or contact Payroll Services.

• The 3% @ 50 formula applies to Police Officers* (Unit 8) employees who qualify for CalPERS membership. The benefit structure/formulas for state employees (including CSU) is defined by statute.

*Note: Public Safety Managers should view the separate presentation for their benefit structure/contribution rates.

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How Your Retirement Benefit is Calculated• Now that you understand the basic building blocks

of a defined benefit retirement system and know your particular CalPERS formula, it’s time to learn how to calculate your service retirement.

• Three factors are multiplied together to calculate your service retirement

1. Service Credit x 2. Benefit Factor x 3. Final Compensation

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The Three FactorsLet’s take a closer look at each of them…

1. Service credit – Your total years of service from CalPERS membership date to last day of employment.

2. Benefit Factor – A percentage based on your age at retirement (for example, 2% if you retire at age 55).

3. Final Compensation – Your highest average monthly pay rate during any consecutive 12 month period.

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Service Credit

• Once eligible for CalPERS membership, you earn service credit for each year or partial year you work for Cal Poly Pomona.

• Service credit accumulates on a fiscal year basis, July 1st through June 30th.

• To earn a full year of service credit during a fiscal year, you must work at least:

• Monthly pay employees – 10 months full-time

• Hourly pay employees - 1,720 hours

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Service Credit

• There are different kinds of service credit, all calculated differently (service toward probation/tenure, service toward leave credit accrual, CalPERS retirement service credit).

• For retirement service credit, refer to your CalPERS Annual Member Statement to verify your current service credit as of each June 30th. You can establish a log-in account and view your statement on-line at www.calpers.ca.gov.

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Service Credit

• In some cases, you may be able to purchase additional service credit that can help you maximize your retirement benefits.

• Review the Service Credit Purchase Options information to see if you may be eligible for or interested in any of the available options.

• To calculate the cost, visit the CalPERS Webpage Estimate My Service Credit Cost.

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Benefit Factor

• Your benefit factor is a percentage of pay to which you are entitled for each year of service, determined by your age at retirement and your retirement formula (3% @ 50).

• The formula chart shows the increase in benefit factor for each quarter of age on the first page and the percentage of final compensation on the second page.

• Following is a link to CalPERS website for the formula chart: State Safety – 3% @ 50.

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Final Compensation• Final compensation is your average full-time monthly

pay rate and special compensation for your last 12 consecutive months of employment.

• CalPERS uses your full-time pay rate, not your earnings. If you work part-time, CalPERS will use your full time equivalent pay rate to determine your final compensation.

• Special compensation includes holiday pay, stipends (special assignment, POST), and your uniform allowance.

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Final Compensation

• If you think there was another 12 consecutive month period (other than your last) when your pay rate was higher let CalPERS know when you apply for retirement.

• CalPERS will use that time period to determine your final compensation.

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Calculating the Monthly Unmodified Allowance Let’s look at how to calculate the Unmodified Allowance, the highest benefit payable:

Step 1: Calculate Percentage of Final CompensationYears of Service x Benefit Factor = Percentage of Final Compensation

Step 2: Calculate Benefit AllowanceFinal Compensation x Percent of Final Compensation from Step 1 = Monthly Unmodified Allowance

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Example Calculation

• Example Unmodified Retirement Allowance calculation for an employee with 25 years of CalPERS service credit, retiring at age 50 (3% benefit factor), with a final compensation figure of $5,000.

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Sick Leave Conversion

• If you retire immediately after separating employment from Cal Poly Pomona (within 120 days of employment separation), your unused sick leave will be converted to retirement service credit.

• To view your sick leave balance, log in to BroncoDirect (Employee Tab) and view your leave balances on Absence Management.

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Sick Leave Calculation

Calculation: To calculate your conversion (sick leave to retirement service credit), first divide the number of hours of unused sick leave by eight to get the number of days. Next, multiply the number of days by .004. This converts your sick days to years of service credit.

So, if you have 2000 hours of sick leave at retirement:

 2000   ÷   8   =  250 days of sick leave 250  x   .004   =  1 year of service credit

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Retiree Medical and Dental

You will be eligible for CalPERS retiree health benefits and CSU retiree dental benefits if:

•You retire at age 50 or greater with at least five years of CalPERS service credit, and

•You were eligible for and enrolled in medical and dental benefits (health or FlexCash) at the time of separation from CSU employment, and

•You retire within 120 days of employment separation from the CSU.

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Retirement Check DeductionsThe difference between gross and net pay differs in retirement than it does for an active employee. There are less deductions--following are examples of deductions that are not taken from retirement checks:

• Social Security Tax

• Medicare Tax

• CalPERS

• Union Dues

• Parking Fees

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CalPERS Retirement Options

• The calculation we’ve gone over is for the Unmodified allowance, which is the highest benefit payable and provides a monthly benefit to you that ends upon your death.

• You also have the choice of requesting a reduction in the Unmodified Allowance to provide a lump sum or monthly benefit for a beneficiary upon your death—these choices are Option 1, 2, 2W, 3, 3W, and 4.

• Before we look at the Option choices, let’s look at a benefit called Survivor Continuance.

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Survivor Continuance• The CSU’s contract with CalPERS provides a

Survivor Continuance benefit--a monthly allowance that automatically continues to an eligible survivor following your death after retirement regardless of the retirement option you select.

• The Survivor Continuance amount is equal to ½ of your Unmodified Retirement Allowance.

• Survivor Continuance applies only if you have an eligible family member as of the date of your retirement.

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Eligible for Survivor Continuance

Eligible Survivors include (in order):

• Your spouse (married for at least one year prior to retirement) or your registered domestic partner (registered for at least one year prior to retirement), or if none;

• Your unmarried natural or adopted children under age 18, or a disabled child who was disabled prior to age 18 and continuously thereafter, or if none;

• Your qualifying economically-dependent parents.25

Unmodifed Retirement AllowanceLet’s Review…

• The Unmodified allowance is the highest allowance payable.

• If, for example, your spouse/domestic partner is named as your beneficiary and is eligible for Survivor Continuance, then your spouse/domestic partner would receive the Survivor Continuance benefit for life upon your death after retirement.

• The Survivor Continuance benefit is an amount equal to ½ of your Unmodified Allowance.

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Option 1

• This retirement option provides a lump sum payment of your remaining member contributions to your beneficiary after your death.

• The reduction to your monthly benefit to provide this payment is based on your life expectancy at retirement and the amount of your contributions.

• Survivor Continuance will be paid, assuming you have an eligible survivor.

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Options 2 or 3• These allowance choices pay less than the Unmodified

Allowance, with the reduction based on both your life expectancy at retirement and that of your beneficiary.

• The younger your beneficiary, the greater the reduction.

• If you have someone eligible for Survivor Continuance, the reduction is applied only to the option portion of the allowance.

• These options (2 and 3) include a pop up provision--if your beneficiary dies before you, your allowance will increase (pop up) to the higher Unmodified Allowance amount.

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Options 2W and 3W

• Option 2W pays the highest allowance possible to a surviving spouse/domestic partner).

• These two options (2W and 3W) are without the pop up provision--if your beneficiary dies before you, your allowance will not increase (pop up) to the higher Unmodified Allowance.

• Survivor Continuance is provided to an eligible survivor.

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Option 4

• The reduction is based on the type of option you design.

• The amount to your beneficiary cannot be greater than that provided by Option 2W.

• Refer to the CalPERS publication, “Retirement Option 4 (PERS-PUB-18)” for examples of allowances you can provide for your beneficiary under this option.

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Choosing a Retirement Date • Retirement cannot be earlier than the first of the month

in which the employee’s application is received by CalPERS (you must be age 50 or greater for a service retirement).

• The earliest possible retirement date is the day following your separation of employment (last day on pay status).

• Retirement may be effective any day of the week--if your last day of employment is Friday, retirement may be effective on Saturday.

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Choosing a Retirement Date

• When retiring prior to attaining age 55, an employee’s age determines the benefit factor used in their retirement formula. (Note: The benefit factor does not increase after age 55 for this formula.)

• To maximize the retirement benefit, an employee may decide to retire on their birthday or a subsequent birthday quarter to increase their benefit factor.

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Retirement Date & Your COLA

• If planning to retire at the beginning of a calendar year, consider the cost-of-living allowance (cola) when choosing your retirement date.

• The COLA (up to 2% based upon the consumer price index) is applied annually to the retirement allowance on the May 1st (April retirement roll) retirement check, starting with the second calendar year following the retirement date.

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Retirement Date & Your COLA

• Example: With a retirement date of 12/29/10, your first cost of living increase would be 05/01/12 (The May 1st retirement check of the 2nd calendar year following your retirement date).

• However, if retirement is 01/01/11 (just days later, but into the next calendar year), the first increase would be 05/01/13—another year later!

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Retirement Estimates

There are two main ways to get a CalPERS retirement estimate:

1.On the Internet (recommended if you are three or more years away from expected retirement) or

2.From CalPERS staff (recommended if you are less than three years from expected retirement).

Both types of estimates are approximations of your retirement benefit.

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On the Internet - Retirement Planning Calculator

On the Internet, you have two ways you can estimate your future retirement benefits with CalPERS:

1.Use the calculator after logging in to My|CalPERS and the calculator will use data from your last annual statement. You can also save estimates with this option.

2.On CalPERS On-Line, you enter your own data and no Login is required. It is best to have your last annual statement handy before you begin.

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CalPERS Staff-Prepared Calculation

Complete the following two steps to request a CalPERS staff-prepared calculation:

1.Download, complete, and print the Estimate Request form at the following link:Estimate Request Form

2.Submit completed form to: CalPERS Member Services Division, P.O. Box 942717, Sacramento, California 94229-2717

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How to Get More Information

The CalPERS Education Center at https://my.calpers.ca.gov/ provides access to on-line workshops 24/7 on such topics as:

• Planning Your Retirement

• Completing Your Retirement Application

(Note: At MyCalpers click on My Education in the left navigation pane to link to the Education Center.)

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More Information…Instructor-Led Workshops

• Visit the CalPERS Education Center to view a description of the classes held both on campus and at CalPERS Field Offices and to enroll.

• Visit the Cal Poly Pomona HR Website for additional information on workshops conducted on campus (click on Benefits, then scroll down and click on Benefits & Retirement Workshops).

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One-on-One Appointments

• Before scheduling an appointment, CalPERS recommends you attend a retirement education class first. For class details and registration, log in to my.calpers.ca.gov

• CalPERS offers several types of appointments to assist you. Log in to my.calpers.ca.gov to review the types of appointments to determine which one is right for you.

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Cal Poly Pomona

• Visit the Cal Poly Pomona Benefit Services’ website for step-by-step instructions on how to file for retirement:

Application Filing Process

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