Pension Contracts Frequently Asked Questions

A contract amendment is a prospective revision of the pension benefits a contracting agency elects to change within its contract. The pension benefits for which an agency can amend its contract is included in the Option Benefits Listing. Depending on the benefit type, the contract amendment process can take up to 6 months because of the additional time needed to obtain an actuarial valuation. For contract amendments not requiring an actuarial valuation report, the process can is approximately 3-4 months depending on how often the agency’s governing board meets.

The contract amendment can be initiated in the following ways:

• Contacting CalPERS Contact Center at (888) 225-7377
• A direct inquiry to the CalPERS Contract Analyst for the agency
• Submitting an email to the Pension Contracts Team at pensioncontracts@calpers.ca.gov
• Utilizing the myCalPERS system

The Public Employees Retirement Law (PERL) allows for two methods of employees sharing additional cost (cost share) of the employer contribution:

• “Informal” cost share under GC 20516(f), allows employers that lawfully agree with represented employees to have those employees pay an additional percentage above the normal employee contribution towards the employer rate separate of CalPERS involvement. There is no requirement for this type of cost share to be included in agency’s contract; as a result, the additional employee contributions are not reportable to CalPERS and are not credited to the employee’s account(s).
• “Formal” cost share under Government Code section (GC) 20516(b), which allows employers that lawfully agree to have its represented and unrepresented employees pay a specific percentage above the normal employee contribution towards the employer rate. Formal cost share requires an amendment to the agency’s pension contract to include CG 20516 with the identified cost share percentage and applicable group. Amending the pension contract to include cost share allows the employer to report the additional member contributions to PERS and is credited to the member’s account.

Contact our team to address questions related specifically to your agency.

With the enactment of the Public Employees’ Pension Reform Act (PEPRA), classic benefit packages were ‘frozen’ as of December 31, 2012. PEPRA precludes any changes made to classic benefit packages.

1. For Public Agency employers, the agency must first amend its contract to include, if it does not already have Government Code Section 20903, within its contract.
2. School Employers are permitted to enact a Golden Handshake via Section 20904.
3. The initiation of the process can be accomplished via the myCalPERS system, or through a contact as noted within this FAQ.

An inactive agency in the CalPERS system is an agency who has contracted with CalPERS to provide pension benefit to its employees, but currently doesn’t have any active employee in all their pension plans with CalPERS.

Yes, a pension contracting agency is required to make the Normal Cost if an active member is hired and Unfunded Accrued Liability (UAL) contributions as determined by the CalPERS actuary on an annual basis. The CalPERS Actuarial Office will continue to issue the annual valuation report.

For an inactive agency, the unfunded liability shall be amortized over a closed amortization period of no more than 15 years at the discretion of the plan actuary. This may result in a higher UAL contribution for an inactive agency.

If an agency contracted with another agency to perform all its operations and doesn’t have any active employees, then it is considered an inactive agency in the CalPERS system. However, CalPERS may request documents to review the employer-employee relationship of affected workers.

No, CalPERS will work with the successor agency to merge the contracts. Pursuant to California Government Code Section 20508, when a contracting agency is succeeded by another CalPERS agency, the contract of the former agency shall be merged into the contract of the successor agency. The successor agency will be liable for all the pension obligation of the former agency.

Pursuant to California Government Code Section 20508, when a contracting agency is succeeded by an agency who doesn’t have contract with CalPERS, the successor agency may contract with CalPERS. The contract of the former agency shall be merged into the contract of the successor agency once the successor agency becomes a contracting agency with CalPERS. The successor agency will be liable for all the pension obligation of the former agency.

If the successor agency doesn’t want to contract with CalPERS, then the former contracted agency will be considered an inactive agency. However, the successor agency will be liable for all the pension obligation of the former contracted agency. CalPERS will continue to issue the annual valuation report to the successor agency. The successor agency is responsible to make payments to CalPERS on the annual basis to fund for the pension obligation of the former contracted agency.

The successor agency also can work with CalPERS to terminate the contract of the former contracted agency. The successor agency is liable to pay for the termination costs in full at the time of termination.

The contracting agency can remain in the CalPERS system as an inactive agency, if there is another entity who is willing to take on the responsibility to make the annual payment to fund the contracting agency’s pension obligations.

If there is no successor agency for the non-profit contracting agency, CalPERS will work with the contracting agency to close out and terminate its contract with CalPERS. The contracting agency is responsible to pay the termination costs in full at termination.