Employees of State Fund participate in the California Public Employees Retirement System (CalPERS). Benefits are based on years of service, final average pay, and an aged based benefit factor. Employees who make contributions to the Plan are covered by the Tier 1 formula. Tier 1 participants vest with five years of service and can retire as early as age 50. Employees who opt not to make contributions are covered by the Tier 2 formula. Tier 2 participants vest with ten years of service and must be 55 to retire.
State employees hired on or after August 11, 2004, participate in a savings plan called the Alternate Retirement Program (ARP) during their first two years of service. Only at the end of this two-year period do employees begin accruing CalPERS service credit. The first two years of service can later be purchased with the ARP savings. The CalPERS Member booklet, “State Miscellaneous & Industrial Benefits” includes retirement formula charts.
Employees may also contribute after-tax funds to the CalPERS Supplemental Contributions Plan. CalPERS will invest the contributions in its portfolio, with some exceptions. The earnings are tax-deferred until withdrawn. Participants cannot withdraw funds while actively employed. Contributions can be made by check or deducted from pay.
The Savings Plus Program (SPP) offers employees a way to save and invest for retirement with tax-deferred contributions and earnings. Employees may participate in a 401(k) or (457) plan, or both. Participants can contribute twice the maximum allowed with one plan. SPP participants manage their own accounts. Both plans offer the same investment choices. The 401(k) plan has penalties for early withdrawal; the 457 plan does not.
Participants in SPP can also open a Personal Choice Retirement Account (PCRA) with Charles Schwab. The PCRA allows participants to invest in common and preferred stock, bonds, and other mutual funds.
