Bringing in the New Year with a New Tier
SBCERA Introduces New Tier for New Members
Over the past few months, SBCERA has worked diligently to prepare for and implement the Public Employees’ Pension Reform Act of 2013 (PEPRA), effective January 1, 2013. Signed into law in September, PEPRA sets forth sweeping changes to public pension benefits in California. While PEPRA has little to no impact on existing SBCERA members, new members hired on or after January 1st will have different benefit levels.
SBCERA members will now be classified using tiers; Tier 1 and Tier 2 members. Tier 1 (existing members) are members with SBCERA membership dates prior to January 1, 2013. Tier 2 (new members) are members who have membership dates on or after January 1, 2013.
According to PEPRA, a new member is someone who becomes a member on or after January 1, 2013 or had a break in service of more than six months from another public retirement system and is ineligible for or does not establish reciprocity. Therefore, any new members entering SBCERA after the first of the year may qualify as a Tier 1 member if they establish reciprocity with another public retirement system. The same provision would apply for SBCERA Tier 1 members who leave membership and establish reciprocity with another public retirement system. For more information about reciprocity, visit www.SBCERA.org/Reciprocity.
Based on a member’s tier, 1 or 2, the benefit levels and requirements will vary. Below is a summary of some differences. Major changes for Tier 2 members include new benefit formulas and how a member’s final average compensation will be calculated. Learn more at www.SBCERA.org/PEPRA.
|Tier 1 vs. Tier 2||Tier 1||Tier 2|
|Benefit Formula||General - 2% @ 55
Safety - 3% @ 50
|General - 2.5% @ 67
Safety - 2.7% @ 57
|Vested||5 Years of Service Credit||5 Years of Service Credit|
|Eligible to Retire||
|Final Average Compensation||Highest 12-consecutive months of earnable compensation.
Earnable compensation: Base pay plus additional pay items, allowances and cash-outs as outlined in Memorandum of Understanding.
|Highest 36-consecutive months of pensionable compensation.
Pensionable compensation: Normal monthly rate of pay, which includes base pay and some additional pay items, as determined by your employer. Allowances and cash-outs are not included. Capped at $136,440 for 2013, and adjusted annually.
|Entry Age Based: Percentage of earnable compensation. Percentages vary based on entry age.||Flat Rate: Fixed percentage of pensionable compensation.
General – 7.75%
Safety – 12.50%
Contributions are not paid for pensionable compensation above the cap (i.e. $136,440 for 2013).
|Special Provisions||Upon reaching 30 years of SBCERA and/or reciprocal service credit, contributions end.||Contribute throughout SBCERA membership.|