Each year, your CalPERS pension is calculated by three important factors:
- service credit
- pay rate
- benefit factor (eg. 2.5% at 55)
The service credit portion is probably not affected by the current California furloughs implemented by Governor Arnold Schwarzenegger. You need to work ten months out of the year (1,720 hours) in full time status to earn the maximum 1.0 service credit per year. Even with the furloughs, you would have enough hours worked to earn the maximum CalPERS pension credit if you work full time.
Those who may be affected include those who have had their hours cut or work part time.
The pay rate (eg. hourly rate) is not affected by the furlough. Your pay has been reduced due to the reduced number of hours worked, not the hourly payrate.
The benefit factor is mandated by your employer. This factor usually remains the same unless you change jobs.
Basically, a furlough does not affect the CalPERS pension of those who work a 12-month year.
CalSTRS, teachers and others with a 10 month work schedule
CalPERS members who work a 10 month schedule may not accrue enough service credit to meet the 1,720 hours (10 months worth) needed to get the full 1.0 service credit. Those with 10 month schedules would have their CalPERS pension reduced due to the furlough.
With CalSTRS, the number of days you have to work may be reduced. This will reduce your final compensation numbers which is used to calculate your pension. Because of the furloughs, you may have had past years where you earned more money. If that is the case, CalSTRS will use the highest compensation you earned in a previous year (or three years)
If you’ve worked for less than 25 years, CalSTRS uses the highest year’s worth worth of compensation to determine your pension amount. For those with more than 25 years of service, CalSTRS uses the highest 36 consecutive months worth of paid employment covered by CalSTRS.
Keep in mind that one important factor that may significantly reduce your planned pension permanently is the lack of pay raises. Even though the economy is bad, inflation still exists and is eating away at your pension even if your labor union fails to negotiate for a pay raise.