MILITARY BUYBACK

In 1998, SRCEA contracted with the City for the CalPERS option that allows members to purchase up to four years of past active-duty military service and apply that time as service credit for your CalPERS retirement.

The CalPERS military buyback option requires that the employee pay both the employee and the employer contributions to CalPERS for the military time purchased plus interest. The employee's costs for the purchased military time using an "old" calculation method was based on his/her payrate and contribution rate in effect on that employee's CalPERS membership date with the City. The City's portion of CalPERS contributions was based upon the City's contribution rate in effect when the employee elected to purchase the military time. In Fiscal Year 1997/1998, the City's CalPERS contribution rate was 6.247%. Effective July 1, 2000, the City's employer contribution rate was reduced to zero. As a result, an employee who elected to purchase military time in 1998 may have paid considerably more than if he/she had waited until 2000 to make that election.

Based on specific criteria, some may be afforded the opportunity to have his/her Military service credit cost recalculated. Take the following quiz, to see if you may be eligible for a Military cost recalculation.

Did you elect to purchase your Military service credit while employed by a CalPERS Public Agency?

Are you an active or retired member who elected to purchase your Military service credit between the period of January 1, 1999 and January 1, 2001?

Are you currently making payments for your Military service credit?

If you answered "Yes" to ALL of these questions, you may be eligible for a recalculation of the lump sum cost of your Military service credit purchase. If you answered "NO" to any of these questions, you are not eligible for a recalculation of your Military service credit cost. If it is determined that the recalculated cost is less than your original lump sum cost, CalPERS will adjust your payment plan accordingly. All payments you have previously paid will be applied to the new lower lump sum cost amount and you will be notified of the new payment plan option for your Military service credit purchase. (Note: CalPERS is not authorized to recalculate Military accounts that have been paid in full. Federal Law also prohibits a refund of payments already received that exceed the recalculated amount.)

AB-2840, which became effective January 1, 2001, permits CalPERS to calculate the cost of military service credit using both the "old" and "new" present value calculation methods for all requests received between January 1, 2001 and December 31, 2003. With the present value calculation method, CalPERS looks at the projected increase in benefit a member is expected to derive from this additional service credit whether at projected retirement, disability, death, or other termination and converts that to a lump sum cost in today’s dollars. Determining the projected increase in benefit involves a number of factors including the member’s current age, years of service, and compensation. It also includes actuarial assumptions including projected age at retirement, life expectancy and probabilities that some members will never receive a service retirement benefit but instead become disabled, die or terminate their CalPERS membership.

The employee will be provided with the lower of the two cost calculation figures. Effective January 1, 2004, the new present value calculation method will be the only method available.

We also hear that the CalPERS fund has lost money this past year, after years of double-digit returns on investments. This loss could affect the City's contribution rate. If the employer rate goes up prior to January 1, 2004, so could the cost of buying military service time under the old calculation method.

Therefore, if you have been thinking about purchasing military time, you should contact CalPERS for the current cost information. You can reach CalPERS at (800)352-2238. This information is also available on their web site at www.calpers.ca.gov . You can download PERS-MSD-369, "Request for Service Credit Cost Information – Military Service" which is available in the "Forms and Publications" library section, under the heading "Service Credit Purchase."