Understanding SCERS

SCERS membership is a significant part of the comprehensive benefits package offered by your employer. As a member, you’re part of a plan designed to provide a guaranteed monthly benefit for life once you retire. 

This page introduces how SCERS works and highlights key differences between  membership categories so you can better understand what applies to you. 

What Kind of Retirement Plan Is SCERS?

SCERS is a defined benefit pension plan. That means:

• You don’t choose investments or manage a retirement account
• Instead, your retirement benefit is calculated using a formula
• Once you retire, your monthly benefit is guaranteed for life

SCERS is funded through a combination of:

• Your payroll contributions
• Your employer’s contributions
• Investment earnings

How Your Benefit Is Calculated

Your monthly retirement benefit is determined using this formula:

Age Factor × Years of Service Credit × Final Compensation

Each component works like this:

• Age Factor: A percentage based on your age when you retire, up to a maximum age factor
• Service Credit: Time you’ve worked and contributed to SCERS
• Final Compensation: Your highest average pension eligible compensation over a set number of consecutive months determined by your membership category and benefit tier 

The more service credit you earn and the higher your final compensation, the larger your retirement benefit will be.

Legacy vs. PEPRA: What’s the Difference?

SCERS members fall into one of two categories based on when they were first hired:

Here’s how these groups differ:

Final Compensation Period

• Legacy: Can be based on your highest 12 consecutive months (Miscellaneous or Safety Tier 1) or 36 months (Miscellaneous Tiers 2-4 and Safety Tiers 2-3)
• PEPRA: Based on your highest 36 consecutive months

Compensation Limits

Internal Revenue Code (IRC) Section 401(a)(17) limits the annual compensation that SCERS can use in the calculation of benefits. Additionally, California state law further limits benefit-eligible compensation for members who enter membership on or after January 1, 2013. This means SCERS cannot collect retirement contributions on compensation above the IRC or California annual limit based on your hire date. If you reach the annual compensation limit during a calendar year, your SCERS contributions will cease until the first pay period of the following year.  

In addition to IRC and California annual compensation limits, there may be other limits on the compensation reported to and considered by SCERS for purpose of collecting contributions and paying benefits. Not all of your pay may be pension-eligible compensation. Which earnings are included or not generally depends on your hire date, state law, and SCERS policy. 

It’s important to note, these compensation limits do not limit the pay you receive from your employer, only the amount of compensation that can be considered in determining your SCERS benefits. 

• Legacy: Subject to a federal annual compensation cap, adjusted each year
• PEPRA: Subject to a state annual compensation cap, adjusted each year

Cost Sharing

Employers and members share plan costs, providing an important source of funding for benefits paid by SCERS.  Contribution rates are determined annually by the plan actuary based on certain assumptions and considering each membership category and benefit tier. Any changes in contribution rates are effective with the new fiscal year. 

• Legacy: Contribution rates set by SCERS and collective bargaining agreements
• PEPRA: Required to pay at least 50% of the plan’s normal cost of benefits

Retirement Age

• Legacy: May retire earlier with more favorable benefit factors 
• PEPRA: Must wait longer to reach full retirement age; benefit formula grows more slowly 

SCERS calculates your benefit according to the laws and formulas that apply to your membership plan and tier. You don’t need to track all the differences—SCERS will review and apply the correct rules based on your record.