CalPERS (California Public Employees’ Retirement System) provides a disability retirement program for employees who are unable to work due to a disability. This program offers a monthly allowance to eligible employees based on their age, service credit, and final compensation. In this article, we will explore how CalPERS disability retirement is calculated and what factors are taken into consideration.
What is CalPERS Disability Retirement?
CalPERS disability retirement is a benefit available to California public employees who are members of the CalPERS retirement system and can no longer work due to a disability. It provides a monthly allowance to compensate for the loss of income due to the employee’s inability to work.
Eligibility for CalPERS Disability Retirement
In order to be eligible for CalPERS disability retirement, an employee must meet the following criteria:
- Be a member of the CalPERS retirement system
- Have at least five years of service credit
- Have a disability that prevents them from performing their job duties
If an employee meets these eligibility requirements, they can apply for disability retirement.
How is CalPERS Disability Retirement Calculated?
The amount of the monthly allowance for CalPERS disability retirement is calculated based on several factors, including the employee’s age, service credit, and final compensation. Let’s take a closer look at each of these factors.
Age
The age factor takes into account the employee’s age at the time of retirement. The younger the employee is, the lower the age factor will be, as they will likely receive more years of retirement payments. The age factor ranges from 1% to 2.4%, with the highest percentage being for employees who are 60 or older at the time of retirement.
Service Credit
The service credit factor takes into account the total years of service an employee has worked for a CalPERS-covered employer. The more service credit an employee has, the higher their service credit factor will be. For example, an employee with 20 years of service credit will have a factor of 20%. This factor is capped at 25 years, which means an employee with more than 25 years of service credit will still have a factor of 25%.
Final Compensation
The final compensation factor takes into account the employee’s highest average monthly salary during their final year of employment. This factor ranges from 1.2% to 2.5%, with the higher percentage being for employees with a higher final compensation.
Example Calculation
Let’s say an employee has a disability retirement age of 60 and has 20 years of service credit with a final compensation of $5,000 per month. Their monthly allowance would be calculated as follows:
Monthly allowance = (age factor x service credit factor x final compensation factor) x final compensation
= (2.4% x 20% x 2.5%) x $5,000
= (0.048 x 0.2 x 0.025) x $5,000
= 0.00024 x $5,000
= $1.20
This means that the employee would receive a monthly allowance of $1.20 for every $1 of final compensation, which in this case is $5,000. The actual monthly allowance would be $6,000.
Frequently Asked Questions
1. Can I receive CalPERS disability retirement if I have not reached retirement age?
1. Can I receive CalPERS disability retirement if I have not reached retirement age?
Yes, as long as you meet the eligibility requirements and have a disability that prevents you from working, you can apply for CalPERS disability retirement even if you have not reached retirement age.
2. Can I work while receiving CalPERS disability retirement?
Yes, you can work while receiving CalPERS disability retirement, but there are certain limitations. You must have a reduced work schedule and your earnings cannot exceed the limit set by CalPERS. If your earnings exceed the limit, your disability retirement payments may be reduced.
3. Is CalPERS disability retirement taxable?
Yes, CalPERS disability retirement is taxable. However, you may be able to exclude a portion of your disability retirement payments from your taxable income if you meet certain criteria. It’s recommended to consult with a tax professional for personalized advice.
Conclusion
CalPERS disability retirement is an important benefit for public employees in California. It provides a monthly allowance to help compensate for the loss of income due to a disability. The amount of the monthly allowance is calculated based on the employee’s age, service credit, and final compensation. If you are unable to work due to a disability and meet the eligibility requirements, you may be eligible for CalPERS disability retirement. If you have any questions, please consult with a CalPERS representative for more information and guidance.
