AB 1383 requires California public retirement systems that offer defined benefit plans for safety members to adopt one or more of four prescribed formulas (a Basic Safety Plan plus three Option Plans). Each formula specifies an age‑graded percentage multiplier applied to final compensation and multiplied by years of service; eligibility to retire under these formulas requires five years of service and attainment of age 50.
The bill also sets rules for new hires and for service that spans multiple statutory periods, preserves employers' obligation to offer the same percentage‑of‑compensation factor that existed at the end of 2025/2026, establishes a 90% final‑compensation cap for the highest option, and frames when employers and employees may negotiate higher or lower plans by memorandum of understanding. The changes will matter to local employers and actuarial offices because they reprice safety liabilities, affect bargaining leverage for unions, and require administrative updates to payroll, valuation, and retirement system processes.
At a Glance
What It Does
The bill prescribes four age‑based defined benefit formulas for safety members (Basic and Options One–Three), with specific per‑age percentage multipliers. It requires retirement systems to use one or more of those formulas for safety members and sets transitional rules for service performed before and after the statutory cutoffs.
Who It Affects
California public safety employees (police, firefighters, other safety classifications), city and county employers, public retirement systems (and their actuaries), and public‑sector labor organizations that negotiate pension terms.
Why It Matters
By standardizing available formulas and freezing the percentage factor offered to new hires as of year‑end 2025/2026, the bill narrows plan design variation across employers, alters the actuarial profile of safety liabilities, and creates bargaining‑level choices (adopt higher or lower plans) that will drive employer contributions and budget planning.
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What This Bill Actually Does
AB 1383 directs every California public retirement system that offers a defined‑benefit plan for safety members to adopt one or more of four statutory formulas. Each formula provides an age‑graded percentage multiplier (expressed in tenths of a percent) that the system multiplies by a member’s years of service and final compensation to calculate the pension.
A safety member may retire under any of these formulas after five years of service and upon reaching age 50, with the entitlement computed to the preceding quarter‑year of age.
The bill lays out four alternatives: the Basic Safety Plan with the lowest multipliers (starting around 1.426% at age 50 and reaching 2.0% at age 55+), and three progressively richer Option Plans (Option One through Option Three) whose per‑age multipliers start higher and reach up to 2.5%, 2.7%, and 3.0% respectively at 55+. Option Three carries an explicit benefit limit: benefits under that option cannot exceed 90% of final compensation.
Those tables are the operational heart of the bill — they set the accrual rates that determine annual pension accruals and, by extension, employer actuarial costs.For new hires, the bill requires employers to offer one or more of the safety formulas and to maintain the percentage‑of‑compensation factor that was in effect at the end of 2025/2026. It also provides transitional rules for members whose service spans earlier and later statutory periods: service performed between January 1, 2013 and the 2025/2026 cutoff remains under the formula the employer offered during that earlier window (subject to Section 7522.25), while service on or after the new effective date uses the formula from this section that most closely matches the prior employer formula.
The section explicitly states it does not create retroactive benefits and adjusts the prospective retirement age to 55 for affected safety employees.The bill preserves collective‑bargaining space: employers and employees can agree via memorandum of understanding (MOU) to adopt a higher safety plan that will apply to members on or after the effective date, subject to statutory constraints; they may also negotiate a lower plan that applies only to employees first employed after the lower plan’s effective date, provided the change is bargained and not imposed through impasse procedures. Finally, AB 1383 cross‑references existing limits on pensionable compensation (Section 7522.10) and sets that members who are not new hires remain subject to contribution rates set under Section 7522.30, which feeds into actuarial valuation and employer contribution calculations.
The Five Things You Need to Know
A safety member becomes eligible to retire under the prescribed formulas after five years of service and upon reaching age 50, with benefits calculated to the preceding quarter‑year of age.
The Basic Safety Plan’s accrual rate runs roughly 1.426% at age 50 and scales to 2.000% at age 55 and older; the three Option Plans rise progressively, with Option Three reaching 3.000% at 55+.
Option Three includes a benefit cap: for service under that option the benefit cannot exceed 90% of final compensation.
For new hires, the employer must offer one or more of these formulas and keep the percentage‑of‑compensation factor at the level offered as of December 31, 2025/2026 (text alternates between 2025 and 2026/2027 in several places).
Employers cannot impose a lower plan via impasse; a lower plan will apply only to employees first hired on or after the lower plan’s effective date and only if adopted through collective bargaining and a retirement plan contract amendment.
Section-by-Section Breakdown
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Mandate to use prescribed safety formulas and basic eligibility
This provision requires each retirement system offering a defined benefit plan for safety members to use one or more of the statutory formulas and establishes the minimum service and age for retirement under these formulas (five years of service and attainment of age 50). Practically, systems must map their plan options to the statute’s tables and update benefit calculators, member communications, and actuarial models to reflect quarter‑year age computation.
Basic Safety Plan — lower accrual schedule
The Basic Safety Plan provides the lowest set of multipliers, starting at about 1.426% at age 50 and increasing to 2.0% at age 55 and older. Employers and actuaries should treat this as the statutory floor for standard safety accruals; employer contribution projections and amortization schedules will shift where employers choose this plan for new hires or existing cohorts.
Options One–Three — richer accrual schedules and a benefit cap
Options One and Two set higher age‑graded multipliers (Option One up to 2.5% at 55+, Option Two up to 2.7% at 55+), while Option Three is the richest (up to 3.0% at 55+) and includes an explicit benefit ceiling: benefits under Option Three cannot exceed 90% of final compensation. Systems offering these options will face higher normal costs and larger funded‑status sensitivity to salary growth and longevity; Option Three’s 90% cap limits runaway replacement ratios but still produces substantially larger accrued liabilities than the Basic Plan.
Rules for new hires and service spanning statutory periods
The bill requires employers to offer one or more of the prescribed formulas to new safety hires and to maintain the percentage‑of‑compensation factor as of year‑end 2025/2026 (the text contains both 2025/2026 and references to 2027 in different clauses, which affects implementation timing). For employees whose service spans the 2013–2025/2026 window and the post‑cutoff period, service performed before the cutoff remains under the employer’s earlier formula (subject to Section 7522.25), and service on or after the new effective date uses the closest matching statutory formula. The section disclaims retroactivity and states the prospective retirement age will be adjusted to 55 for affected safety employees.
Collective bargaining: agreeing to a higher plan
Employers and employees may adopt a higher safety plan by MOU that is collectively bargained. The higher plan applies to members on or after its effective date and remains subject to statutory cross‑references (including Section 7522.44), meaning a union can secure richer benefits but must rely on a negotiated MOU and system contract amendments to implement them.
Collective bargaining: agreeing to a lower plan and procedural limits
A lower plan may be adopted by MOU only for employees first employed on or after the lower plan’s effective date; employers cannot implement such a change without a bargained MOU, cannot use impasse procedures to impose it, and cannot provide different defined benefit formulas to nonrepresented managerial or supervisory employees vis‑à‑vis represented employees of the same membership classification. These constraints preserve bargaining protections and restrict unilateral employer actions.
Pensionable compensation limit and contribution‑rate linkage
The statute reaffirms that pensionable compensation is limited as described in Section 7522.10 and that contribution rates for non‑new members remain governed by Section 7522.30. For administrators and employers, this means the new accrual schedules must be integrated with existing caps on pensionable pay and with statutory contribution‑setting mechanics that drive employer payment schedules and disclosure obligations.
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Who Benefits
- Long‑service safety members who choose richer option plans — they accrue benefits faster because the Option tables produce higher percentage multipliers per year of service, increasing lifetime pension outlays for those who remain in service long enough to retire.
- Public‑sector labor organizations — unions gain a clear statutory menu for bargaining richer plans (and protections against unilateral imposition of lower plans), strengthening their leverage in MOU negotiations over retirement design.
- Retirement system administrators — standardizing the available formulas reduces variation between employers and simplifies plan administration and member counseling once systems implement the tables and recalibrate calculators.
Who Bears the Cost
- Local employers (cities, counties, special districts) — choosing richer statutory options for new hires or negotiating higher plans increases normal cost and amortization payments, pressuring municipal budgets and potentially requiring higher employer contributions.
- Taxpayers/local budgets — higher employer contributions flow through to local budgets and could force service cuts, tax increases, or borrowing to cover pension costs, particularly for smaller jurisdictions with limited fiscal flexibility.
- Actuarial and payroll teams at retirement systems and employers — they must rework valuation assumptions, contribution models, payroll reporting, and member communications to reflect quarter‑year age computations, multiple option tables, and the Option Three cap.
Key Issues
The Core Tension
AB 1383 balances two legitimate objectives that pull in opposite directions: it aims to standardize and, where appropriate, preserve or increase retirement accruals for safety members (promoting retirement security and bargaining certainty) while constraining plan‑design variation and protecting employers from unilateral imposition of changes — but doing so forces a trade‑off between richer benefits and the fiscal capacity of employers to fund those benefits without adverse impacts on services or taxes.
The bill’s text contains inconsistent effective‑date references (both January 1, 2026 and January 1, 2027 appear), which creates a near‑term implementation puzzle: systems and employers must clarify which date controls before conducting valuations, drafting MOUs, or programming payroll and retirement‑calculation systems. The instruction to “maintain the percentage of compensation factor offered as of December 31, 2025/2026” is operationally blunt — systems will need rules to map existing, nonstandard employer formulas into the statute’s discrete tables and to determine whether a close match exists.
The transitional rule that service before and after the cutoff uses different formulas raises measurement and equity questions. Splitting accruals across two formulas requires precise recordkeeping and could yield odd-looking benefit outcomes for members with mixed service; it also complicates normal cost allocation between employers and cohorts.
Option Three’s 90% cap mitigates extremely high replacement ratios but may prompt employers and employees to repackage compensation (e.g., non‑pensionable pay elements) to preserve take‑home pay, with downstream effects on recruitment and pay equity. Finally, the interplay with Sections 7522.10 and 7522.30 — pensionable‑compensation limits and statutory contribution‑setting — means the apparent policy choice (higher or lower accruals) ultimately interacts with funding rules that determine whether benefits are actually prefunded or shift costs to future taxpayers.
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