SB 939 rewrites when CalPERS must receive payments for purchased service credit and narrows the circumstances under which members can simply accept an actuarially reduced retirement allowance instead of completing payments. For elections with an effective date on or after January 1, 2028, the bill requires the member’s payment to be received by CalPERS no later than 90 days after the member’s retirement effective date, and requires survivor or beneficiary payments to be received within 90 days after CalPERS mails a notification of balance due.
If the balance is not paid in that window, the service credit bought by the election is reduced or eliminated proportionately.
The bill also confines the option to receive an allowance reduced by the actuarial equivalent of unpaid balances to elections that took effect on or after January 1, 2020 but prior to January 1, 2028, clarifies treatment of industrial disability cases, updates rules for installment suspensions and cancellations, and adjusts the mechanics for tier conversions and other service purchases. The result is a shift toward quicker collection and clearer outcomes at retirement — with immediate implications for members who rely on installment plans, survivors trying to secure benefits, and CalPERS’ operational processes.
At a Glance
What It Does
For elections with effective dates on or after January 1, 2028, the bill requires CalPERS to receive member payments within 90 days after the member’s retirement effective date and requires survivor/beneficiary payments within 90 days after a mailed notice. If timely payment isn’t received, the corresponding service credit is reduced or eliminated in proportion to the unpaid balance. The bill also limits the actuarial‑reduction option (accepting a smaller allowance instead of paying the balance) to elections made between Jan 1, 2020 and Jan 1, 2028.
Who It Affects
Members who purchase service credit with after‑tax installments, safety members retiring for industrial disability, survivors and beneficiaries who may be called on to pay balances, CalPERS administrators who collect and post payments, and employers/HR offices that provide retirement paperwork and notices.
Why It Matters
SB 939 shifts collection risk and timing onto members and survivors by imposing a hard receipt deadline and replacing an open actuarial‑reduction fallback for post‑2027 elections with automatic service‑credit adjustments. That changes retirement planning, benefit calculations, and CalPERS’ administrative workload — and could materially affect retirees with suspended payments or constrained cash at retirement.
More articles like this one.
A weekly email with all the latest developments on this topic.
What This Bill Actually Does
SB 939 tightens the rules that govern how and when payments for purchased CalPERS service credit must be completed. Today, members who buy credit in installments have multiple mechanisms at retirement: complete the balance, continue payroll or retirement‑allowance deductions, cancel installments and lose proportionate service credit, or in many cases elect to accept a reduced allowance equal to the actuarial value of the unpaid balance.
This bill narrows those fallback paths for elections arising after a statutory cut‑off and imposes strict short windows for payment receipt.
For any election with an effective date on or after January 1, 2028, CalPERS must actually receive the member’s payment within 90 days of the member’s retirement effective date; if the payment is not received, CalPERS will reduce or eliminate the service credit tied to that unpaid balance proportionally. Survivors and beneficiaries get the same 90‑day receipt window measured from the date CalPERS mails a notice of balance due.
The bill makes similar changes for a range of contribution and service credit adjustments: those effective on or after January 1, 2028, become due at retirement or preretirement death and, if unpaid, will trigger an actuarial reduction of the allowance or proportional elimination of service credit as specified.SB 939 also restricts the option to accept an actuarially reduced retirement allowance instead of paying the remaining balance. That election remains available only for elections that had initial effective dates on or after January 1, 2020 and prior to January 1, 2028 (or for other specified grandfathered elections).
For elections falling on or after the 2028 threshold, the statute defaults to the 90‑day collection rule and proportional service‑credit adjustment rather than allowing a blanket actuarial reduction as an alternative. The bill preserves the statutory mechanisms for suspensions, cancellations, recalculation with interest, and post‑cancellation buybacks, while clarifying when those mechanics apply and which kinds of purchases (for example, tier conversions) are subject to the new deadlines.Finally, the bill explicitly limits the application of one provision so it does not apply to industrial disability payments, and it clarifies board authority around deposits, installment interest treatment, and rulemaking for certain tier conversion deposits.
Those technical fixes interact with the main payment‑deadline changes by carving out particular cases and detailing how balances are recalculated when payments resume or are canceled.
The Five Things You Need to Know
For any election with an effective date on or after January 1, 2028, the member’s payment must be received by CalPERS within 90 days after the member’s retirement effective date.
If the required payment or survivor/beneficiary payment is not received within the 90‑day window, the service credit bought by that election is reduced in proportion to the unpaid balance; credits dependent on completion may be eliminated for allowance computation.
The option to accept an actuarially reduced allowance in lieu of completing payments is limited to elections with initial effective dates on or after January 1, 2020 and prior to January 1, 2028; that option is not available for post‑2027 elections.
Section 20776 is amended so that its provision allowing certain unpaid balances to be handled without immediate payment does not apply to industrial disability payments, creating a specific carve‑out for those cases.
For tier conversions and similar deposits under Section 21073.1, elections on or after January 1, 2028 require payment receipt by CalPERS within 90 days of retirement (or the notice), and the CalPERS board may adopt implementing regulations that are exempt from Office of Administrative Law review.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Deadlines and proportional reduction for unpaid election balances
This section centralizes the bill’s payment‑timing rule: starting with elections effective January 1, 2028, the member’s payment must be received within 90 days after the retirement effective date and survivor/beneficiary payments must be received within 90 days after CalPERS mails notice. If the payment is not timely, the service credit purchased by the election is reduced proportionately and any credits conditioned on completion may be eliminated for allowance computation. The section preserves the existing option to continue authorized payroll or retirement‑allowance deductions when available, but otherwise replaces the wide use of an actuarial reduction fallback for post‑2027 elections with a clear cut‑off and proportional adjustment rule.
Disability retiree cancellations and interaction with new timing rules
Section 21037 keeps rules allowing disability retirees (and eligible survivors) to cancel installment payments prospectively when the purchased credit does not increase the allowance. The bill ties elections on or after January 1, 2028 to the new Section 20776(g) mechanics, meaning a disability retiree who relied on the actuarial‑reduction pathway for earlier elections would not have that automatic option for post‑2027 elections. The section also confirms existing procedural constraints — e.g., the limited window for submitting an election following approval of a disability retirement — and preserves recalculation of the remaining balance with interest when installments resume.
Safety members and industrial disability: cancellations and carve‑outs
For safety members retiring for industrial disability, Section 21039 continues to allow prospective cancellation of installment payments where the election does not increase the allowance. The bill makes clear that elections with effective dates on or after January 1, 2028, fall under the Section 20776(g) framework. Separately, the statute also specifies that certain protections in Section 20776 do not apply to industrial disability payments, so the interplay of cancellation, payment deadlines, and benefit treatment for industrial‑disability cases differs from ordinary service purchases and requires careful case‑by‑case handling.
Installment suspensions, cancellations, and retirement‑time options
This section governs installment payment authorizations and the temporary suspension option. SB 939 keeps the 12‑month suspension rule and the recalculation of balances with interest, but it clarifies retirement‑time choices: members who retire during a suspension may pay the recalculated balance in lump sum, cancel remaining installments (triggering proportional service reduction), or, only for qualifying pre‑2028 elections, elect an actuarial reduction of the allowance. The bill also makes the fallback explicit if a member fails to make a retirement‑time election — Section 20776 will determine the treatment — and preserves member buyback rights after cancellation subject to interest and timing rules.
Tier conversion deposits and regulatory authority
For members electing First Tier credit or similar tier conversions, the bill preserves the deposit or installment framework for repaying withdrawn contributions plus interest. It limits the alternate route (reducing the allowance instead of paying the deposit) to elections made prior to January 1, 2028. For elections on or after January 1, 2028 the 90‑day receipt rule applies and unpaid balances will lead to proportional adjustments to service credit. The section also authorizes the CalPERS board to adopt implementing regulations for these conversions and exempts those specific regulations from Office of Administrative Law review while requiring filing and publication.
This bill is one of many.
Codify tracks hundreds of bills on Finance across all five countries.
Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- CalPERS (Board and fund managers): Gains clearer, enforceable collection rules and reduced actuarial uncertainty from unpaid installment balances, which improves benefit calculation integrity and cash‑flow predictability.
- Public employers/HR administrators: Face fewer legacy cases where benefits are calculated pending long unpaid balances; clearer rules reduce ambiguous retirement outcomes and litigation risk tied to open installment accounts.
- Members who complete payments before retirement (lump‑sum payers): Benefit from a transparent regime that protects purchased service credit from post‑retirement adjustment or loss.
- Plan actuaries and financial officers: Receive more reliable inputs for liability modeling because post‑retirement adjustments and open installment liabilities will be resolved quickly rather than left open indefinitely.
Who Bears the Cost
- Members relying on after‑tax installments, particularly low‑ and moderate‑income members: Face a short 90‑day receipt window that may force lump‑sum payments or result in proportional loss of purchased service credit at retirement.
- Survivors and beneficiaries: Must assemble payment within 90 days of a mailed notice to avoid losing service credit or accept proportionate reductions; that timeframe can be difficult in the aftermath of a member’s death.
- CalPERS operational staff and IT systems: Must implement new receipt‑tracking, notice and postmark/receipt rules, and recalculation mechanics, incurring administrative and systems costs despite longer‑term predictability gains.
- Employers and payroll offices: May have increased near‑retirement demands to process final payroll deductions or provide rapid documentation to assist members and survivors in meeting the 90‑day window.
Key Issues
The Core Tension
The central tension is between protecting the pension fund’s actuarial integrity by resolving outstanding installment obligations quickly, and protecting individual members and survivors from losing purchased service credit because they cannot arrange timely payment. SB 939 favors system certainty and administrative finality; the downside is that it may convert previously negotiable or flexible retiree outcomes into hard losses of service credit for financially constrained members and grieving survivors.
SB 939 trades open‑ended actuarial reduction options for a bright‑line collection regime. That reduces actuarial ambiguity but creates practical fairness and operational questions.
A 90‑day receipt deadline can be punishing: many public employees arrange installment schedules around paycheck timing, and survivors often need more than 90 days to marshal funds after a death. The statute measures the survivor window from the date CalPERS mails a notice — which shifts importance to the method and proof of mailing and raises questions about when a notice is considered delivered or 'received' for enforcement.
The bill does not elaborate on payment methods, whether cashier’s checks, electronic transfers, or payroll deductions executed within the window satisfy the rule, nor does it define when a mailed notice is deemed mailed for cases involving returned mail or wrong addresses.
Try it yourself.
Ask a question in plain English, or pick a topic below. Results in seconds.