California AB 1383: Potential CalPERS changes

Assembly Bill 1383 (AB 1383) proposes significant changes to the California Public Employees’ Pension Reform Act of 2013 (PEPRA) that would increase pension benefits and costs for public agencies. The bill has passed the California Legislature and was presented to the Governor on September 9, 2026. As of the date of this article, it has not yet been signed into law. 

Assembly Bill (AB) 1383 would make the following changes for CalPERS PEPRA members. Changes would be on a prospective basis only (meaning changes would only apply to service after the January 1, 2027 effective date): 

  • Increase the PERSable compensation limit. 
  • Allow the PEPRA employee share of the Total Normal Cost to be negotiated (currently, PEPRA employees must pay ½ of the Total Normal Cost). 
  • Change existing PEPRA Safety formulas from 2%@57, 2.5%@57, and 2.7%@57 to corresponding formulas at age 55. 
  • Establish an optional 3%@55 Safety formula, subject to a 90% benefit cap. 

CalPERS public agency impact 

The proposed changes would increase future pension benefits and, consequently, pension costs for affected public agencies. Key considerations include: 

  • The changes do not apply to Classic members or current retirees. 
  • The impact will generally be larger for Safety members than for Miscellaneous members.   
  • In May 2026 CalPERS estimated: 
    • The median additional PEPRA Total Normal Cost for non-pooled plans is 0.22% of payroll for Miscellaneous, and 3.01% of payroll for Safety. 
    • The increase in the present value of future benefits for current PEPRA members is approximately $4.8 billion (includes all State, Schools and Public Agency plans). For context, estimates are that PEPRA has saved agencies approximately $5.8 billion over the last 10+ years. 
  • Absent negotiated changes to PEPRA employee contributions, PEPRA employee contributions will increase. 
  • The additional required agency total (Classic + PEPRA) contributions are expected to grow over time as agencies transition to larger, and ultimately 100%, PEPRA workforces.   
  • The ability for agencies to negotiate reductions in employee contributions and/or transition Safety employees to the 3%@55 formula could create additional competitive pressure among agencies to enhanced benefits to attract and retain future employees. 

An actuarial analysis can help an agency understand the potential impact of the proposed changes on current and projected contribution requirements. 

Our team has experience analyzing the impact of AB 1383 on CalPERS public agency pension plans. We can prepare an agency-specific analysis illustrating how the proposed changes may affect pension costs and future contributions. 

If your agency would like to better understand the potential impact of AB 1383 on your CalPERS plan, please contact us. We would be happy to discuss an analysis tailored to your agency. 

 

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