California AB 1383: vetoed CalPERS pension reform proposal

by Doug Pryor, ASA, EA, MAAA

Assembly Bill 1383 (AB 1383) proposed significant changes to the California Public Employees’ Pension Reform Act of 2013 (PEPRA) that would have increased pension benefits and costs for public agencies. Although the bill passed the California Legislature, Governor Gavin Newsom vetoed it on September 20, 2026. As a result, the proposed changes will not take effect.

Assembly Bill (AB) 1383 would have made the following changes for CalPERS PEPRA members. Changes would have been on a prospective basis only (meaning changes would have applied 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 

Although AB 1383 was vetoed and its proposed changes will not take effect, the bill highlighted potential changes to future pension benefits and, consequently, pension costs for affected public agencies. Key considerations under the proposal include:

• The changes would not have applied to Classic members or current retirees.
• The impact would generally have been larger for Safety members than for Miscellaneous members.
• In May 2026 CalPERS estimated:
  • The median additional PEPRA Total Normal Cost for non-pooled plans would have been 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 would have been 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 would have increased under the proposal.
• The additional required agency total (Classic + PEPRA) contributions would have been 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 have created additional competitive pressure among agencies to enhance benefits to attract and retain future employees.

Although AB 1383 was vetoed, agencies can benefit from understanding their existing pension costs and evaluating how future legislative proposals could affect contribution requirements.

Our team has extensive experience analyzing CalPERS pension plans. If your agency would like to better understand its CalPERS pension costs, future contribution requirements, or the potential implications of future legislative changes, please contact us. We would be happy to discuss an analysis tailored to your agency.