CalPERS Service Credit Purchase Before Retirement

Why Service Credit Purchases Matter

Every year of service credit directly increases your CalPERS pension. The retirement formula is straightforward: Service Credit × Age Factor × Final Compensation. Buy an extra year of credit, and your monthly benefit rises by whatever your age factor times your final compensation produces for that year. On a salary of $80,000 with a 2% factor, one additional year adds roughly $133 per month — for life.

The catch is timing. You must make your service credit purchase election before retirement. For eligible purchases made on or before December 31, 2027, an outstanding balance may be paid in full or through an Actuarial Equivalent Reduction (AER) at retirement. For purchases made on or after January 1, 2028, the full amount must be paid before retirement under California Government Code Section 21050.

What You Can Still Purchase

CalPERS offers several categories of purchasable service credit:

Redeposit of withdrawn contributions is the most common. If you left CalPERS employment and withdrew your contributions, then returned to CalPERS-covered work later, you can redeposit those withdrawn funds plus interest to restore the service credit you originally earned. The cost is the amount you withdrew plus interest compounded from the date of withdrawal.

Military service credit lets eligible members purchase credit for active U.S. military duty. State and school members need at least one year of CalPERS service for each year purchased, up to four years; they must have at least one year of active duty and not have been dishonorably discharged. Public agency members have no minimum CalPERS service requirement and may purchase up to four years; if their military service is less than four years, they may purchase up to an additional six months within that four-year limit. Public agency employers must contract for this benefit.

Service prior to membership (SPM) covers qualifying work for a CalPERS employer before you became eligible for CalPERS membership. This can include part-time, temporary, on-call, permanent intermittent, or seasonal work. State and school members are eligible; public agency members are eligible when their employer contracts for this benefit.

What You Cannot Purchase: Airtime Is Gone

Before PEPRA took effect on January 1, 2013, CalPERS members could purchase "nonqualified service credit" — commonly called airtime. This let you buy up to five years of service credit even if you never actually worked during those years. PEPRA eliminated airtime purchases. If you search for "buying airtime CalPERS," every result you find is describing a program that no longer exists.

The active purchase categories — redeposits, military service, and service prior to membership — all require that you actually performed work or service during the period you are buying.

How the Purchase Process Works

Start by requesting a cost estimate from CalPERS through the myCalPERS portal or by contacting CalPERS directly. The cost method depends on the purchase type: a redeposit is the withdrawn contributions plus interest, while other purchase types use their applicable CalPERS calculation rules.

You can pay by lump sum or through installments. For eligible purchase elections made on or before December 31, 2027, an unpaid balance may be paid in full or handled through an AER at retirement. For purchase elections made on or after January 1, 2028, the full amount must be paid before retirement. Check the payment options CalPERS lists for your purchase.

This is why the 12-month planning window matters. Request your cost estimate at least a year out. If you plan to use payroll deductions and want the balance paid before retirement, make sure enough pay periods remain.

The Purchase Election Deadline

Your purchase election must be completed before retirement. For eligible purchases made on or before December 31, 2027, CalPERS may allow an outstanding balance to be handled through an AER at retirement; the balance does not always have to be paid in full beforehand. For purchases made on or after January 1, 2028, the full amount must be paid before retirement.

If you are within the 120-day application filing window and still have a payroll deduction balance, talk to CalPERS immediately. Depending on your purchase date and eligibility, you may be able to pay the balance in full or use an AER at retirement; purchases made on or after January 1, 2028, must be paid in full before retirement.

Evaluating Whether a Purchase Makes Sense

The math is simple but personal. Take the purchase cost, divide by the monthly benefit increase, and you get a breakeven period in months. A $15,000 redeposit that adds $100 per month breaks even at 150 months — 12.5 years. If you retire at 60 and expect to live past 72.5, the purchase pays for itself.

CalPERS pensions include cost-of-living adjustments, which improve the breakeven calculation. And the purchased credit also increases survivor benefits if you elect Option 2, 2W, 3, or 3W.

For a structured framework to evaluate service credit purchase decisions alongside the rest of your retirement application, the CalPERS Service Retirement Guide includes a Service Credit Purchase Decision Tracker worksheet.

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