How Your Pension is Calculated

Overview

Getting an early understanding of how you earn credit toward retirement and how ACERA will calculate your lifetime pension allowance will make it much easier for you to plan for retirement.

A Percentage of Your Highest Salary For Each Year Your Work

In retirement, you will receive a percentage of the highest salary your earned while you were working. ACERA uses this formula to calculate that:

Age Factor Percentage
Service Credit (Years)
X       Highest Average Monthly Salary
= Monthly Pension Allowance for Life

Let’s break this down a little bit with an example. Let’s say you’re going to get 2% of your highest salary for each year that you work. And let’s say you work exactly 20 full time years and retire.

2%
20 Years
X       Highest Average Monthly Salary
= Monthly Pension Allowance for Life

For each one of those 20 years you worked and earned service credit, you’ll get 2% of your highest salary. So 20 years x 2% = 40%. You’re going to get 40% of your highest working salary in retirement.

40%
X       Highest Average Monthly Salary
= Monthly Pension Allowance for Life

Now let’s say that the highest salary you earned per month during your career was $5,000.

40%
X       $5,000
= Monthly Pension Allowance for Life

40% of $5,000 is $2,000. So you earned a $2,000 per month pension allowance for the rest of your life.

40%
X       $5,000
= $2,000

You can see that since this is a multiplication, the higher any of these three factors, the greater your pension allowance will be, in general. These three numbers are going to be particular to you when we calculate your retirement. Let’s talk about how we determine each of these numbers for you.

 

How We Determine Your Age Factor Percentage at Retirement

Your age factor percentage probably won’t be exactly 2% like the example above. Your age factor percentage will be determined based on your tier and your age at retirement. Each ACERA tier has its own set of age factor percentages. When ACERA calculates your retirement benefit using the formula above, we use the age factor percentage from your tier for the age you retire at. Find your tier below and look at the set of age factor percentages for your tier. You may notice a few things:

The older your retirement age, the higher the age factor percentage, up to a limit for each tier. The limit is denoted by the bold percentage. If you retire at that age or older, you get the maximum age factor percentage for your tier.

Age factor percentages increase with every quarter year you wait to retire, based on your birthday. If your birthday is on January 15, your next quarter age is three months later on April 15, the quarter after that is three months later on July 15, and the next quarter is on October 15. In order to get the next higher age factor percentage, you have to retire at least the next day after your birthday or your quarter year dates.

Age Factor Percentages for General Tiers 1, 2A, 3, and 4 

Age at Retirement Tier 1 Tier 2A Tier 3 Tier 4
50 1.336% 1.182% 2.000%  
50.25 1.355% 1.197% 2.025%  
50.5 1.374% 1.212% 2.050%  
50.75 1.392% 1.228% 2.075%  
51 1.411% 1.243% 2.100%  
51.25 1.431% 1.258% 2.125%  
51.5 1.451% 1.273% 2.150%  
51.75 1.471% 1.288% 2.175%  
52 1.491% 1.303% 2.200% 1.000%
52.25 1.512% 1.318% 2.225% 1.025%
52.5 1.534% 1.333% 2.250% 1.050%
52.75 1.555% 1.348% 2.275% 1.075%
53 1.576% 1.364% 2.300% 1.100%
53.25 1.600% 1.379% 2.325% 1.125%
53.5 1.623% 1.395% 2.350% 1.150%
53.75 1.646% 1.410% 2.375% 1.175%
54 1.669% 1.426% 2.400% 1.200%
54.25 1.694% 1.443% 2.425% 1.225%
54.5 1.720% 1.459% 2.450% 1.250%
54.75 1.745% 1.476% 2.475% 1.275%
55 1.770% 1.492% 2.500% 1.300%
55.25 1.797% 1.510% 2.500% 1.325%
55.5 1.825% 1.528% 2.500% 1.350%
55.75 1.852% 1.546% 2.500% 1.375%
56 1.880% 1.564% 2.500% 1.400%
56.25 1.910% 1.583% 2.500% 1.425%
56.5 1.940% 1.602% 2.500% 1.450%
56.75 1.970% 1.622% 2.500% 1.475%
57 2.000% 1.641% 2.500% 1.500%
57.25 2.022% 1.662% 2.500% 1.525%
57.5 2.045% 1.683% 2.500% 1.550%
57.75 2.067% 1.704% 2.500% 1.575%
58 2.089% 1.725% 2.500% 1.600%
58.25 2.119% 1.748% 2.500% 1.625%
58.5 2.149% 1.771% 2.500% 1.650%
58.75 2.180% 1.794% 2.500% 1.675%
59 2.210% 1.817% 2.500% 1.700%
59.25 2.241% 1.842% 2.500% 1.725%
59.5 2.273% 1.867% 2.500% 1.750%
59.75 2.305% 1.892% 2.500% 1.775%
60 2.337% 1.917% 2.500% 1.800%
60.25 2.371% 1.935% 2.500% 1.825%
60.5 2.405% 1.954% 2.500% 1.850%
60.75 2.439% 1.973% 2.500% 1.875%
61 2.473% 1.991% 2.500% 1.900%
61.25 2.509% 2.016% 2.500% 1.925%
61.5 2.546% 2.041% 2.500% 1.950%
61.75 2.582% 2.066% 2.500% 1.975%
62 2.619% 2.091% 2.500% 2.000%
62.25 2.619% 2.118% 2.500% 2.025%
62.5 2.619% 2.145% 2.500% 2.050%
62.75 2.619% 2.171% 2.500% 2.075%
63 2.619% 2.198% 2.500% 2.100%
63.25 2.619% 2.226% 2.500% 2.125%
63.5 2.619% 2.254% 2.500% 2.150%
63.75 2.619% 2.283% 2.500% 2.175%
64 2.619% 2.311% 2.500% 2.200%
64.25 2.619% 2.341% 2.500% 2.225%
64.5 2.619% 2.372% 2.500% 2.250%
64.75 2.619% 2.402% 2.500% 2.275%
65 2.619% 2.432% 2.500% 2.300%
65.25 2.619% 2.432% 2.500% 2.325%
65.5 2.619% 2.432% 2.500% 2.350%
65.75 2.619% 2.432% 2.500% 2.375%
66 2.619% 2.432% 2.500% 2.400%
66.25 2.619% 2.432% 2.500% 2.425%
66.5 2.619% 2.432% 2.500% 2.450%
66.75 2.619% 2.432% 2.500% 2.475%
67 & Over 2.619% 2.432% 2.500% 2.500%

 

Age Factor Percentages for Safety Tiers 1, 2B, 2C, 2D, and 4

Age at Retirement Tier 1 and Tier 2B Tier 2C Tier 2D Tier 4
41 1.877% 1.252% 1.433%  
41.25 1.905% 1.270% 1.454%  
41.5 1.933% 1.288% 1.475%  
41.75 1.960% 1.307% 1.496%  
42 1.988% 1.325% 1.517%  
42.25 2.016% 1.344% 1.539%  
42.5 2.044% 1.363% 1.561%  
42.75 2.073% 1.382% 1.582%  
43 2.101% 1.401% 1.604%  
43.25 2.131% 1.420% 1.627%  
43.5 2.160% 1.440% 1.649%  
43.75 2.190% 1.460% 1.672%  
44 2.219% 1.479% 1.694%  
44.25 2.250% 1.500% 1.718%  
44.5 2.280% 1.520% 1.741%  
44.75 2.311% 1.541% 1.764%  
45 2.342% 1.561% 1.787%  
45.25 2.373% 1.582% 1.812%  
45.5 2.405% 1.603% 1.836%  
45.75 2.436% 1.624% 1.860%  
46 2.468% 1.645% 1.884%  
46.25 2.502% 1.668% 1.910%  
46.5 2.536% 1.690% 1.936%  
46.75 2.576% 1.713% 1.967%  
47 2.603% 1.736% 1.988%  
47.25 2.634% 1.756% 2.011%  
47.5 2.665% 1.776% 2.034%  
47.75 2.695% 1.797% 2.057%  
48 2.726% 1.817% 2.081%  
48.25 2.758% 1.839% 2.106%  
48.5 2.791% 1.861% 2.131%  
48.75 2.824% 1.883% 2.156%  
49 2.857% 1.904% 2.181%  
49.25 2.892% 1.928% 2.208%  
49.5 2.928% 1.952% 2.236%  
49.75 2.964% 1.976% 2.263%  
50 3.000% 2.000% 2.290% 2.000%
50.25 3.000% 2.026% 2.320% 2.025%
50.5 3.000% 2.052% 2.350% 2.050%
50.75 3.000% 2.077% 2.379% 2.075%
51 3.000% 2.103% 2.408% 2.100%
51.25 3.000% 2.131% 2.441% 2.125%
51.5 3.000% 2.159% 2.473% 2.150%
51.75 3.000% 2.187% 2.505% 2.175%
52 3.000% 2.216% 2.537% 2.200%
52.25 3.000% 2.246% 2.572% 2.225%
52.5 3.000% 2.277% 2.607% 2.250%
52.75 3.000% 2.308% 2.642% 2.275%
53 3.000% 2.338% 2.678% 2.300%
53.25 3.000% 2.372% 2.716% 2.325%
53.5 3.000% 2.406% 2.755% 2.350%
53.75 3.000% 2.439% 2.793% 2.375%
54 3.000% 2.473% 2.825% 2.400%
54.25 3.000% 2.509% 2.874% 2.425%
54.5 3.000% 2.546% 2.915% 2.450%
54.75 3.000% 2.583% 2.958% 2.475%
55 3.000% 2.620% 3.000% 2.500%
55.25 3.000% 2.620% 3.000% 2.525%
55.5 3.000% 2.620% 3.000% 2.550%
55.75 3.000% 2.620% 3.000% 2.575%
56 3.000% 2.620% 3.000% 2.600%
56.25 3.000% 2.620% 3.000% 2.625%
56.5 3.000% 2.620% 3.000% 2.650%
56.75 3.000% 2.620% 3.000% 2.675%
57 & Over 3.000% 2.620% 3.000% 2.700%

 

How Your Highest Average Monthly Salary is Calculated Based on Your Final Compensation Period

Your Highest Average Monthly Salary (also know as Final Average Salary) is the amount of pay you made on average per month during your period of highest pay in your career. This consecutive period of highest pay is know as your Final Compensation Period. The length of that period depends on your tier:

Final Compensation Period
  Tiers 1 and 3 Tiers 2 and 4
Your highest consecutive pay periods:

26 biweekly or 12 monthly

(Highest 1 year of pay)

78 biweekly or 36 monthly

(Highest 3 years of pay)

In order to calculate your Highest Average Monthly Salary, ACERA divides your total pay during your Final Compensation Period by the number of months in the period, either 12 or 36, to give us your average pay. That number goes in the retirement formula.

 

How does working less than full time during my Final Compensation Period affect my retirement?

Working less than full time during your Final Compensation Period doesn’t really count against you when we calculate your Highest Average Monthly Salary. ACERA will tack on other consecutive pay periods to get you up to the equivalent of 1 or 3 years worth of full time pay periods, depending on your tier. For example, if you’re in tier 2 and you worked half time your last 6 years, ACERA would use all those pay periods to equivocate 3 full time years of pay (assuming you’re making your highest hourly rate of pay at the end of your career).

However, you will be earning service credit at a slower rate if you work less than full time. For example, if you work half time for 6 years, you’ll earn 3 years of service credit during that time.

 

What Types of Pay Are Part of Your Highest Average Monthly Salary?

ACERA will include the following gross pay earned during your Final Compensation Period in your Highest Average Monthly Salary:

Your Base Pay

Other Pay Types
Sometimes footnotes or other pay types are included. Find whether your the pay codes are included here. Overtime is not included.

Vacation Sales
This is when you sell your earned vacation back to your employer while you’re employed. Does not apply to Tier 4.

Vacation Cash-Out
If you have unused vacation time on the books when you stop working and/or retire, you’ll get compensation for it in your final paycheck. Does not apply to Tier 4.

There are limits to the amount of compensation for unused vacation ACERA can include in your Highest Average Monthly salary.

Will stand-by and on-call pay be included in my Highest Average Monthly Salary?

Stand-by and on-call pay will be included or excluded from the highest average monthly salary calculation based on a member-by-member review at the time of retirement. The includable amount will be based on the same amount of compensation earned by other employees in the same position. Amounts beyond those limits may be considered a benefit enhancement and therefore not includable.

 

Understand How Unused Vacation Leave Affects Your Retirement Allowance

If compensation for unused vacation is included in your salary for calculating your Highest Average Monthly Salary, via Vacation Sales or Vacation Cash-Out or both, your lifetime pension allowance will be greater because your salary used to calculate that allowance is greater. Our video on Highest Average Monthly Salary includes and animated depiction of this.

If you’re in tiers 1 or 2, ACERA must include this compensation by law in your salary calculation up to a limit, also stipulated in the law. How to find your limit is outlined below. When finding your limit, your total vacation compensation will be any vacation sales you made combined with any vacation cash-out your were paid. These limits assume you retire on any day except for July 1. If you retire on July 1, the limits are lower.

ACERA does not include compensation for vacation in the calculation for Tier 4 members.

Alameda County, Courts, Housing Authority Employee Limits

The charts below depict the limitations on inclusion of vacation pay in Highest Average Monthly Salary, unless your first day of retirement is on July 1; if so, the limitations will be lower.

Earned” means however much an individual member personally earns during the final compensation period. “Payable” means the amount an employer allows an individual member to sell during the final compensation period. If these two amounts differ, the limitation is on the lesser of what is earned and payable. If the final compensation period straddles fiscal years (July 1 – June 30), the payable limit will include an extra years’ worth.

Example
For example, Tier 2 member Jon Jonson earns 5 weeks of vacation per year, and his employer allows him to sell up to 2 weeks of vacation per year. Jon sells 4 weeks of vacation during his 3-year final compensation period and receives cash for 8 weeks of vacation he still had on the books when he retired—this is a total of 12 weeks of vacation compensation. ACERA will include 8 weeks of compensation for unused vacation in Jon’s highest average monthly salary calculation, which is the maximum amount ACERA can include. This maximum for Jon is based on Jon’s employer allowing him to sell 2 weeks each of his 3 years of highest pay, for a total of 8 weeks.

Court Employees: Limits for Those Who Can Sell 1 Day Per Year

Since your ability to sell vacation is low, this makes the limit on how much vacation pay for unused vacation can be included in the salary calculation low.

Tier 1: 2 days’ vacation pay

Tier 2: 4 days’ vacation pay

These limits assume you retire on any day except for July 1. If you retire on July 1, the limits are lower.

Alameda Health System (AHS) Employee Limits

Employees of AHS don’t earn vacation and sick leave; they earn both in one bucket labeled Paid Time Off (PTO). Limits for PTO pay (through a combination of PTO sales and PTO pay off) that can be included in the salary calculation are as follows:

Tier 1:
1 year’s worth of earned PTO

Calculate your limit in hours by multiplying the vacation hours you earn per pay period by 26.

Tier 2:
2 year’s worth of earned PTO

Calculate your limit in hours by multiplying the vacation hours you earn per pay period by 52.

These limits assume you retire on any day except for July 1. If you retire on July 1, the limits are lower.

Livermore Area Recreation and Park District (LARPD) and Tier 3 Limits

Since you all aren’t allowed to sell vacation, no vacation pay can be included in your salary calculation at retirement.