CalPERS Service Credit Purchase: Eligibility, Pricing, and Payment

A CalPERS service credit purchase lets you add years to the service figure in your pension formula by paying for eligible past work, military duty, or approved leave. Because your monthly retirement check is calculated by multiplying service years, an age factor, and your highest average pay, every added year raises the benefit for life. The catch: once you elect a purchase, it is permanent and non-refundable, and the price almost always goes up the longer you wait.

Who Qualifies to Buy Credit

You generally need to be an active CalPERS member, working for a CalPERS-covered employer and contributing to the system. Inactive members who left their contributions on deposit instead of taking a refund can also qualify, as long as they have not retired or cashed out.

One disqualifier catches people off guard. If you are vested in the Federal Employees’ Retirement System (FERS) or the Civil Service Retirement System (CSRS), you cannot purchase service credit in CalPERS.¹ You also cannot buy credit for a period already covered by another public retirement system unless a reciprocal agreement applies and the proper certifications are provided.

Classic Members vs. PEPRA Members

Members hired into CalPERS-covered employment before January 1, 2013 are “Classic.” Those hired on or after that date with no prior CalPERS membership fall under the Public Employees’ Pension Reform Act (PEPRA). Most purchase categories remain open to both groups, but PEPRA eliminated Additional Retirement Service Credit, sometimes called “air time,” which had allowed members to buy credit for years never actually worked in public service.¹ Classic members who started an ARSC purchase before PEPRA took effect could finish paying it, but no new ARSC elections are allowed.

What You Can Purchase

CalPERS recognizes more than a dozen categories. These are the ones most members use.

Redeposit of Withdrawn Contributions

If you once left CalPERS employment and took a refund of your contributions, you can restore that credit by redepositing the amount withdrawn plus accrued interest. This is one of the most common purchases because it recaptures time you already earned. Interest can be substantial after a long break, but the restored years count fully toward your retirement formula.

Service Prior to Membership

This covers time you worked for a CalPERS employer before you were required to join the system, often part-time, seasonal, or temporary roles that did not trigger automatic enrollment. Your employer must verify the dates and pay for that period, because the cost calculation depends on what you earned then.

Military Service

Active-duty military service performed before or during your CalPERS employment is eligible. State, school, and public agency members can buy up to four years of military credit, and state and school members are also limited to no more than their years of CalPERS-credited service.² You will need a DD-214 or equivalent discharge document showing active-duty dates and an honorable or general discharge.

Peace Corps, AmeriCorps VISTA, and AmeriCorps

Federal volunteer service in these programs qualifies, priced under the present value method. You will need documentation of your dates and completion status.

Leaves of Absence

Several approved leaves are purchasable:

Maternity or paternity leave, up to one year per leave. You must have returned to CalPERS-covered employment at the end of the leave and stayed employed at least as long as the leave lasted.³
Employer-approved unpaid leave for your own serious illness.
Temporary disability leave and formal layoff from a CalPERS employer.

How CalPERS Prices the Purchase

CalPERS uses two cost methods, and the category you are buying determines which one applies. The two can produce very different numbers for similar-sounding periods, which is where most members miscalculate.

Pay Rate and Contribution Rate Method

This method applies to service prior to membership, temporary disability leave, layoff, and optional member service. CalPERS looks up your pay rate and contribution rate on a specified date, multiplies them for the period you are buying, and adds interest.³ For service before membership, the specified date is the day you joined CalPERS. For temporary disability leave and layoff, it is the day you returned to work. Because the math anchors to historical pay, costs under this method are usually more modest.

Present Value Method

Military service, Peace Corps and AmeriCorps service, and most leave-of-absence categories use the present value method. This approach calculates the total projected increase to your lifetime pension using your current highest monthly pay rate, projected retirement age, life expectancy, salary inflation, and CalPERS’s assumed investment return.³ Because it captures the full cost of paying you a larger pension for life, it almost always costs more than the pay-rate method.

Why Waiting Costs More

Under either method, the price rises as time passes. Pay-rate purchases accrue interest on the base cost. Present value purchases ride your salary growth, because a higher future pay rate inflates the projected benefit increase. Members who buy early in their careers routinely pay a fraction of what colleagues pay for the same type of credit a decade later.

How to Pay

Payment method affects both your taxes and your flexibility.

Lump Sum

A single payment covers the full cost. You can pay by credit card, debit card, bank account, or a rollover from a qualifying retirement plan. You cannot pay more than the lump-sum amount quoted.⁴ Lump sums from your personal funds use after-tax dollars; CalPERS does not treat these as deductible and recommends consulting a tax advisor for your situation.³

Installment Payroll Deductions

Installments spread the cost over up to 180 monthly pay periods, roughly 15 years. The installment amount includes a small actuarial adjustment of up to 0.5% to account for the delayed payment, under Government Code section 21050.⁵

If your employer has adopted a resolution under Internal Revenue Code section 414(h)(2), you can make installments on a pre-tax basis.⁴ That lowers your current taxable income, but the trade-off is rigid: you cannot change the number of payments, alter the schedule, pay off the balance early, or switch to after-tax deductions after electing it. All state employees have access to this option; school and public agency employees should verify their employer’s participation.

Rollover or Plan-to-Plan Transfer

Pre-tax funds from a 401(a), 401(k), 403(a), 403(b), governmental 457, or traditional IRA can be transferred directly to CalPERS without triggering a taxable distribution.⁴ This preserves tax deferral on money you have already set aside for retirement.

Suspending or Canceling Installments

On an after-tax installment plan, you can suspend payments once per purchase for up to 12 months. Payments resume automatically, interest accrues during the pause, and another suspension on the same purchase is not available for three years.⁵

You can also cancel the remaining installment balance before retirement. If you do, CalPERS reduces the credit on your account proportionally to the unpaid balance. You keep credit only for what you actually paid for.

How to Apply

The fastest route is through your myCalPERS account. Log in, go to the Retirement tab, select Service Credit Purchase, and click Search for Purchase Options. The system asks a series of questions about your employment and the period you want to buy, and identifies which categories you may qualify for.¹

Some categories require your employer or a reciprocal agency to certify your service dates and contributions. CalPERS notifies the agency electronically and gives it 30 days to respond. If the agency misses that window, the request expires and you have to resubmit.¹ Military purchases skip the employer step; you upload or mail your DD-214 directly to CalPERS.²

Once all documents are in and eligibility is confirmed, your cost and election details appear in myCalPERS within 60 days.¹ The election package shows the final price, your payment options, and the estimated impact on your monthly pension. You must electronically sign and submit the election before the printed expiration date.⁶ Miss that deadline and the quote expires; you start over, usually at a higher cost.

Before You Commit

A service credit purchase is not a savings account. Think these through before you sign.

The Election Is Irrevocable and Non-Refundable

Once signed, the election cannot be undone. If you leave CalPERS-covered employment before retiring, you will not get back the payments you have made.³ On an installment plan, separating from your employer means paying the remaining balance in full, because installments can only be collected through payroll deductions from a CalPERS-covered position. If you are not certain you will stay in California public service long enough to retire from CalPERS, weigh that carefully.

Purchased Credit Is Community Property

In California, service credit purchased during a marriage or registered domestic partnership is community property. A divorce can result in a court order allocating part of that credit to your former spouse, which reduces the benefit you ultimately receive.⁷

Not All Credit Counts Toward Vesting

CalPERS requires five years of service credit to vest. Not every type of purchased credit counts toward that threshold. Military and leave-of-absence credit add to your benefit formula but may not satisfy the vesting requirement on their own. If you are short of five years, confirm with CalPERS whether the specific category counts toward vesting before you buy.

Disability Retirement Does Not Benefit

If you end up on a disability or industrial disability retirement, purchased credit does not increase your disability allowance, and no refund is issued for the payments you made.³ The value of a purchase is tied to a service retirement.

1
CalPERS. Service Credit (Time Worked)
2
California Public Employees’ Retirement System. A Guide to Your CalPERS Military Service Credit Options
3
California Public Employees’ Retirement System. A Guide to Your CalPERS Service Credit Purchase Options
4
CalPERS. Payment Options
5
California Legislative Information. California Code Government Code GOV 21050
6
CalPERS. Service Credit Purchase: Could You Qualify for a Service Credit Purchase?
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CalPERS. Divorce and Your Pension Facts About Community Property