CalSTRS and CalPERS Pension Basics for Public Employees

Two systems, one basic design philosophy

California's two largest public employee pension systems — the California State Teachers' Retirement System, known as CalSTRS, and the California Public Employees' Retirement System, known as CalPERS — cover different groups of public workers but share the same fundamental structure. Both are defined-benefit pension plans, which means the retirement benefit is calculated using a formula based on service and salary, rather than depending on the balance of an individual investment account the way a 401(k) does. CalSTRS generally covers California's public school educators, while CalPERS generally covers most other state employees and employees of participating local public agencies.

How the benefit formula works

Both systems calculate a pension benefit using a version of the same basic formula: an age factor, multiplied by years of service credit, multiplied by final compensation. The age factor typically rises with the age at which a member retires, rewarding members who work longer and retire later. Years of service credit is generally a straightforward count of qualifying years worked within the system. Final compensation is typically based on the member's highest salary over some defined period near the end of their career, such as the final year or an average of the final few years, depending on the specific benefit formula and tier that applies.

The specific formula that applies to any individual member depends heavily on when they were hired, since both systems have created different benefit tiers over time, generally offering less generous formulas to members hired more recently as part of broader pension reform efforts. Formulas are commonly referred to by shorthand names like "2% at 62" or "2% at 60," which describe the age factor a member reaches at a specific retirement age under that tier.

Vesting

Neither pension is earned all at once. Members generally need to accumulate a minimum number of years of service credit — commonly cited as around five years for both systems — before they become vested and entitled to a pension benefit at retirement age. A member who leaves public service before reaching that vesting threshold is generally not entitled to a lifetime pension benefit, though contributions made are often available for withdrawal or transfer under specific circumstances.

Reciprocity between CalSTRS and CalPERS

Public employees who move between a CalSTRS-covered teaching position and a CalPERS-covered position at some point in their career — for example, an educator who later takes an administrative role at a state agency, or vice versa — do not automatically lose credit for their earlier service. California's public retirement systems generally offer reciprocity agreements that allow service credit and final compensation calculations to carry over between systems under specific conditions, most commonly requiring that the employee begin the new position within a limited window after leaving the prior one.

Reciprocity does not merge the two pensions into one; a member with reciprocal service typically ends up receiving two separate pension benefits at retirement, one from each system, each calculated using that system's own formula and tier. What reciprocity preserves is the ability to use the higher of the two systems' final compensation figures across both benefit calculations, and to avoid the kind of vesting or benefit-tier penalty that switching systems without reciprocity could otherwise create.

The Social Security interaction that changed in 2025

For decades, one of the most significant and least understood features of the CalSTRS system involved Social Security. Because many CalSTRS-covered teaching positions historically did not participate in Social Security — meaning payroll taxes for those specific jobs went toward the CalSTRS pension rather than Social Security — many CalSTRS members reached retirement without having paid into Social Security through their teaching careers, even if they had separately earned Social Security credits through other jobs, or were eligible for spousal or survivor Social Security benefits based on a spouse's work history.

Two federal provisions, the Windfall Elimination Provision, known as WEP, and the Government Pension Offset, known as GPO, historically reduced or eliminated the Social Security benefits these educators and other public employees with non-covered pensions would otherwise have received, on the theory that receiving both a full pension from non-Social-Security-covered work and a full Social Security benefit would be a kind of windfall. This created a well-documented, long-running source of frustration for CalSTRS members and other public employees, including many CalPERS members in positions that similarly did not participate in Social Security, who found their spousal or survivor Social Security benefits significantly reduced or eliminated despite having a legitimate claim to them through a spouse's work record.

This changed with the Social Security Fairness Act, signed into law in January 2025, which repealed both WEP and GPO. The repeal is a substantial and genuinely current change: many CalSTRS members and retirees, along with affected CalPERS members, are now eligible for higher Social Security benefits than the WEP and GPO rules previously allowed, whether through their own separately earned Social Security credits or through spousal and survivor benefits that had previously been reduced or zeroed out.

What affected members should do

• Members and retirees who were previously affected by WEP or GPO should confirm with the Social Security Administration whether their benefit has been recalculated under the repeal, and understand any retroactive adjustment that may apply.
• Current CalSTRS or CalPERS members approaching retirement who have some separate Social Security-covered work history should factor the repeal into retirement income projections, since a benefit that was previously assumed to be reduced or eliminated may now be available in full.
• Anyone unsure whether their specific position was Social Security-covered or not should check directly with their pension system and the Social Security Administration, since coverage varies by specific employer and position even within CalSTRS and CalPERS.

The takeaway

CalSTRS and CalPERS both provide defined-benefit pensions calculated through a formula tied to age, service, and final compensation, with vesting generally reached around five years of service and specific formula generosity depending heavily on hire-date tier. The repeal of WEP and GPO through the Social Security Fairness Act in January 2025 is a genuinely significant, recent change for the many CalSTRS members and some CalPERS members whose Social Security benefits were previously reduced by those provisions, and it is worth actively confirming with the Social Security Administration rather than assuming an old WEP- or GPO-reduced benefit estimate still applies.