Planning for Income in Retirement

The SCERS plan offers members a secure benefit during their retirement. However, there may be other sources of income available to you in retirement, such as Social Security, your balance in a defined contribution savings plan, an Individual Retirement Account (IRA), or your own personal savings account.

Social Security and SCERS

Your SCERS benefit structure is designed to coordinate with Social Security to avoid duplicating retirement income, control costs, and integrate federally provided benefits with public pensions under longstanding legal and policy frameworks.

Social Security Benefits

The benefits provided by SCERS have been integrated with Social Security since January 1, 1956. This combination of benefits provides you with a retirement allowance from SCERS and, if you meet the required minimum quarters of coverage, qualifies you for Social Security benefits when you reach the minimum retirement age as defined by the Social Security Administration. The Federal government has gradually increased the Social Security Normal Retirement Age for people born after 1937. Normal retirement age is the age at which you can collect full retirement benefits from Social Security without any reduction for early retirement. Eligibility for Social Security benefits is set by federal law. You may contact the nearest Social Security office or refer to the Social Security website, www.ssa.gov, for information about your eligibility, rights and benefits under Social Security. If Social Security (FICA) is deducted from your paycheck, your SCERS-covered service is considered “integrated” with Social Security. This requires SCERS to adjust the benefit allowance paid to members by a set Social Security Reduction Factor.

To facilitate the addition of Social Security benefits for public sector workers who were already receiving pensions, the state Legislature sought to avoid the cost of stacking Social Security benefits on top of the state or local government pension, which would have created a windfall of retirement income. The state put in place a formula that partially reduced the pension, but still provided workers with more retirement income when adding in the new Social Security benefit than the base pension would have allowed.

The formula slightly reduces contributions paid into the system and slightly reduces the benefit levels at retirement. When these integration factors were implemented, they represented meaningful adjustments – approximately ¼ of pension income. What remained in law, however, was the dollar amount of the offset, not a percentage based formula. Today, the adjustments are minor.

Integrated (High/Low) Contribution: You pay a lower SCERS rate on the portion of your salary up to a “breakage point” (tied to the SS wage base threshold) and a higher SCERS rate on the salary above that point. The “breakage point” is $161 per pay period, where a lower contribution rate applies up to that amount and a higher rate applies to the remaining retirement-applicable earnings. Under state law, member contribution rates are reduced by one-third of the regular contribution rate for the first $161 per pay period.

Social Security Reduction Factor Applies: When you retire, your monthly SCERS benefit allowance will be permanently reduced by a set Social Security Reduction Factor – a dollar amount determined by your Membership Category (Safety or Miscellaneous) and age at retirement multiplied by your years of SCERS-covered service. Under state law, the benefit is reduced by a percentage of $350 in monthly salary, resulting in a monthly benefit reduction of approximately $2-3 multiplied by the total years of service.

Congress recently passed legislation that makes significant changes to Social Security benefits for government workers whose employment is not covered by Social Security but may be eligible for Social Security benefits. Please note this law has no effect on most SCERS members.  More than 99% of SCERS members – including all Safety members – are covered by Social Security.

The Social Security Fairness Act, signed into law by President Biden on January 6, 2025, may affect a small number of SCERS retirees working in the Mission Oaks and Rio Linda Elverta recreation and parks districts. SCERS does not manage the changes provided by the new law or the potential adjustments to Social Security benefits. Signed into law on January 5, 2025, the Social Security Fairness Act (SSFA) eliminates the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), restoring full Social Security benefits to over 2.8 million public service workers, including teachers, police, and firefighters. 

Deferred Compensation Plan

A defined contribution plan, such as a Section 457 deferred compensation plan, works much differently than a Defined Benefit Pension Plan. Under a defined contribution plan, you choose how much to contribute toward your retirement savings. Contributions are deducted from your pay on a pre-tax basis. You decided how to invest the contributions, and your plan account balance fluctuates with the performance of your investments over time. The amount of money available upon retirement is based on your actual account balance–and it’s up to you to make that money last through your retirement.

As a County employee, you have an opportunity to enroll in the County of Sacramento 457(b) Deferred Compensation Plan. Deferred Compensation is a voluntary retirement savings plan that offers a convenient, tax-advantaged way to save for your retirement. For more information on the County’s Plan, contact the Department of Personnel Services, Deferred Compensation Office: 700 H Street, Sacramento, CA, 95814; phone number: (916) 874-2020.

If you are not a County employee, your Participating Employer may provide a similar tax-advantaged savings program. Contact your human resources or payroll department for more information.