PPPA and COLA Update from CalPERS:
We (CalPERS) wanted to inform you about a change in the Purchasing Power Protection Allowance (PPPA) that goes into effect in January 2013. As a reminder, PPPA is a supplementary cost-of-living benefit payable over and above the annual Cost of Living Adjustment (COLA). Most members will not begin to be eligible for the PPPA adjustment until 25 to 30 years into retirement. In the past, the PPPA was calculated and reflected in checks each January, but due to legislation that CalPERS sponsored in recent years to make technical amendments to the law, we are required to make PPPA adjustments in May to coincide with the annual COLA. We made this change so the same measure of inflation could be used for the PPPA and COLA to ensure the adjustments are precise. In the past PPPA was based on estimated inflation amounts in January and later adjusted. This new process will provide more reliable numbers for our members. For 2013, CalPERS will calculate a retroactive adjustment to cover the four months of January through April of 2013. Pension law also dictates that CalPERS use the Consumer Price Index (CPI-U) for all U.S. cities, provided by the U.S. Department of Labor, Bureau of Labor Statistics, to determine the annual loss or gain of purchasing power. The benefit can increase or decrease, and under the change in timing a decrease could be offset by the annual COLA. About 45,000 members are expected to be eligible for PPPA this year.
Law Changes PPPA Assignment Date Expect Your PPPA in May, not January
For the last two decades, any increases (or decreases) to the amount of CalPERS retirees' PPPA, or "Purchasing Power Protection Allowance," were reflected in the January 1 benefit payment.
Senate Bill 1139, passed in 2010, changed the payment date. The PPPA benefit will now be paid annually in the May 1 benefit payment, to coincide with the annual cost-of-living (COLA) adjustment. The 2013 PPPA will begin with your May 1, 2013 benefit payment.
CalPERS will calculate a retroactive adjustment to cover the four months of January through April of 2013. The benefit can increase (or decrease) based on recent inflation; therefore, we will process your adjustment accordingly.
The Purchasing Power Protection Allowance (PPPA) is a supplementary cost-of-living benefit payable over and above the annual COLA. It restores up to 75 percent of the original purchasing power of the retirement benefit for retirees who have State or school service. It restores up to 80 percent of the original purchasing power of retirement benefits for retirees who have public agency service.
State law dictates that CalPERS use the Consumer Price Index (CPI-U) for all U.S. cities, provided by the U.S. Department of Labor, Bureau of Labor Statistics, to determine the annual loss (or gain) of purchasing power.
Your eligibility for the PPPA benefit is based on the year of your retirement, the cost-of-living adjustment you receive each May, and the extent of increase or decrease of your purchasing power. Based on recent historical rates of inflation, it could take approximately 25 to 30 years for a retiree, beneficiary or survivor to receive a PPPA adjustment.
If you have any questions regarding your PPPA benefit, please contact the Benefit Services Division at the following address:
P.O. Box 942716 Sacramento, California 94229-2716
You can also call CalPERS toll free at 888 CALPERS (or 888-225-7377).