Senate BillChaptered/SignedGovernment
SB 939: Public employees’ retirement: service credit: payments.
What SB 939 does, verified September 7, 2026
This bill aims to modify the public employees' retirement system by introducing stricter payment deadlines for service credit and contributions. Elections made on or after January 1, 2028, will require payment to be received by the system within 90 days of retirement or death. The payment deadline will apply to all types of elections, including those for normal contributions, arrears, absences, and public service. If a payment is not made within the specified timeframe, the service credit included in the election will be reduced or eliminated. The bill also limits the option for a member to reduce their allowance by the actuarial equivalent of any balance remaining unpaid to elections made on or after January 1, 2020. Additionally, the bill modifies the process for members who elect to receive credit for service under the system, requiring them to make payment within 90 days of retireme…
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Last action: Chaptered by Secretary of State. Chapter 110, Statutes of 2026. (2026-08-06)Alert me
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| Aug. 17, 2026 | Chaptered by Secretary of State. Chapter 110, Statutes of 2026. |
| Aug. 17, 2026 | Approved by the Governor. |
| Aug. 11, 2026 | Enrolled and presented to the Governor at 3 p.m. |
| Aug. 06, 2026 | Read third time. Passed. (Ayes 74. Noes 1. Page 6078.) Ordered to the Senate. |
| Aug. 06, 2026 | In Senate. Ordered to engrossing and enrolling. |
Latest bill textChaptered version, August 17, 2026 · 4,342 words
Senate Bill No. 939
CHAPTER 110
An act to amend Sections 20776, 21037, 21039, 21050, and 21073.1 of the Government Code, relating to public employees’ retirement.
[ Approved by Governor August 17, 2026. Filed with Secretary of State August 17, 2026. ]
LEGISLATIVE COUNSEL'S DIGEST
SB 939, Laird. Public employees’ retirement: service credit: payments.
(1) The Public Employees’ Retirement Law (PERL) creates the Public Employees’ Retirement System (PERS), which provides a defined benefit to members of the system based on final compensation, credited service, and age at retirement, subject to certain variations. PERL vests management and control of PERS in the Board of Administration.
Under that law, members may make certain elections, including elections to purchase service credit for various types of public service, upon payment of additional contributions. Existing law permits a member who retires before paying off the entire amount for service credit to pay the balance due by deductions from their retirement allowance equal to those authorized as payroll deductions, as specified. Under existing law, upon the death of that member, a survivor of the member, who is eligible for a monthly allowance, may elect to continue those deductions from the survivor’s allowance. Existing law authorizes the member, survivor, or beneficiary, as an alternative, on or after January 1, 2020, to elect to receive an allowance that is reduced by the actuarial equivalent of any balance remaining unpaid by the member.
This bill would limit that alternative option to elections made on or after January 1, 2020, with an initial effective date prior to January 1, 2028.
(2) Existing law provides that all elections taking effect on or after January 1, 2020, including elections for normal contributions, arrears contributions, absences, or public service become due and payable at the time of the member’s retirement or preretirement death.
This bill would require, for all elections with an effective date on or after January 1, 2028, except as specified, the member’s payment to be received by the system no later than 90 days after the member’s retirement effective date, or the survivor or beneficiary’s payment to be received by the system no later than 90 days after the date the notification of balance due is mailed. For any balance not paid, the service credit included in the election would be reduced or eliminated, as specified.
This bill would also require all contributions or service credit adjustments required by law or agreement with an effective date on or after January 1, 2028, to become due and payable at the time of retirement or preretirement death. The bill would require the member, survivor, or beneficiary to have their allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(3) Existing law permits a member of PERS who has elected to receive credit for service and who retires for disability, including a safety member who retires due to industrial disability, to elect to cancel the installments prospectively, in accordance with certain provisions. Existing law specifies that, for an election taking place on or after January 1, 2020, the amount remaining for normal contributions, arrears, contributions, absences, or public service for the election becomes due and payable at the time of the member’s retirement or preretirement death and provides that in these circumstances the member, survivor, or beneficiary allowance is reduced by the actuarial equivalent of any balance remaining unpaid by the member.
This bill would require, for any election with an effective date on or after January 1, 2028, except as specified, the member’s payment to be received by the system no later than 90 days after the member’s retirement effective date, or the survivor or beneficiary’s payment to be received by the system no later than 90 days after the date the notification of balance due is mailed. For any balance not paid, the service credit included in the election would be reduced or eliminated, as specified.
(4) Existing law specifies that an election by a member to receive credit for service under PERL is effective only if accompanied by a lump-sum payment or an authorization for payments, in accordance with regulations of the board. Existing law authorizes a member paying for credit for service in after-tax installments to suspend these payments for a period not to exceed 12 months, with payments automatically resuming at the end of the period, or earlier, if requested by the member. Under existing law, a member who retires during the suspension period may, prior to retirement, either make a lump-sum payment for the recalculated balance due or cancel installment payments, as specified. Existing law also provides a 3rd option, under which a member, on or after January 1, 2020, may elect to reduce their allowance by the actuarial equivalent of the recalculated balance remaining unpaid by the member. Under existing law, a member’s failure to make an election results in the resumption of installment payments as of the member’s retirement date, or for elections with an initial effective date on or after January 1, 2020, results in the allowance being reduced by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
This bill would limit that 3rd option to elections made on or after January 1, 2020, with a initial effective date prior to January 1, 2028. The bill would provide that if a member fails to make an election, any balance remaining unpaid at the time of retirement would become due and payable, as specified.
(5) The PERL establishes retirement formulas, known as the Second Tier, modified First Tier, and First Tier, which are applicable to specified members of the retirement system. Effective January 1, 2000, a member who received service credit subject to Second Tier benefits may elect to become subject to First Tier benefits and contribution rates. That law requires a member who elects to become subject to First Tier benefits to deposit accumulated contributions the member withdrew while they were subject to Second Tier benefits, plus interest, as specified, or alternatively, the deposit requirement may be satisfied by an election to reduce the member’s allowance by the actuarial equivalent of any balance remaining unpaid by the member at the time of the member’s retirement or preretirement death.
This bill would make that alternative provision applicable only to elections made prior to January 1, 2028.
Existing law specifies that, for a member who elects to receive First Tier credit on or after January 1, 2020, any unpaid balance of that member is due and payable at the time of the member’s retirement or preretirement death, with the member, survivor, or beneficiary’s allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
This bill would require for an election on or after January 1, 2028, the member’s payment to be received by the system no later than 90 days after the member’s retirement effective date, or the survivor or beneficiary’s payment to be received by the system no later than 90 days after the date the notification of balance due is mailed. For any balance not paid, the service credit included in the election would be adjusted, as specified.
The bill would make other related and clarifying changes.
The people of the State of California do enact as follows:
SECTION 1.
Section 20776 of the Government Code is amended to read:20776.
(a) If a basic death benefit becomes payable before the payment of the total amount the member elected to pay under any election with respect to normal contributions, arrears contributions, absences, or public service credit permitted under this part, the member’s entire compensation, or the service upon which that total amount was based, shall be included in the computation of the portion of the death benefit that is provided in subdivision (b) of Section 21532, and the unpaid balance of the total amount may not be paid to this system, nor may it be included in the member’s accumulated contributions that constitute a part of the basic death benefit.(b) Any balance of any total amount remaining unpaid at the death of the member on account of whom a special death benefit is payable or at the retirement of a member for industrial disability may be subject to Section 21037 or 21039 when payment of the balance would not increase the allowance payable. When the balance of the amount remaining unpaid would increase the allowance payable, the balance shall become due and payable immediately, except that the survivor of a member who died under circumstances under which a special death benefit is payable and who had authorized payroll deductions may elect to continue those deductions from the survivor allowance in lieu of the lump-sum payment. If the balance is not paid, the portion of the unpaid amount representing contributions on compensation earned in the membership applicable to the member at the time of injury resulting in death or disability shall be deducted from the benefit otherwise payable and this system shall be discharged from any liability for any annuity or benefit with respect to any remainder of the unpaid contribution.
(c) Any balance of the total amount remaining unpaid at the time of retirement for service or disability, or at death, with respect to which a benefit is payable under Section 21546, may be subject to Section 21037 or 21039 when payment of the balance would not increase the allowance payable. When the balance of the amount remaining unpaid would increase the allowance payable, the balance shall become due and payable immediately, except that the survivor of a member who died under circumstances under which a benefit under Section 21546 is payable and who had authorized payroll deductions may elect to continue those deductions from the survivor allowance in lieu of a lump-sum payment of the balance due. If the balance is not paid, the service credit included in the election shall be reduced in proportion to the balance of the total amount remaining unpaid and any service credit dependent on completion of payments eliminated for purposes of computing the allowance but not for purposes of determining entitlement to an allowance.
(d) Notwithstanding any provision of subdivision (b) or (c), a member who retires before payment of the total amount which the member elected to pay, may elect to pay the balance due, or the total amount if no payroll deductions had been made prior to retirement, by deductions from the member’s retirement allowance equal to those which the member authorized as payroll deductions. In that case, service credit included in the election may not be reduced, nor may any prior service dependent on completion of payments be eliminated for purposes of computing the allowance. Any balance of the total amount remaining unpaid upon the death of the member shall be treated in the same manner as unpaid balances are treated if a special death benefit is payable, except that the survivor of a retired member who had authorized deductions from their retirement allowance in accordance with this subdivision, and who is eligible for a monthly allowance, may elect to continue those deductions from the survivor’s allowance in lieu of the lump-sum payment otherwise required. Alternatively, on or after January 1, 2020, for elections with an initial effective date prior to January 1, 2028, the member, survivor, or beneficiary may elect to receive an allowance that is reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(e) Notwithstanding any other provision of this section, all elections with an effective date on or after January 1, 2020, and prior to January 1, 2028, including elections for normal contributions, arrears contributions, absences, or public service, shall become due and payable at the time of retirement or preretirement death. The member, survivor, or beneficiary shall have their allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member. This subdivision does not apply to elections made under Section 21027 or 21029 for retired members.
(f) Notwithstanding any other provision of this section, all contributions or service credit adjustments required by law or agreement with an effective date on or after January 1, 2028, shall become due and payable at the time of retirement or preretirement death. The member, survivor, or beneficiary shall have their allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(g) Notwithstanding any other provision of this section, all elections with an effective date on or after January 1, 2028, including elections for normal contributions, arrears contributions, absences, or public service, shall become due and payable at the time of retirement or preretirement death. The member’s payment must be received by the system no later than 90 days after the member’s retirement effective date. The survivor or beneficiary’s payment must be received by the system no later than 90 days after the date the notification of balance due is mailed. If the balance is not paid, the service credit included in the election shall be reduced in proportion to the balance of the total amount remaining unpaid and any service credit dependent on completion of payments eliminated for purposes of computing the allowance. This subdivision does not apply to elections made under Section 21027 or 21029 for retired members.
(h) Interest paid with respect to normal contributions, arrears contributions, absences, or public service credit permitted under this part, prior to date of retirement or death of the member, shall be credited to the member’s individual account. Interest paid after the date of retirement or death of the member shall be credited to the retirement fund pursuant to Section 20174.
SEC. 2.
Section 21037 of the Government Code is amended to read:21037.
Notwithstanding any other law, the following applies:(a) A member who has elected to receive credit for service by contributing in installments and who retires for disability on or after January 1, 2004, when the election for service credit does not increase the member’s allowance payable, may elect to cancel the installments prospectively. The member’s election may be received by the system no more than 30 days after the date on which the member’s retirement for disability is approved. The effective date of the member’s election shall be the effective date of the member’s retirement for disability. No refund of contributions paid in installments prior to the effective date of the member’s election may be payable to a member or retired member as a result of an election made by a member pursuant to this section.
(b) A member’s election pursuant to this section shall be void, and installment payments shall resume, upon a member’s reinstatement from retirement for disability. The remaining balance due shall be recalculated to include interest during the disability retirement period.
(c) On or after January 1, 2004, the survivor of a member who elected to receive credit for service by contributing in installments, when the survivor is eligible to receive an allowance subject to Section 21541, may elect to cancel the installments prospectively when the election for service credit does not increase the survivor’s allowance payable. The survivor’s election shall be received by the system no more than 30 days after the member’s date of death. The effective date of the survivor’s election shall be the member’s date of death. No refund of contributions paid in installments prior to the member’s date of death may be payable as a result of an election made by a survivor pursuant to this section.
(d) A survivor’s election pursuant to this section shall be void, and installment payments shall resume, upon a determination that the death was not industrial, following payment of a temporary special death benefit allowance, provided that the survivor is then entitled to a monthly allowance under Section 21546, 21547, 21547.7, or 21548. The remaining balance due shall be recalculated to include interest during the temporary special death benefit period.
(e) A member who retired for disability prior to January 1, 2004, or the survivor of a deceased disability retiree who began receiving a postretirement death benefit allowance prior to January 1, 2004, or the survivor of a member who began receiving an allowance subject to Section 21541 prior to January 1, 2004, may elect to cancel installments prospectively when the election for service credit does not increase the allowance payable. The effective date of the election shall be the date that the election is received by this system. No refund of contributions paid in installments prior to the effective date of the election may be payable pursuant to this section.
(f) Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2020, and prior to January 1, 2028, shall be subject to subdivision (e) of Section 20776.
(g) Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2028, shall be subject to subdivision (g) of Section 20776.
SEC. 3.
Section 21039 of the Government Code is amended to read:21039.
(a) Notwithstanding any other law, a safety member, as defined in subdivision (b) of Section 20371, who has elected to receive credit for service by making contributions in installment payments and who retires or has retired due to industrial disability while making those payments, may elect to cancel the payments prospectively if the election to receive credit for service does not increase the member’s allowance payable. The effective date of the member’s election to cancel payments shall be the first day of the month following receipt of the election by the system. No refund of contributions paid in installments prior to the effective date of the member’s election to cancel the payments shall be payable to a member or retired member as a result of an election made by a member pursuant to this section.(b) A member’s election pursuant to this section shall be void, and the installment payments shall resume, upon a member’s reinstatement from retirement for industrial disability. The remaining balance due shall be recalculated to include interest during the industrial disability retirement period.
(c) Except as set forth in subdivisions (d) and (e), nothing in this section shall be construed to limit any right or benefit granted pursuant to Section 20776 or 21037, as amended by Senate Bill 268 of the 2003–04 Regular Session.
(d) Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2020, and prior to January 1, 2028, shall be subject to subdivision (e) of Section 20776.
(e) Notwithstanding any other provision of this section, any election with an effective date on or after January 1, 2028, shall be subject to subdivision (g) of Section 20776.
SEC. 4.
Section 21050 of the Government Code is amended to read:21050.
(a) An election by a member to receive credit for service under this part, in addition to his or her current and prior service credit, shall be effective only if accompanied by a lump-sum payment or an authorization for payments, other than a lump-sum payment, in accordance with regulations of the board.(b) If a member electing to receive credit for service under this part is authorized to pay for that service in installment payments beginning on or after January 1, 2004, the amount of the installment payments shall include an actuarial adjustment, as determined by the chief actuary, as necessary to take into account the provisions of Section 21037. The amount of the actuarial adjustment may not exceed one-half of 1 percent of the total installment payment.
(c) (1) A member authorized to pay for credit for service in after-tax installments may elect in writing, including by verified electronic transaction, at any time prior to retirement, to suspend after-tax installment payments for a period not to exceed 12 months. Installment payments shall automatically resume at the end of the suspension period, or earlier if requested by the member. A member may not elect an additional suspension of those installment payments for the same service for three years following the resumption of installment payments.
(2) The balance due at the end of a suspension period shall be recalculated to include interest accrued during the suspension.
(3) (A) A member who retires during the suspension period may, prior to retirement, elect to do one of the following:
(i) Make a lump-sum payment for the recalculated balance due.
(ii) Cancel installment payments in the manner specified in subdivision (d).
(iii) On or after January 1, 2020, for elections with an initial effective date prior to January 1, 2028, reduce the member’s allowance by the actuarial equivalent of the recalculated balance remaining unpaid by the member.
(B) If a member fails to make an election under subparagraph (A), Section 20776 shall apply to any balance remaining unpaid at the time of retirement.
(d) A member authorized to pay for credit for service in after-tax installments may elect in writing, including by verified electronic transaction, at any time prior to retirement, to prospectively cancel payment of the remaining unpaid balance for those installment payments.
(1) An election shall be effective upon the earlier of the member’s retirement date, or the first day of the month following approval by the system of the election.
(2) Service credited to the member’s account shall be reduced in proportion to the balance of the total amount remaining unpaid on the effective date of the cancellation. If the member elects to cancel during or at the end of a suspension period, the balance shall include any interest accrued and unpaid during the suspension period.
(3) Installment payments shall not be canceled for any of the following:
(A) Contribution or service credit adjustments required by law or agreement.
(B) A tier election pursuant to Article 2 (commencing with Section 21070) of Chapter 12 of Part 3 of Division 5 of Title 2.
(C) The purchase of service credit subject to a community property division by way of court judgment, domestic relations, or other court order or settlement agreement.
(e) If a member who has not elected to suspend installment payments pursuant to subdivision (c) fails to make after-tax installment payments when due for a period of 12 months, the board may cancel the remaining unpaid balance in the same manner and with the same effect as if the member had elected to cancel their installment payments pursuant to subdivision (d).
(f) Prior to retirement, a member may elect to purchase that portion of the service credit not credited to his or her account as a result of a cancellation executed pursuant to subdivision (d) or (e). A member shall not make an election for three years following the effective date of the cancellation unless the member retires before the conclusion of that period.
(1) A member who elects to purchase that service credit shall contribute an amount equal to the sum of the following:
(A) The remaining unpaid balance of the canceled installment payments.
(B) Interest from the effective date of the cancellation until the date of completion of payment.
(C) If the member elects to contribute in installment payments, interest on the unpaid balance of the amount payable, beginning on the date of the election to receive credit through completion of payments.
(2) Notwithstanding Section 575.1 of Title 2 of the California Code of Regulations, the interest rate applicable to the amount due for this election shall be the interest rate applicable to the canceled installment payments.
SEC. 5.
Section 21073.1 of the Government Code is amended to read:21073.1.
(a) Effective January 1, 2000, a member who elects to receive service credit under Section 21354.1, as authorized by Section 21073.7, for time during which the member received service credit subject to Section 21076 or 21077, shall deposit an amount equal to any accumulated contributions the member withdrew pursuant to Section 20737, plus the interest that would have been credited to the member’s account had the contributions not been withdrawn, and any contributions the member would have made, plus an amount equal to the interest that would have been credited to those contributions, had the member not been subject to Section 21076 or 21077. This deposit shall be made in a lump sum or by installments, with interest through the completion of payments, over that period and subject to minimum payment amounts as may be prescribed by regulations of the board. Alternatively, for an election prior to January 1, 2028, this deposit requirement may be satisfied by an election to reduce the member’s allowance by the actuarial equivalent of any balance remaining unpaid by the member at the time of retirement or preretirement death.(b) Any unpaid balance with respect to an election with an effective date on or after January 1, 2020, shall become due and payable at the time of retirement or preretirement death.
(1) For elections prior to January 1, 2028, the member, survivor, or beneficiary shall have their allowance reduced by the actuarial equivalent of any balance remaining unpaid by the member.
(2) For elections on or after January 1, 2028, the member’s payment must be received by the system no later than 90 days after the member’s retirement effective date. The survivor or beneficiary’s payment must be received by the system no later than 90 days after the date the notification of balance due is mailed. If the balance is not paid, the service credit included in the election shall be adjusted in proportion to the balance of the total amount remaining unpaid and any service credit dependent on completion of payments shall remain subject to Section 21076 or 21077.
(c) The board, in addition to its general rulemaking authority under Section 20121, may adopt regulations that implement this section. Those regulations shall be exempt from review by the Office of Administrative Law. However, the board shall transmit those regulations to the Office of Administrative Law for filing with the Secretary of State and publication in the California Code of Regulations.
(d) The amendments to this section enacted during the first year of the 1999−2000 Regular Session are subject to the limitations set forth in Section 21251.13.
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