Alternate Retirement Program (ARP)
The Alternate Retirement Program, or ARP, is a retirement savings program in which certain State employees are automatically enrolled between August 11, 2004, and June 30, 2013 for their first two years of employment with the State of California. ARP provides up to two years of retirement savings in place of retirement service credit under the California Public Employees' Retirement System (CalPERS.) Even though employees don't earn retirement service credit with CalPERS during this period, employees still have CalPERS membership and are entitled to all other CalPERS benefits.
Note: Employees who become CalPERS eligible on or after July 1, 2013 are not subject to ARP. This includes PST employees who were employed prior to July 1, 2013 and become CalPERS eligible on or after July 1, 2013
Senate Bill 1105, effective August 11, 2004
CalHR Law 19999.3
ARP Eligibility Worksheet
CalHR provides an online ARP Eligibility Worksheet to help personnel offices decide whether an employee must be placed in ARP.
Note: This worksheet is obsolete for any employee who becomes CalPERS eligible on or after July 1, 2013. It should only be used for retroactive corrections to ARP.
Employees enrolled in ARP are covered by Social Security. ARP coverage applies to new State miscellaneous and industrial employees hired between August 11, 2004 and June 30, 2013 and lasts for 24 months from the date the employee first qualified for CalPERS membership (typically the employee's original hire date).
A separation doesn't alter the 24 month period. If an employee separates and returns to a miscellaneous or industrial position within the 24 months of their enrollment to ARP, they go back in ARP to complete their 24 month period.
Employees are covered by ARP if they meet all the following conditions:
- First hired by the State between August 11, 2004 and June 30, 2013, and
- Qualify for CalPERS membership as a State Miscellaneous or State Industrial category; and
- Meet the definition of "State employee" under GC Section 19815.
Employees aren't in ARP if they have State experience prior to August 11, 2004, or were hired after June 30, 2013, this includes:
- Part-Time, Seasonal, or Temporary (PST) experience (including State employment at a DAA Fair)
- Student Assistant experience with a State Agency
- Youth Aid experience
The following employees are not subject to ARP:
- Employees who become CalPERS eligible on or after July 1, 2013
- Current or prior members of CalPERS
- Members of a CalPERS reciprocal retirement system within the prior six months
- Members of the Judges' Retirement System (JRS), Legislators' Retirement System (LRS), California State Teachers' Retirement System, or the University of California Retirement Plan
- Employed by the California State University (CSU Student Assistant employment doesn't count)
- Employed by the California Legislative and Judicial branch of government
- Employed as a California Highway Patrol Cadet
- Qualify for CalPERS membership in the State Safety, State Patrol, or State Peace Officer/Firefighter categories
- Part-Time California National Guard member who elected CalPERS membership
- Non-resident aliens employed on a F1, J-1, M-1, or Q-1 visa and not coordinated with Social Security
ARP enrollment is effective upon appointment for all employees who meet the criteria for ARP. Personnel departments are responsible for establishing ARP coverage for eligible employees. Use the ARP Eligibility Worksheet at calhr.ca.gov under "HR Professionals" to determine ARP eligibility and the proper ARP code.
Employees directly appointed by the Governor aren't automatically covered by CalPERS, but have the option to become a member (see GC section 2032[a].) If they elect to become a member and don't have anything in their employment history that excludes them form ARP, their two year ARP enrollment begins on the date they elect CalPERS membership.
Questions concerning personnel transaction processing should be directed to your assigned Personnel Specialist Representative at SCO. Payroll processing questions should be directed to SCO at (916) 372-7200.
ARP has three phases that span a four year period:
Employees contribute to ARP for the first 24 months from CalPERS eligibility and ARP enrollment. Employees don't earn CalPERS retirement service credit during this time; however, they are CalPERS members and entitled to all benefits such as health insurance.
Beginning at month 25, employees stop contributing to their ARP account and begin contributing to a CalPERS retirement account (deduction amount is the same.)
Employees have a three-month period beginning on the first day of month 47 through the last day month 49 to decide what happens to their ARP funds. Most employees have three options:
1. Transfer ARP to CalPERS to receive service credit for the time worked during Phase 1; or,
2. Take a lump-sum distribution of their ARP account, or
3. Transfer their ARP funds to a Savings Plus 401(k) account.
Employees receive a postcard at month 45, notifying them of their approaching election period (Phase III). Just prior to their election period, they'll receive their ARP Payout Election Notification Letter in the mail. The letter provides their election due date, details on their payout options, and instructions on making their election online or through the Savings Plus Service Center.
Go to SavingsPlusNow.com
ARP Tab, "How Does ARP Work?" for further details on the Phase III process and communications.
ARP to CalPERS Conversion
After month 24, SCO automatically processes a 505 transaction to change employees' ARP account code to the appropriate CalPERS retirement account code. Transactions are processed during the first week of the month for employees whose 24 months of ARP participation ended the prior month (refer to Personnel Letter 06-009). Turnaround PARs are generated from the 505-transaction mass update process.
When turnaround PARs are received, departments must
provide the employee with the CalPERS State Miscellaneous and Industrial Members Retirement Benefit Election Package
(PUB 52) available at calpers.ca.gov
under the "For Employers" tab, Employers Forms and Publications Directory.
ARP Waiting Period
Under IRS rules, ARP funds must remain in the ARP account for 24 months after they become CalPERS contributors. Employees continue to receive ARP statements during this time.
Separated employees are eligible to take a distribution of their ARP account, (refer to Section 1048 for further details.)
Employers are charged an administrative fee to cover costs associated with administering ARP. The fee amount is determined by applying a per deduction fee of $4.80 and multiplying the fee by the number of ARP deductions, including corrections, regardless of whether the transaction involves a positive or negative amount. The fee is assessed quarterly by the SCO.
Address and Name Changes
Employees currently working for the State must notify their departmental personnel/payroll office of an address change and complete an Employee Action Request (EAR Form).
Separated employees may update their address online, by phone, fax, or mail.
Employees should provide their full name, Social Security number, former and new address, daytime phone number (including area code), signature and date.
For name changes, employees should provide a copy of their marriage license, dissolution or court document authorizing the name change and a copy of their driver's license or picture ID.
Beneficiary Designation is automatic. Upon an employee's death, all benefits are distributed to their statutory survivors, according to the terms and conditions of the existing plan document. ARP death benefits are paid in the following order:
- Surviving spouse or registered domestic partner (whether or not the employee was still living together with the spouse/partner at the time of his/her death); or, if none,
- Natural and adopted children, including a natural child adopted by another, share and share alike; or, if none,
- Parents, share and share alike; or, if none,
- Brothers and sisters, share and share alike; or, if none,
- Employee's estate (if probated or subject to probate); or, if not,
- Employee's trust (if one exists); or, if not,
- Stepchildren, share and share alike; or, if none,
- Grandchildren, including step-grandchildren, share and share alike; or, if none,
- Nieces and nephews, share and share alike; or, if none,
- Great-grandchildren, share and share alike; or, if none,
- Cousins, share and share alike; or, if none,
- In accordance with state law for intestate estates.
Savings Plus issues annual statements reflecting employee contributions, earned interest, and their current balance. ARP Statements and Newsletters are mailed in August to the employee's address on record.
Employees must keep their address information updated, to insure receipt of their ARP Statement. Statements continue as long as the employee has a balance in their ARP account.
Payment/Distributions for Eligible Employees
Employees are eligible for a 100% distribution of their ARP account balance 90 days after permanent separation from all State employment or 90 days from the last transaction in their account (whichever is later).
Payment is issued no sooner than 90 days after the last contribution posts into or out of the employee's ARP account and their eligibility has been verified. All payments are issued via direct deposit to one financial institution of the employee's choice.
A 1099-R is issued by January 31 of the following year for tax reporting purposes. The 1099-R will apply to both Direct Payment and Direct Rollover to Other Entity (non-taxable event) payment options.
There are consequences for taking distribution of the ARP account upon separation. Employees are encouraged to carefully review their options prior to taking a distribution. Their decisions are irrevocable.
This payment method allows employees to receive their entire account balance. This payment is reported to the IRS as ordinary income. There is a mandatory 20% withholding for Federal income taxes.
State income taxes are withheld at a rate of married with three allowances unless the employee requests otherwise by completing a California State Withholding Certificate for Pension or Annuity Payments (DE-4P).
All payments are issued via direct deposit to one financial institution of the employee's choice. There is no fee for this electronic transfer.
Direct Rollover to Other Entity
This payment option allows employees to roll over funds from their ARP account to an Individual Retirement Account (IRA), 457, 401(k) Plan, or 403(b) Tax Sheltered Annuity as long as the entity sponsoring the plan accepts 401(a) funds.
If the employee is age 70½ or older and elects to rollover their funds, the Required Minimum Distribution (RMD) is processed and paid to them directly before the funds are rolled over to the new provider.
For employees who don't take a distribution upon separation, funds will remain in their ARP account until they reach their Phase III election period, where they must choose what happens to their ARP funds.
Eligibility to Contribute to a Savings Plus 401(k) Plan or 457 Plan
ARP employees are eligible to contribute to a Savings Plus 401(k) Plan and/or 457 Plan. To participate in Savings Plus employees enroll on line at SavingsPlusNow.com
or Contact Savings Plus
for more information.
Employees can roll their 401(k), 457 or 403(b) funds from another institution to their Savings Plus Plan. You may submit a rollover-in request online at SavingsPlusNow.com
Employees should review the Information Kit they receive from Savings Plus to select investment options available and manage their 401(k) Plan and/or 457 Plan.
Additional information and links to our investment providers, prospectus, and fund fact sheets are available at SavingsPlusNow.com
Savings Plus / ARP Phone:
916-324-2909 (HR pros only)