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Supplemental benefit program helps guard against inflation

Pension Sense blog | May 27, 2022

Calculator with "inflation" typed on screen and hundred dollar bills in the background

Soaring prices for food, gas and other goods have almost everyone worried, especially those with fixed incomes.

We offer two programs intended to ease the impact of inflation on our members.

First is the simple benefit adjustment, which provides a 2% increase to your monthly pension every September. This increase is based on your initial allowance and is not compounded as benefits increase.

Next are supplemental benefits. The Supplemental Benefit Maintenance Account is one of the strongest anti-inflation programs operated by any public pension in the nation. Its goal is to provide supplemental payments to maintain 85% of the purchasing power of your initial allowance.

What is purchasing power? It’s a measure of how your retirement benefit keeps pace with inflation. For example, if your benefit stays the same, but the cost of items doubles, your purchasing power is only 50% of what it was originally.

The amount of the supplemental payment is based on inflation as measured by changes in the All-Urban California Consumer Price Index, which is calculated by the Division of Labor Statistics and Research in the California Department of Industrial Relations. Each year, CalSTRS calculates the inflation for the previous fiscal year and assesses the level of purchasing power for CalSTRS retirees. Eligible members automatically receive SBMA benefits as part of their pension and don't need to contact CalSTRS for enrollment.

Once calculated, payments are made quarterly on the first of the months of October, January, April and July.

To learn more about supplemental payments, please read our Supplemental Payments publication. Also see “Protecting against inflation during retirement” on page 84 of our Member Handbook.