Editorial note: This page is educational and is not legal, tax, or financial advice. CalSTRS benefit adjustments and Supplemental Benefit Maintenance Account payments are set by California Education Code and depend on your retirement effective date and initial monthly benefit. Confirm your specific figures on your my CalSTRS account and consult a California licensed CPA or attorney before acting on any number shown here.
Last updated: August 13, 2026 · By Gold California Editorial
Quick answer: The CalSTRS annual benefit adjustment is a flat 2 percent of the initial benefit, added each September 1 after the first anniversary of retirement, per Education Code sections 22140 and 24402. It is simple, not compounded, and it is not tied to changes in the cost of living. If accumulated inflation still pushes a retiree's purchasing power below 85 percent of the initial benefit, quarterly supplemental payments from school lands revenue and the Supplemental Benefit Maintenance Account restore purchasing power up to that floor under Education Code section 24415.
Short on time? The essentials
- CalSTRS uses a 2 percent annual benefit adjustment defined by Education Code sections 22140 and 22141, applied under section 24402 to service, disability, family, and survivor allowances.
- The adjustment is SIMPLE, not compounded, per Education Code section 22140(b), and applies to the initial monthly benefit each year.
- Payment timing: added September 1 following the first anniversary of retirement, with the increased amount appearing in the October 1 payment, per the CalSTRS inflation protection page.
- Under the CalSTRS Funding Plan (Assembly Bill 1469, 2014), the 2 percent adjustment is contractually vested for members who retire on or after January 1, 2014.
- Purchasing Power Protection: quarterly supplemental payments restore purchasing power up to 85 percent of the initial benefit under Education Code section 24415.
- Two funding sources: school lands revenue under sections 24412 and 24413, and the Supplemental Benefit Maintenance Account under sections 24415, 24415.5, 24416, and 24417.
- The purchasing power calculation uses the All Urban California Consumer Price Index (CCPI) from the California Department of Industrial Relations.
- Supplemental payments are quarterly on October 1, January 1, April 1, and July 1, and are not guaranteed beyond available funds.
- Compare vs CalPERS: CalPERS COLA is COMPOUNDED up to a 2, 3, 4, or 5 percent contract cap; CalSTRS is SIMPLE at a flat 2 percent. The two systems are not interchangeable.
This page explains how the CalSTRS annual benefit adjustment works and how the Supplemental Benefit Maintenance Account restores purchasing power when inflation runs faster than a flat 2 percent per year. Both mechanisms are set by California Education Code and by the CalSTRS Funding Plan.
The 2 percent annual benefit adjustment and the supplemental payments are two separate benefits. Confusing the two is the most common source of wrong expectations about how a CalSTRS benefit grows over a long retirement.
What the CalSTRS 2 percent simple COLA is
The CalSTRS 2 percent simple annual benefit adjustment is a flat percentage of the initial monthly benefit, added each September 1 after the first anniversary of retirement. It is often called a cost-of-living adjustment, but it is not indexed to the Consumer Price Index and it does not compound.
Under Education Code section 22140(a), the improvement factor means an increase of 2 percent in monthly allowances, added on September 1 commencing the first anniversary of the effective date of retirement (source: California Education Code Section 22140). Section 22140(b) states that the improvement factor may not be compounded.
Section 24402 applies the improvement factor to service retirement allowances, disability allowances, disability retirement allowances, family allowances, and survivor benefit allowances payable under the Defined Benefit Program (source: California Education Code Section 24402). The same section extends the factor to option beneficiary allowances under sections 24300, 24300.1, 24307, and 24332.
Statutory basis in Education Code sections 22140, 22141 and 24402
Three Education Code sections together define the CalSTRS 2 percent simple annual benefit adjustment. Section 22140 sets the baseline improvement factor for allowances under the Defined Benefit Program. Section 22141 sets the improvement factor for specific benefit sections that were enacted after 1981.
Section 22141 applies the 2 percent improvement factor to benefits under sections 24408 and 24409 for each year commencing September 1, 1981, and to sections 24410.5, 24410.6, and 24410.7 for later commencement dates (source: California Education Code Section 22141). Section 22141 also confirms that the improvement factor is not compounded.
Section 24402 is the operative section that says which benefits get the improvement factor. All service, disability, family, and survivor allowances are covered. The section excludes annuities payable from accumulated annuity deposit contributions on the effective date of retirement.
Assume a California teacher retired March 15, 2020 with an initial monthly benefit of $4,000, under the CalSTRS Defined Benefit Program 2 percent age factor formula. The 2 percent simple annual adjustment equals 2 percent of the initial $4,000 benefit, or $80 per year.
Because the retirement was before September 1, 2020, the first adjustment is added on September 1, 2021, per Education Code section 22140(a). The increased amount appears in the October 1, 2021 payment. Subsequent $80 increases are added on September 1 each year, per the CalSTRS inflation protection page.
After five annual adjustments (September 2021 through September 2025), this retiree's monthly benefit has grown from $4,000 to $4,400, a $400 or 10.0 percent increase over five years. Confirm your specific initial monthly benefit and adjustment history in your my CalSTRS account.
When your first 2 percent adjustment appears
The 2 percent annual benefit adjustment is added each September 1, but only after the first anniversary of retirement. A retirement date before September 1 receives the first adjustment on September 1 of the following calendar year, per the CalSTRS inflation protection page.
The amount appears in the October 1 monthly payment. A retiree with a March 15, 2024 effective date sees the first adjustment on September 1, 2025, and it lands in the October 1, 2025 payment (source: CalSTRS, Inflation Protection).
Retirees whose effective date falls between September and December receive their annual adjustment starting the following October. This timing rule matters when comparing benefit statements across a group of colleagues who retired in different months of the same year.
Simple math versus compound math on a base benefit
Simple math applies the same dollar amount each year, based on the initial monthly benefit. Compound math applies the percentage to a rising base, so the dollar amount grows every year.
On a $4,000 initial monthly benefit, a flat 2 percent simple adjustment adds $80 per year, every year. After ten years the benefit reaches $4,800. After twenty years the benefit reaches $5,600. The dollar amount added never changes because the base for the calculation is fixed.
A hypothetical 2 percent compound calculation on the same $4,000 base would add $80 in year 1, $81.60 in year 2, $83.23 in year 3, and so on. After ten years the compound benefit reaches about $4,876. After twenty years the compound benefit reaches about $5,946. The illustration below compares the two math approaches on a $1,000 base over twenty years.
Vesting under the CalSTRS Funding Plan
The CalSTRS Funding Plan was enacted by Assembly Bill 1469 in 2014. Under Education Code section 22141(b), the 2 percent improvement factor vests for members who paid the increased member contributions required by section 22901.7. In practice, this means the 2 percent adjustment is contractually protected for members who retire on or after January 1, 2014.
For members who retired before January 1, 2014, the improvement factor is not contractually vested. Section 22140(e) and section 22141(d) both reserve the Legislature's right to adjust the improvement factor up or down as economic conditions dictate. The CalSTRS inflation protection page notes that the Legislature has never reduced the annual benefit adjustment.
Vesting under the Funding Plan does not extend to the supplemental payments discussed in the next section. Those payments remain subject to available funds and are not contractually guaranteed at any purchasing power level.
What the Supplemental Benefit Maintenance Account does
The Supplemental Benefit Maintenance Account is a separate account within the Teachers' Retirement Fund that funds quarterly supplemental payments when a retiree's purchasing power falls below the 85 percent floor. It is authorized by Education Code sections 24415, 24415.5, 24416, and 24417.
Two revenue streams feed the supplemental payment system. School lands revenue under sections 24412 and 24413 provides the first tier, targeting an 80 percent purchasing power floor. The SBMA provides the second tier. Each July 1, the state contributes 2.5 percent of the prior fiscal year annual earnings of all CalSTRS members (source: CalSTRS, Supplemental Payments Funding Information and Estimation, FY 2025 to 2026, Revised 06/2026).
Chapter 751, Statutes of 2008, authorized the Teachers' Retirement Board to adjust the SBMA payments to no less than 80 percent and no more than 85 percent of the purchasing power of the initial monthly benefit, based on actuarial projections. The Board currently sets the floor at 85 percent, per the CalSTRS inflation protection page.
How the 85 percent purchasing power floor is calculated
Purchasing power is a measurement of how a retirement benefit keeps pace with inflation. If the benefit stays the same in dollars but consumer prices rise, the real value of the benefit falls. CalSTRS measures the change in prices using the All Urban California Consumer Price Index, published by the California Department of Industrial Relations, Bureau of Labor Statistics.
Under Education Code section 24415(b), the purchasing power calculation for each retiree is based on the change in the All Urban California CPI. The comparison runs from June of the calendar year of retirement to June of the fiscal year before distribution (source: California Education Code Section 24415). The formula sequentially applies the 2 percent improvement factor, then the school lands revenue tier, then the SBMA tier.
When the sequential application still leaves a benefit below 85 percent of the initial purchasing power, the SBMA fills the gap, subject to available funds. Payments are made in quarterly installments on October 1, January 1, April 1, and July 1, per the CalSTRS Supplemental Payments publication.
Assume a California teacher retired June 30, 1998 with an initial monthly benefit of $3,000. After 27 years of 2 percent simple adjustments, the current monthly benefit equals $3,000 plus 27 times $60, or $4,620. That is a 54.0 percent increase over 27 years.
If the All Urban California CPI has risen more than 54.0 percent between June 1998 and June 2025, the purchasing power of the current benefit is below 100 percent of the initial benefit. When the sequential calculation under Education Code section 24415(b) shows the benefit below 85 percent of initial purchasing power, the SBMA issues quarterly supplemental payments to close the gap.
Actual amounts depend on published CCPI values, prior supplemental payments, and available SBMA funds each fiscal year. Confirm your specific figures in your my CalSTRS account and in the CalSTRS Supplemental Payments: Funding Information and Estimation publication, which includes worksheets to estimate supplemental payments.
The Senate Bill 868 increase for pre-1999 retirees
Senate Bill 868 (Chapter 818, Statutes of 2022), codified at Education Code section 24410.8, provided additional SBMA-funded benefits effective July 1, 2023. The payments are quarterly and target retired members, nonmember spouses, disabled members, and beneficiaries whose benefit effective, disability, or death date fell before January 1, 1999.
| Period of retirement, disability, or death | Percentage increase | Payment mechanism |
|---|---|---|
| Before January 1, 1980 | 15.0 percent | Quarterly, from SBMA, not part of base benefit |
| January 1, 1980 through December 31, 1989 | 10.0 percent | Quarterly, from SBMA, not part of base benefit |
| January 1, 1990 through December 31, 1998 | 5.0 percent | Quarterly, from SBMA, not part of base benefit |
| After December 31, 1998 | 0.0 percent | No SB 868 increase |
Source: California Education Code Section 24410.8 (added by SB 868, Chapter 818, Statutes of 2022); CalSTRS, Supplemental Payments: Funding Information and Estimation publication, Fiscal Year 2025 to 2026, revised 06/2026. Checked August 2026.
The SB 868 increase was calculated on the total benefit being paid on July 1, 2023. That base includes all prior benefit increases and the monthly equivalent of any purchasing power payments. It excludes annuities payable from accumulated annuity deposit contributions and tax-sheltered annuity contributions. The increase is not part of the base benefit and remains payable only to the extent that SBMA funds are available.
CalSTRS 2 percent simple versus CalPERS COLA compounded
CalSTRS and CalPERS both provide an inflation adjustment on top of the base retirement benefit, but the math and the statutory basis are different. Do not assume a CalSTRS retiree and a CalPERS retiree with the same starting benefit receive the same adjustment over time.
| Feature | CalSTRS Defined Benefit | CalPERS defined benefit |
|---|---|---|
| Statutory basis | Education Code sections 22140, 22141, 24402 | Government Code sections 21310 through 21337.1 |
| Annual factor | Flat 2 percent of initial monthly benefit | Lesser of CPI-U (1967 base) rate of inflation or contract cap |
| Contract cap variability | Not applicable; 2 percent is uniform | 2, 3, 4, or 5 percent depending on employer contract |
| Compounding | NOT compounded; simple math on initial benefit | COMPOUNDED; each year applies to prior adjusted allowance |
| Payment timing | September 1, appears in October 1 payment | May 1 warrant |
| First year eligible | September 1 after first anniversary of retirement | Second calendar year after retirement |
| Inflation floor mechanism | Supplemental Payments (school lands revenue plus SBMA) to 85 percent | PPPA to 75 percent (state and school) or 80 percent (public agency) |
| Inflation index used for floor | All Urban California CPI (CCPI), California Department of Industrial Relations | CPI-U (1967 base), Bureau of Labor Statistics |
Sources: California Education Code sections 22140, 22141, 24402, and 24415 (leginfo.legislature.ca.gov); CalPERS, Cost-of-Living Adjustments; CalPERS, Purchasing Power Protection Allowance; California Government Code section 21329. All checked August 2026.
The compounding difference matters most in high-inflation periods. When CPI runs above 2 percent for many years, a CalPERS 2 percent compounded COLA grows the dollar amount every year, while a CalSTRS 2 percent simple adjustment adds the same dollar amount every year. The SBMA is what keeps the CalSTRS benefit from falling below 85 percent of its initial purchasing power under those conditions.
How to check your 2 percent adjustment and any supplemental payment
The steps below outline how a CalSTRS retiree confirms the annual 2 percent benefit adjustment and any SBMA supplemental payment. They describe the general mechanics; consult CalSTRS customer service for figures specific to your account.
- Find your CalSTRS retirement effective date and initial monthly benefit. Your original retirement election paperwork, your annual member statement, or your my CalSTRS account online shows both. The effective date determines the first September 1 adjustment date and the CCPI base year for purchasing power calculations.
- Compute your annual improvement amount. Multiply your initial monthly benefit by 2 percent. That fixed dollar amount is added each September 1 after the first anniversary of retirement, per Education Code section 22140(a).
- Compare your September and October payments. The October 1 payment should reflect the added 2 percent amount. If the dollar difference does not match your calculation, verify that the September 1 timing rule was applied to your effective date.
- Check for quarterly supplemental payments. Supplemental payments are issued in October, January, April, and July. They appear as separate line items from the base monthly benefit. Their amounts depend on the SBMA calculation for the fiscal year.
- Read the CalSTRS Supplemental Payments publication. The publication, updated annually and available on the CalSTRS supplemental payments page, contains worksheets to estimate your quarterly supplemental payment based on published CCPI values and your retirement year.
- Call CalSTRS or use my CalSTRS if the math does not match. The CalSTRS Customer Service center can walk through your specific initial benefit, adjustment history, and any supplemental payment. Rounding at each step can produce small differences between a hand calculation and the printed benefit.
None of these steps replaces confirmation from CalSTRS. A licensed California CPA or a fiduciary financial planner can help you fit the 2 percent adjustment and any SBMA payments into your broader retirement income plan.
When this page does not answer your question
This page covers the CalSTRS Defined Benefit Program 2 percent simple annual benefit adjustment and the Supplemental Benefit Maintenance Account. It does not cover several adjacent topics that are worth flagging so a reader does not draw the wrong conclusion from what is here.
- CalPERS COLA and PPPA. CalPERS uses a compounded COLA under Government Code section 21329 and a separate Purchasing Power Protection Allowance under sections 21337 and 21337.1. Different statutes, different math. See the sibling CalPERS page.
- UC Retirement Plan COLA. The University of California pension plan follows UC Regents' rules under a separate governance structure. Its COLA and floor mechanics differ from CalSTRS. See the sibling UC page.
- CalSTRS Defined Benefit Supplement Program. The DBS program is a separate cash balance program and its own rules for interest crediting apply. It is not the Defined Benefit Program discussed here.
- CalSTRS Cash Balance Benefit Program. Part-time educators may participate in this alternative plan, which is separately funded and has separate crediting rules.
- Federal Social Security COLA. The Social Security cost-of-living adjustment is announced by the Social Security Administration each October under the CPI-W (federal) index. Many CalSTRS members are covered by the Social Security noncovered rules and do not receive a Social Security benefit based on CalSTRS earnings.
- Predictions of future SBMA levels. This page does not predict what future purchasing power levels will be. The CalSTRS Actuarial Office publishes periodic actuarial valuations that include long-range assumptions; those are assumption sets, not forecasts.
None of these situations replaces professional advice. A California CPA or a fiduciary planner should confirm the numbers before you assume a specific outcome for your retirement income.
CalSTRS 2 percent simple COLA, answered
Is the CalSTRS 2 percent annual benefit adjustment the same as a CalPERS COLA?
No. CalSTRS applies a flat 2 percent of the initial monthly benefit each year under Education Code section 22140(b), and it does not compound. CalPERS applies the lesser of the CPI-U change or the employer contract cap of 2, 3, 4, or 5 percent, and it does compound. The two systems use different statutes, different indexes, and different math.
When does my first 2 percent adjustment appear?
On the October 1 monthly payment following the first September 1 after your retirement effective date, per Education Code section 22140(a) and the CalSTRS inflation protection page. A retirement effective before September 1 receives the first adjustment on September 1 of the following calendar year. A retirement effective on or after September 1 waits until September 1 of the year after that.
Does the CalSTRS 2 percent annual benefit adjustment compound?
No. Education Code section 22140(b) states that the improvement factor may not be compounded. The 2 percent is calculated on the initial monthly benefit each year, so the dollar amount added stays the same. Section 22141(a) restates the no-compounding rule for the benefit sections it covers.
What is the difference between the 2 percent adjustment and a supplemental payment?
The 2 percent adjustment is a permanent monthly benefit increase under Education Code section 24402. Supplemental payments are quarterly amounts issued from the SBMA under Education Code sections 24415 through 24417 when a retiree's purchasing power falls below 85 percent of the initial benefit. Supplemental payments are not part of the base benefit and are subject to available funds.
Is the 2 percent adjustment guaranteed?
For members who retire on or after January 1, 2014, yes. The CalSTRS Funding Plan (Assembly Bill 1469, 2014) makes the 2 percent adjustment a contractual right under Education Code section 22141(b). It vests for members who paid the increased contributions required by section 22901.7.
For members who retired before January 1, 2014, the Legislature reserves the right to adjust the improvement factor as economic conditions dictate under section 22140(e). The CalSTRS inflation protection page states the Legislature has never reduced the annual benefit adjustment.
Which inflation index does CalSTRS use for the SBMA purchasing power calculation?
The All Urban California Consumer Price Index (CCPI), calculated by the Division of Labor Statistics and Research in the California Department of Industrial Relations. Under Education Code section 24415(b), the purchasing power calculation uses the change in the CCPI between June of the calendar year of retirement and June of the fiscal year preceding the fiscal year of distribution.
Am I eligible for supplemental payments?
You are eligible if the sequential application of your annual 2 percent adjustment and any school lands revenue payments leaves your benefit below 85 percent of its initial purchasing power, and if SBMA funds are available. The CalSTRS inflation protection page publishes an eligibility chart by retirement year. Confirm your specific eligibility on your my CalSTRS account.
What did Senate Bill 868 (2022) change for pre-1999 CalSTRS retirees?
SB 868, codified at Education Code section 24410.8, added quarterly SBMA-funded increases effective July 1, 2023, for retired members, nonmember spouses, disabled members, and beneficiaries whose benefit effective, disability, or death date fell before January 1, 1999. The increases are 15.0 percent for pre-1980 dates, 10.0 percent for 1980 through 1989, and 5.0 percent for 1990 through 1998. They are not part of the base benefit and are subject to available SBMA funds.
Sources
- California Education Code Section 22140 (improvement factor, Defined Benefit Program). Defines the 2 percent improvement factor, the September 1 timing rule, and the no-compounding rule. Checked August 2026.
- California Education Code Section 22141 (improvement factor, specific benefit sections). Applies the 2 percent factor to benefits under sections 24408, 24409, 24410.5, 24410.6, and 24410.7 and confirms vesting under the CalSTRS Funding Plan. Checked August 2026.
- California Education Code Section 24402 (application of the improvement factor). Applies the improvement factor to service retirement, disability, family, and survivor allowances. Checked August 2026.
- California Education Code Section 24415 (Supplemental Benefit Maintenance Account distribution). Sets the 85 percent purchasing power floor and the CCPI-based calculation for quarterly SBMA payments. Checked August 2026.
- CalSTRS, Inflation Protection. Confirms the September 1 timing rule, the October 1 payment appearance, the no-compounding rule, the 85 percent purchasing power floor, and the SBMA eligibility chart. Checked August 2026.
- CalSTRS, Supplemental Payments: Funding Information and Estimation publication page. Links to the annual CalSTRS Supplemental Payments booklet with estimation worksheets. Checked August 2026.
- CalSTRS, Supplemental Payments: Funding Information and Estimation, Fiscal Year 2025 to 2026, Revised 06/2026. Confirms the two revenue streams (school lands and SBMA), the state 2.5 percent annual contribution, the 80 percent school lands target, the 85 percent SBMA target, the quarterly October, January, April, and July payment dates, and the SB 868 cohort percentages. Checked August 2026.
- CalPERS, Cost-of-Living Adjustments (COLA). Confirms CalPERS uses a compounded COLA at the lesser of CPI-U (1967 base) change or the employer contract cap of 2, 3, 4, or 5 percent. Used to compare with the CalSTRS simple 2 percent. Checked August 2026.
- California Government Code Section 21329 (CalPERS COLA limits). Establishes the 2 percent default cap for CalPERS state and school members, with compounding. Cross-reference for the CalSTRS versus CalPERS comparison. Checked August 2026.
