How Does AB 340 (CalSTRS Reform) Affect You?
The California Public Employees' Pension Reform Act of 2013
There are several handy resources available online to help sort out the details of recent reform in the California State Teachers' Retirement System, most notably the CalSTRS website itself, where they have gathered links on the subject in their newsroom.
Among their resources is a summary chart presenting each reform summarized, how it changes the current rules, and who is impacted. Below, I’ve attempted to reorganize that summary into three basic member categories: current members, retired members age 60 and up, and new members hired after this year. The reforms enumerated in AB 340, the California Public Employees’ Pension Reform Act of 2013, take effect on January 1, 2013.
Current members, including part-time faculty, will not be able to teach (and get paid) for the first 180 days after retirement without it affecting your retirement benefit (more specifically, you can teach and get paid, but your CalSTRS benefit will be reduced by any income earned in this period). New pension enhancements will not be retroactive for current or new members.
Additionally, current members and new will no longer be able to purchase “air time” as of January 1, 2013. If you'd like to purchase air-time, CalSTRS must receive your request by 5pm on December 31, 2012 (previously, you could purchase up to five years of “nonqualified service”; CalSTRS reports that only 700 people do this each year statewide). All other types of permissive service credit purchases are still OK, so check out the CalSTRS website for details if you’re worried about this.
See the CalSTRS information for additional modifications that apply to current and new members.
New members who are hired to perform CalSTRS creditable activities on and after January 1, 2013 (including part-time faculty) will feel the most pain, of course. Along with the cutbacks mentioned already, new members will have to work longer to qualify for the same age factors that current and retired members enjoy. The “normal” retirement age will be calculated at 62 rather than 60, and the age factor benefit will max out at 2.4% by age 65 rather than age 63, like it does now. Also, new members will have to wait until 55 to retire, no matter how long they’ve served (current members may retire at age 50 with 30 years of service).
The other big reform that will impact new members on a large scale will be the new three-year calculation, rather than one-year, for determining final compensation for members retiring with twenty-five years of service. According to CalSTRS, a little more than half of retirees in recent years have qualified for the one-year calculation.
Other pension reforms that will impact new members (but to a minimal degree for most) include: equal cost-sharing of pensions (not actually anticipated to be any more $ than members already contribute at this time); an initial cap of $136,440 on compensation for calculating a defined benefit; elimination of replacement benefits program; and the exclusion of allowances, bonuses and cash in lieu from counting toward defined benefits.
Members age 60 or older who retired as of 2012
One major change: current retirees will no longer be grandfathered into future benefits that might be added to STRS. Faculty retired before 2013 who are 60 and older are exempt from the 180-day “zero-dollar” benefit limit that kicks in for everyone else as of January 1.
by Diane Putnam