Retirement
Plans/Issues
April 25, 2014
Agenda
Which Retirement System Are You?
Defined Benefit vs Defined Contribution
STRS
• Contributions
• Qualifications
Election Process
• Reporting to STRS
• Compensation
Creditable/Non Creditable
Agenda
• Penalties
• Service Credit
Furlough Implications
• Retirees
PERS
• Contribution
• Qualifications
Exclusions
Agenda
• Compensation
Special Compensation
Non-Reportable
• Overtime
• Service Credit
Furlough Implications
• Election Process
• Retirees
OASDI/Medicare Qualification
 Questions
Agenda
Next “Concept” Classes
• Beginning Fall of 2014
Salary Computation
Payroll Deductions/Withholdings
Paying Employees
Employee Leaves/Benefits
Retirement Systems
• Open Labs after Each Concept Class
Which Retirement System?
Based on Position not the Person
• STRS:
Requires Credential, Permit or Certificate
 Teachers, Administrators, Nurses, Psychologist
• PERS:
Non-Credential, Meets PERS Qualification
 Bus Drivers, Office Staff, Instructional Aides
 Director of Human Resources, Chief Financial Officer
See Circular in Concepts Docs for Examples
Which Retirement System?
• Alternate Retirement/Social Security
Does Not Meet STRS or PERS Requirements
 Part Time Employees - Less Than 20 Hours
• Dual Retirement
Member in One System, Non-member in the
Other, or Member in both
Working in both Classified and Certificate
must have 2 Escape retirement tabs
Special Requirements
Defined Benefit vs Defined
Contribution
Defined Benefits Plans:
• STRS/PERS
• Promised Benefit Based on the Following
Factors:
–Age
–Years of Service
–Highest Final Compensation Pay
Defined Benefit vs Defined
Contribution
Defined Contribution Plans:
• 457B/403B
–Employee Contributions and Interest
–Employer Can Participate
STRS - Contributions
California State Teachers Retirement
System (STRS)
Common name CalSTRS or STRS
• Employee Contributions Currently 8%
Requires Legislation to Change
• Employer Contribution Currently 8.25%
• Reduced Workload Currently 10.276%
for Employer
STRS - Qualifications
(See Retirement Qualification Rules)
Full Time
• Immediately with Full Time 100% Contract
Part-time
• 50% - 99%
• Month following or
• STRS Permissive Election (Form ES 350) from
day one
- Election can be made at anytime
STRS Retirement Qualification Rules
STRS - Qualifications
Substitute - Long Term/Daily/Hourly
• 100 Days/600 Hours
• With a Single District
• 1st of the Following Month
• During Same FY
• Escape Report Retire01
STRS - Qualifications
Less Than 50% of Contract/Daily/Hourly
• After 60 Hours/10 Days
• 1st of Following Month, unless the following pay
period is in the new FY
• With a Single District
• Escape Report Retire02
Funds on Deposit From Previous STRS
Employment
• Compulsory Membership Regardless of the Type
of Employment Less Than Half Time
STRS - Election
CalSTRS Audits Election Procedures
Permissive Election
• Form ES 350 for Election
• Form is Irrevocable
 All Future Certificated Work is STRS
• No Earlier than 1st Day of Pay Period in which
Form is Signed
• Forward Form to County Office
 New – Need Employee 99 (Used to be NOPA)
STRS - Election
(See Join CalSTRS? Join CalPERS?)
• CalSTRS Member in PERS Qualifying
Classified Position
• 60 Days to Elect to Stay in STRS
• New ES-372 Form for Election
CalPERS Member in STRS Qualifying
Certificated Position
• 60 Days to Elect to Stay in PERS
• New ES-372 Form for Election
STRS - Election
 Required to Ensure Employees have been
Given the Election Form
 Recommended that Districts Retain Written
Acknowledgement (ES-373):
• Employees Advised Concerning Form
• Employees Given Form-372
 Forward Form-372 to County Office for
Review
(See Various Certificated Retirement Scenarios)
STRS - Reporting
Issues:
• Assignments Coding
–Are They Reporting Correctly
»Daily or Hourly
• Special Compensation
–Pension Spiking
»Enhancing Member’s Benefits
–Watch Contract Language
–Requires Backup to County Offices
STRS - Reporting
For “New” Members
‾ Only Creditable Special Compensation is
Longevity (See “T -chart”)
‾ Reported with Code “72”
SEW
• Secure Employer Web Site (SEW)
• To Check Retirement Status:
– https://sew.calstrs.com/CalSTRSSewWebUI/
Registration/Pages/Register.aspx
STRS – Compensation
(See CalSTRS Directive 2014-01)
 Creditable: Ed Code 22119.5, 22119.2 and
22119.3 (PEPRA has been added)
•
Contributions on Service in Excess of One
Year:


Creditable to the Defined Benefit Supplemental
(DBS) Program
Not Used in the Calculation for Final Compensation
Purposes
CalSTRS Directive 2014-01 p.1
(See Handout)
STRS – Compensation
(See Employers’ Creditable Compensation Guide for
existing members)
STRS Creditable Compensation Guide
• Lists What Types of Compensation
To Creditable Service
To Defined Benefit Program (DBS)
STRS – Compensation
Non Creditable:
• Position is Not Eligible for State
Apportionment
• Position Does Not Require Credential,
Certificate or Permit
• Position Does Not Meet Community College
Standards
Walk On Coaches are an example
 Walk On vs Contract (does not have a STRS
position with the Disrtict)
STRS – Compensation
Compensation Cap for CalSTRS 2% at 62Employee Portion Only
• Cap on Compensation is Equal to 120% of the 2013
Social Security Wage Base
• Will be Adjusted Annually Based on Changes to the
Consumer Price Index for All Urban Consumers
• Beginning July 1, 2013, the Compensation Cap for
CalSTRS 2% at 62 is $136,440
STRS – Service Credit
STRS Service Credit Calculation:
Pay Code
Service Credit Formula
0
1
2
3
Examples:
Earnings divided by Pay Rate
Earnings divided by Pay Rate divided by 12
Earnings divided by Pay Rate divided by 11
Earnings divided by Pay Rate divided by 10
Pay Rate
Cd
Earnings
Service Credit
32,445.84
0
99.68
0.0030
*2,187.50
3
1,093.75
0.0500
*1,093.75/2,187.50 = .5 then divided by 10 = .0500
STRS – Service Credit
Certificated Mandatory Furlough
• Preserve Pay Rate
Reduces Service Credit
• Preserve Service Credit
Change Calendars
Change Salary Schedules
Do Not Choose as Final Compensation Year
• For K-12, Reduction Cannot Result in Less than:
175 Days for Teachers
190 Days for Program Managers, Principals, Administrators
STRS – Retirees
CalSTRS Retirees can Work:
• Earnings Limitations
• FY13/14 = $39,903
• FY14/15 = $40,173
• After January 1, 2013, must wait 180 days before
returning to work with a CalSTRS employer
Will reduce their retirement benefit dollar for dollar
by an amount equal to their earnings
• Can Work as Classified Instructional Aide Only (Ed
Code 45134)
Watch Payroll Reporting
STRS – Retirees
Unused and Excess Sick Leave At Retirement
• Basic Sick Leave
One Day’s Paid Leave of Absence per Pay Period
• Excess Sick Leave
Number of Days in Excess of Basic Sick Leave
Employer Pays Present Value for Excess Sick Leave
• Service Credit:
(Basic Days + Excess Days) /Contract Base Days
• Employers Required to Report Basic & Excess
Separately at Retirement
(See Express Benefit Form SR0554E)
PERS - Contributions
California Public Employees’
Retirement System (CalPERS)
• Classic Member Currently 7%
• New Members Currently 6%
• Employers Contribution Currently
11.442%
Changes every fiscal year base on Actuary
Assessment
PERS rate is an employer pool rate
PERS – Qualifications
Membership Qualifications:
• Permanent Full-Time (40 hours per week)
• Part-Time Averaging at Least 20Hrs/Wk
for at least one year
• Full-Time Temp Assignment in Excess of 6
Months
• Currently a Member
PERS – Qualifications
Member Reciprocal Self-Certification
Form (PERS-CASD-801)
• Form is for employers to identify if new
employees are classic members due to
reciprocity
• Employers need to properly identify status
of members at the time of hire
(See Circular Letter 200-063-12 in Concepts Docs)
PERS - Qualifications
Temporary, Seasonal, On Call,
Emergency, Substitute or Irregular
Basis:
• Qualifies When Worked 1000 Hrs or 125
Days in Fiscal Year
• OT Hrs. ARE Included for Qualifying
Purposes
• Escape Report Retire09
PERS - Exclusions
 Membership Exclusions:
(Notice of Exclusion - AESD-139)
• Independent Contractors
• Elected or Appointed Officers (effect July
1, 1994)
• Students employed by a school district
they attend in a position established for
students only
PERS Retirement Verification
PERS–Enrollment/Change
Form
New Procedure
• Log into PERS
• Verify the employees PERS status
• Verify employees enrollment level
• Classic or New
• Print a snap shot of PERS record in PERS
• Log into Escape Employee Management
• Go to Retirement tab (based on PERS info)
• Setup employee’s retirement status
• Setup employee’s retirement level
PERS–Enrollment/Change
Form
New Procedure
• Forward to Maria in Business Services
• Required Prior to First Payroll
• PERS snap shot of employees PERS status/level
• Form example in Concepts – Retirement documentation
• Member Self - Certification Form
• Form example in Concepts - Retirement documentation
• PERS Enrollment/Change Form
• Form example in Concepts - Retirement documentation
PERS - Compensation
Compensation:
• Pay Rate – Member’s Normal Rate of Pay
or Base Pay
• Report as Earned According to Job
Classification
• Must be Reflected in Pay Schedule or
Bargaining Unit Agreement
• PERS Members Can Be Paid on Monthly
Basis, Hourly Basis or Daily Basis
PERS - Compensation
CalPERS Compensation Cap for New Members
(Employee Portion Only)
• Members Participating in Social Security
• Compensation Capped at the Social Security Wage Base
• For 2014 the Compensation Cap is $260,000
• Members Not Participating in Social Security
• Compensation Capped at 120% of the Social Security Wage
Base
• For 2014 the Compensation Cap is $138,077
PERS - Compensation
 CalPERS Compensation Cap for Classic
Members (Employee Portion Only)
• For 2014 the Compensation Cap is $126,000
• CalPERS Circular Letter 200-007-14
• Copy provided in Concepts – Retirement
Documentation
PERS - Reporting
Special Comp/Additional Pay
• Limited to Labor Policy
• Reported in Addition to and Separately from
Pay Rate
PERS - Reporting Special
Compensation
Commonly used Special Comp Pay
• Educational Pay
 Includes educational incentive pay
• Incentive Pay
 Includes bonus pay and longevity
• Premium/Temporary Upgrade Pay
 Includes working out of class
• Holiday Pay
 When employees are required to work during scheduled
holidays and paid over and above normal salary
• Additional Examples Available in Concepts Docs
PERS - Reporting Special
Compensation
• Uniform Allowances (Classic Members Only)
Compensation paid or reimbursed for monetary
value of purchasing, renting and maintaining
required clothing
Clothing must be a substitute for personal attire
clothing
Excludes items considered safety equipment:
• Protective vests, pistols, bullets and steel-toed
boots
PERS - Non-Reportable
Compensation
Non-Reportable Compensation:
• Automobile/Mileage Allowance
• OT Over 40hrs in a Week
• Cafeteria Plans
• Cash in Lieu of Health Benefits
• Health Benefits/Fringe Benefits
• API Awards
• Lump Sum Vacation to Clear Books
• Severance Pay
PERS – Reporting Overtime
 Circular Letter #200-211-05
•
•
Proper Reporting of OT Pay Rates
Employees paid “overtime” rates for
hours between “regular work week” and
40 hours/week
–
–
Report “straight-time” rate
Report “straight-time” earnings
» May require two different addons
PERS – Service Credit
Service Credit:
• Member in full-time employment will be
credited one year service credit
• 10 months of work
• 215 days of work
• 1,720 hrs. of work in a fiscal year
PERS - Service Credit
How Service Credit is Earned:
• Fiscal Year Basis: July 1 – June 30
• Earned by tenths: 10 Months = 1 Year
• Pro-rated for part-time employees based
on 1,720hrs = 1 Year
• Service Credit = earnings divided by full
time pay rate for each service period
PERS - Service Credit
PERS SERVICE CREDIT
Earnings Divided by Pay Rate Equals Service Credit:
Example: 1. Member Earnings = $2,400 = 1.000 month of
Monthly Pay Rate $2,400
service credit
2. Member Earnings = $1,200 = .500 month of
Monthly Pay Rate
$2,400 = service credit
3. Member Earnings = $1,200 = 80 hours of
Hourly Pay Rate
$15.00
service credit
4. Member Earnings = $1,200 = 20 days of
Daily Pay Rate
$60.00
service credit
PERS - Furlough Days
Furlough Days:
• Salary Roll Back or Docking Days
• Should never change Pay Rate
• Impact to Retirement
PERS - Election
Qualifying Elections:
• Cal-PERS member hired for qualifying certificated
STRS position
• 60 days to elect to stay in Cal-PERS
Must meet other requirements
• Use Form ES-372
 Not required to return form unless electing into
 Should retain written acknowledgement of form
(ES-373)
• Forward Form to County Office for Review
PERS-Retiree
Cal-PERS Retiree (Circular Letter #200-002-14)
• Make sure the retiring employee is aware of rules
before they retire
• After January 1, 2013, Retiree Must Wait 6 Months
(180 days) before They Can Return to Work with a
CalPERS Employer
• Can Be Hired for Temp Assign during Emergency or
Has Special Skills – Critically needed position
• No Exception if a Golden Handshake/employer
incentive has been given
PERS-Retiree
 Cal-PERS Retiree
•
There Cannot be an Agreement to Return to
Work between the Member and the CalPERS
Employer Prior to Retirement
Can Work Up to 960 Hours in a Fiscal Year.
Compensation must be comparable to other
employees doing similar duties
Must be enrolled as retired annuitant
•
•
•
•
Pay rate with hours worked reported
PERS-Retiree/Unemployment
Retiree/Unemployment:
• Cannot Hire Retired Annuitant that
Received Unemployment Insurance
Payments within the Previous 12 Months as
Retired Annuitant
• Annuitant Must Sign Affidavit as Such
PERS-Retiree/Disability
Disability Retiree:
• Temporary Position
• 960 hours
• No approval required
• Permanent Position:
• Employment must be in a different position
• CalPERS approval required before accepting
employment
• Earnings limitation applies
Retiree OASDI/Medicare
Retiree OASDI/Medicare Issues:
• STRS Retiree-rehired in a PERS position
Yes Medicare and Yes OASDI
• PERS Retiree-rehired in a PERS position
Yes Medicare and No OASDI
• PERS Retiree-rehired in a STRS position
Yes Medicare and Yes OASDI
Next Payroll Concept Class
Next “Concept” Classes
• Beginning Fall of 2014
Salary Computation
Payroll Deductions/Withholdings
Paying Employees
Employee Leaves/Benefits
Retirement Systems
• Open Labs After Each Concepts Class