Tulare County Office of Ed – December 12, 2012
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PEPRA Summary of Reform Provisions
Cap on Pensionable Compensation
Types of Pensionable Compensation
Member Contributions
Employer Contributions
Postretirement Employment
Equal Health Benefits/Vesting
Felon’s Forfeiture of Benefits
Tier Membership Determinations
Follow-up and Actions Needed
Other/Resources/Questions
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New Members After January 1, 2013
◦ Reduced Retirement Benefits
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Normal Retirement Age Increase
Age Factors Reduced
Minimum Retirement Age Increased
STRS Career Factor Eliminated
Final Compensation Period Increased to 36 Months
◦ Pensionable Compensation is Capped
 $136,440 in 2013 for Those Without Social Security
 $113,700 for Those With Social Security
 Subject to Annual CPI (Consumer Price Index) Adjustment
◦ Changes in Types of Pensionable Compensation
 Limits on Compensation Not Included in Base Salary
◦ Member & Employer Contributions Requirements
 Minimums Established for New Members *
 Employer Paid Member Contributions (EPMC) Prohibited/Phased Out *
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All Members after January 1, 2013
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Membership Status Can Change *
Employer Paid Member Contributions Phase Out *
Retroactive Benefits Are Prohibited
Postretirement Employment
 New 180 Day Sit Out Period
 New Rules for Eligibility
◦ Equal Health Benefits/Vesting
◦ Forfeit of Benefits for Felony Conviction *
 From Time of Committing Felony
 New Employer Notice Requirement
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The New Cap Only Applies to New Members
Cap of 120% of Social Security Wage Base
◦ $136,440 without Social Security for 2013
◦ $113,700 with Social Security for 2013
◦ Rate Adjusted by CPI Annually
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No Defined Benefit on Compensation above Cap
(Including DBS)
Employers Can Offer Defined Contribution (e.g.,
Employer TSA) for Compensation over Cap (rate
cannot exceed DB rate) – more info to come
STRS will apply Cap to member and employer
contributions
PERS will apply Cap only to member contributions
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New Type Restrictions Apply Only to New Members
◦ Only Base Salary Paid on Salary Schedule Counts toward DB
◦ Excludes Most Special Compensation (No CC6)
◦ Salary Schedule Must be Publicly Available
◦STRS – Excluded
PERS - Only
Special Comp (CC6) - Longevity
Stipends; Degree Stipends
Normal Base
Allowances – Health, Auto, Cell Phone
In Cash to Group
Bonuses – Pay for Performance, Off
Salary Schedule Payment
Excludes Overtime in excess of 40
hours per week
Cash In-Lieu
Excludes Special Comp – Bonus,
Uniform Allowance (list coming)
Limited Number of Payments
Enhancing Benefits
◦ Retirement Boards Have Authority to Make Other Exclusions
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STRS SPECIAL COMPENSATION EXAMPLE
RETIREMENT PLAN
STRS TIER 1
STRS TIER 2
BASE MONTHLY SALARY
5,000.00
5,000.00
SEPARATE STIPEND (CC6)
LONGEVITY STIPEND
HEALTH ALLOWANCE
CELL PHONE ALLOWANCE
100.00
1,000.00
50.00
100.00
1,000.00
50.00
TOTAL COMPENSATION
6,150.00
6,150.00
PENSIONABLE COMPENSATION
6,150.00
5,000.00
Only the employee's base salary on the salary schedule will be creditable for STRS
Tier 2 plan members.
Districts should consider modifying salary schedule to include special
compensation earnings in base salary.
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New Members
STRS
PERS
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8% for 2013; Greater of 50%
of Normal Cost* or Current
Member Rate (Either Tier)
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6% for 2013; Greater of 50% of
Normal Cost* or Current Rate
of Similarly Situated Employees
(Same Tier unless Covered by
Bargaining Agreement)
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Employer Not Permitted to
Pay Employee Contributions
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Prohibits EPMC unless MOU is
Impaired **
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Member Can Bargain to Pay
Employer Contributions
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Member Can Bargain to Pay
Employer Contributions
Normal Cost – The cost to provide the current year’s benefit for
services performed by today’s members. A lesser benefit
(formula) will have a lower normal cost. This does not include
unfunded liability/surplus for previous years.
** Applies to TCOE, Tulare Jt. Union, Farmersville, COS
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Current Members
STRS
PERS
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Set by Statute at 8%
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Encourages Equal Sharing of
Normal Cost Between
Employer & Employee (Not
Required)
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Employer can Continue to
pay Member Contributions
for Everyone in Same Class
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After 1/1/2018 Employer MAY
Require Members to Pay 50%
of Normal Cost
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AB 340 May Allow
Retirement Board to Now
Set Rates
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Required Employee
Contributions are Capped at
8%
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New Members
STRS
PERS
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8.25% for 2013
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Rate Coming
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Employer Will Pay at Least
Normal Cost Minus
Employee Contributions
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Employer Will Pay at Least
Normal Cost Minus Employee
Contributions
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Employer is Not Permitted to
Pay Employee’s Contribution
Unless an Existing Bargaining
Agreement is Impaired
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If EPMC is Impaired, May
Continue Until Contract is
Amended
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Current Members
STRS
PERS
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8.25% for 2013
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11.417% Unchanged
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Employer May Continue to
Pay Member Contributions
for Entire Class
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Employer May Continue to Pay
Member Contributions for
Entire Class
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RETIREMENT PLAN
STRS
TIER I
2% @ 60
STRS
TIER II
2% @ 62
TOTAL NORMAL COST
EMPLOYEE CONTRIBUTION
EMPLOYER NORMAL COST
16.000%
8.000%
8.250%
16.000%
8.000%
8.250%
AMORTIZATION OF
UNFUNDED LIABILITY
0.000%
0.000%
TOTAL EMPLOYER RATE
8.250%
8.250%
250,000.00
136,440.00
EARNINGS
CREDITABLE
EARNINGS
EMPLOYEE
SHARE
EPMC
EMPLOYER
SHARE
EXAMPLE NO EPMC PER MOU
CLASSIC MEMBER TIER I
150,000.00
150,000.00
12,000.00
0.00
12,375.00
NEW MEMBER TIER II
150,000.00
136,440.00
10,915.20
N/A
11,256.30
EXAMPLE EPMC PER MOU
CLASSIC MEMBER TIER I
150,000.00
150,000.00
0.00
12,000.00
12,375.00
NEW MEMBER TIER II
150,000.00
136,440.00
10,915.20
N/A
11,256.30
CREDITABLE COMP LIMIT
WITHOUT SOCIAL SECURITY
NOTES: STRS DOES NOT CURRENTLY RECOGNIZE MOU IMPAIRMENT FOR EPMC. EPMC NOT ALLOWED
FOR TIER 2 PLAN MEMBERS.
STRS DOES NOT CURRENTLY HAVE AUTHORITY TO SET CONTRIBUTION RATES.
UNTIL CLARIFYING LANGUAGE IS DEVELOPED, INTRODUCED, PASSED INTO LAW, CONTRIBUTION
RATES FOR EXISTING AND NEW MEMBERS WILL REMAIN AT 8% AND EMPLOYER CONTRIBUTION RATE WILL
REMAIN AT 8.25%
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RETIREMENT PLAN
PERS
TIER I
2% @ 55
PERS
TIER II
2% @ 62
TOTAL NORMAL COST
EMPLOYEE CONTRIBUTION
EMPLOYER NORMAL COST
14.000%
7.000%
7.000%
12.000%
6.000%
6.000%
AMORTIZATION OF
UNFUNDED LIABILITY
TOTAL EMPLOYER RATE
3.000%
10.000%
6.000%
N/A
N/A
113,700.00
136,440.00
EARNINGS
CREDITABLE
EARNINGS
EMPLOYEE
SHARE
EPMC
EMPLOYER
SHARE
EXAMPLE NO EPMC PER MOU
CLASSIC MEMBER TIER I
150,000.00
150,000.00
10,500.00
0.00
15,000.00
NEW MEMBER TIER II
150,000.00
113,700.00
6,822.00
N/A
9000.00
EXAMPLE EPMC PER MOU
CLASSIC MEMBER TIER I
150,000.00
150,000.00
0.00
10,500.00
15,000.00
NEW MEMBER TIER II (SEE NOTE)
150,000.00
113,700.00
0.00
6,822.00
9000.00
CREDITABLE COMP LIMIT
WITH SOCIAL SECURITY
WITHOUT SOCIAL SECURITY
NOTE: IF MOU IS IMPAIRED, EPMC CONTINUES UNTIL AGREEMENT IS MODIFIED OR EXPIRES; THEN NEW
MEMBER MUST PAY THEIR SHARE.
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Equal Health Benefits/Vesting
Public employers prohibited
from providing better health
benefits and health vesting to
management
◦ Seeking Counsel clarification that
membership classification refers
to classified and certificated,
interpretation of extended
retirement health benefits
compliance, and of offering
varying health vesting
requirements
◦ Varying health packages should be
reviewed for compliance
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Felons Forfeit Pension Benefits
Member forfeiture of pension
benefits for job-related felony
◦ Retains benefits prior to
committing felony
◦ Forfeiture processed upon
conviction, retroactive to date of
committing felony
◦ Member & Prosecuting Agency –
60-day notice to public employer
requirement
◦ Public employer & Member – 90day notice to applicable retirement
system requirement
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Notification procedures are pending
the retirement systems’
implementation of procedures and
forms.
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Retired Prior to 1/1/13
◦ Restrictions apply to employment with employers within
CalSTRS
 Earnings limit for 2012-13 is $40,011.
 Narrow exemption in AB 178 extended through 2013-14.
 Must take 6 month break or reach full retirement age.
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Retired on or after 1/1/13 (in addition to above)
◦ Must take 180-day break unless limited exemption is
applicable.
 Limited to critical vacancies
 Must be at or above normal retirement age
 Governing body approval through resolution at public meeting
 No retirement incentive or financial inducement to retire from
any public employer
 Termination of services cannot be a factor in hiring
 Required form and documentation must be received prior to the
member beginning work
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Retired prior to 1/1/13
◦ Restrictions apply to employment with employers within
CalPERS
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Limited circumstances for appointment
960-hour limit for all employers within the same system
Hourly pay rate
Rate of pay tied to employees performing similar duties
Must meet full retirement age or wait 60 days
Retired on or after 1/1/13 (in addition to above)
◦ Must take 180-day break unless limited exemption is
applicable
 Employer certification and/or governing body approval of
exemption
 If retiree received a retirement incentive, the waiting period is
compulsory, no exceptions
 Must meet full retirement age of applicable formula
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2% @ 60 Formula Current
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Individuals who are first
hired to perform CalSTRS
creditable activities before
January 1, 2013. This
includes:
◦ Individuals that are placed on
a district substitute list.
◦ Were CalSTRS members before
2013, terminated
membership, & return to active
membership on or after
1/1/13.
◦ Performed CalSTRS creditable
activities even if they were
subject to coverage under a
different retirement system
(elected CalPERS).
2% @ 62 Formula - New
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Individuals who are first
hired to perform CalSTRS
creditable activities on or
after January 1, 2013.
◦ The STRS system (SEW) will
default the individual to
the new formula if the
initial set up is completed
on or after 1/1/13,
regardless of the effective
date. The individual will be
required to petition for the
2% @ 60 formula if they
qualify.
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CalSTRS
Permissive
Member Election
Form ES 350
Directions:
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Employee must complete
all of “Employee
Certification” section.
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Employer (school district)
completes Employer
section.
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Should be completed by
the school district
representative that
provides the information
and forms to the
employees.
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Leave employee number
and membership date
blank.
https://forms.calstrs.com/CalSTRSOnlineFormRequestWebUI/Root/Pages/OpenAttachment.aspx?FormId=0b9bcd0d-72bf-4d75b3c4-1f072e1da663
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2% @ 55 - Current
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An individual who became
a member of CalPERS prior
to 1/1/13.
An individual who became
a member of a reciprocal
system prior to 1/1/13,
and moved to CalPERS
within the reciprocity
guidelines.
CalPERS membership must
also meet reciprocity
guidelines if the CalPERS
membership was not
under the School 2% @ 55
Formula.
2% @ 62 - New
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An individual who has
never been a member of
any public retirement
system prior to 1/1/13.
An individual who moved
between public
retirement and was not
subject to reciprocity.
An individual who moved
between public
employers within a public
retirement system after
more than a six month
break in service.
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Expand what agencies CalSTRS considers in
determining a current member to recognize
individuals who were first employed by a public
employer to perform service subject to coverage in a
concurrent retirement system on or before December
31, 2012. Intend to make it consistent with
reciprocity which requires employee to have been
employed to perform creditable service in the
concurrent retirement system within the last six
months.
Seek guidance to determine if the CalSTRS board can
set rates.
Seek to change Cap on Creditable Compensation
from calendar year to fiscal year.
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New Tier 2 Retirement Plans for STRS and PERS
New plans can have member and employer rates
different than from existing Tier 1 plans
New edits added to prevent reporting of nonpensionable special compensation for new
members
Compensation caps may be added to ensure
contributions do not exceed new limits
System bargaining units will allow for member
payment of employer contribution
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Human Resources
◦ Determine if EPMC Bargaining Agreements are Impaired
◦ Certify to PERS if EPMC Impaired – Form Pending
◦ Review Special Compensation Payments for Modification of
Salary Schedule to include in Base Salary
◦ Verify all pensionable compensation is included in a
publicly available salary schedule
◦ Determine if needed and then amend Health Benefit
Vesting Schedules if required
◦ Ensure employer gathers enough information from new
hires to determine correct tier
◦ Submit any outstanding STRS Permissive Membership
Election Forms (ES 350) to Tulare COE by 12/21/2012
◦ Monitor clean-up legislation
◦ Determine sit out period when employees retire
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Business
◦ Notify TCOE when EPMC Agreement is Amended, Extended or Renewed
to Coordinate Payroll System Changes
◦ Review Independent Contractor & Third Party Agreements for New
Postretirement Limitations
◦ Contact TCOE before starting Employer Paid Contributions to a TSA for
any New Member.
◦ Watch for announcement for System Modifications Training Session
January 8th – Doe Ave starting at 8:30 – (pending need)
◦ CalPERS FAQs
http://www.calpers.ca.gov/index.jsp?bc=/member/retirement/faq-pra-2013.xml
◦ CalSTRS FAQs
http://www.calstrsbenefits.us/post/frequently-asked-questions-ab-340-public-employees-pension- reform-act-2013
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Tulare County Office of Education
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