This bill would extend eligibility to receive credit at retirement for unused sick leave to members of the State Teachers' Retirement System (STRS) Defined Benefit (DB) Plan who became members on and after July 1, 1980 and who retire on or after January 1, 1998. Under current law, only persons who became members prior to July 1, 1980 are eligible to receive credit at retirement for unused sick leave. The bill includes a similar provision for school members, except school safety members, under the Public Employees' Retirement System.

In addition, the bill would eliminate the restriction that currently prohibits a STRS member who reinstates from service retirement from receiving credit at a subsequent retirement for unused sick leave accrued after termination of the original retirement.

The opportunity to receive service credit for unused sick leave days at the time of retirement was granted to STRS members retiring on or after March 23, 1974, under the provisions of Chapter 89, Statutes of 1974 (SB-647, Harmer). It was anticipated that this benefit would reduce sick leave usage and enable employers to achieve some salary savings from not having to hire substitute teachers to replace teachers who might otherwise have been absent from the classroom.

The anticipated reduction in sick leave usage and the projected salary savings were not realized. Consequently, employer costs increased as employers continued to pay salary for teachers who were absent from work because of illness, covered the cost of substitute teachers, and also paid STRS for the cost of the additional benefit at retirement.

Under Chapter 1135, Statutes of 1977 (SB-90) the State was required to pay for the increased benefits payable for unused sick leave as a State-Mandated Local Cost. This led to legislation, Chapter 1201/1979 (SB-797, Russell), which limited the crediting of service for unused sick leave to persons who became STRS members prior to July 1, 1980.

Current law provides for members with membership dates prior to July 1, 1980 to receive service credit at the time of retirement for accumulated unused sick leave. Employers currently contribute 0.25% of payroll for the costs of the additional service credit for these members, although the actual cost is 0.37% of payroll. When a member who is eligible for this benefit applies for service retirement, the employer certifies to STRS the number of unused sick leave days for which the member is entitled to receive credit.

The average service credit resulting from unused sick leave at the time of retirement amounts to 0.604 year of service credit.

Current law also provides that a retired member who reinstates is not eligible to receive credit at a subsequent retirement for unused sick leave accrued after termination of the original retirement.

Proponents of this bill believe it is a major inequity that because of a person's membership date he or she is not eligible for a benefit enjoyed by other members of the STRS DB Plan. Some proponents also believe that expanding eligibility to receive credit at retirement for unused sick leave would discourage the unnecessary use of sick leave as a member who is currently ineligible for this benefit approaches retirement. Employers have indicated that providing this benefit would be less costly than retaining substitutes to fill-in for teachers who are absent from the classroom on sick leave, although history would not seem to support this assertion.

Program - Extending eligibility to receive credit for unused sick leave to all members of the STRS DB Plan would cost 0.38% of payroll or $53.2 million annually. This rate does not account for the 0.12% under-funding in the current program.

Administrative - Any administrative effort necessary to implement the provisions of this bill would be minor and absorbable.

Support, if amended, to provide funding to expand credit for unused sick leave to ineligible members.

 
Assembly Bill 1102 posted: June 26, 1997