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October 27, 2003
A new law provides retirement incentives that increase monthly
benefits for members of the CalSTRS Defined Benefit (DB) Program
retiring from school districts that agree to offer the benefit.
These two retirement incentive programs would increase either
one or two of the elements used in calculating your CalSTRS
service retirement benefit.
The law, Chapter 313, Statutes of 2003 (AB 1207—Corbett),
allows an eligible member employed by a participating district
to receive either:
- Two additional years of service credit added to the member’s
benefit calculation;
OR
- An additional two years of service credit and an additional
two years of age added to increase the age factor, which
is used in determining the member’s retirement benefit.
This has been referred to as the 2+2.
School districts, county offices of education or community
college districts may participate in the CalSTRS retirement
incentive programs if they are able to pay the full cost of
the benefit and demonstrate that providing it will result
in a net savings. It is not necessary that the employer realize
a cost savings for each individual employee; the net savings
may be realized through the retirement of all its employees
who retire under the incentive. CalSTRS has provided information
to your employer on the cost and restrictions for these new
programs, and will provide additional information in December
on the specific steps each must take to participate.
In order to receive the benefit, you must already be eligible
to retire, and do so within the window period specified by
your employer. A DB Program member is eligible to retire at:
- Age 55 with at least five years of service credit,
- Age 50 with at least 30 years of service credit (excluding
unused sick leave or service credit granted under either
retirement incentive), or
- Age 55 with fewer than five years of service credit but
eligible for concurrent retirement with another California
public retirement system such as the California Public Employees’
Retirement System (CalPERS).
The additional two years of service credit granted under
either retirement incentive program doesn’t count towards
eligibility for benefit enhancements such as one-year final
compensation, career factor or the longevity bonus, or towards
qualifying for a retirement benefit. Employers, including
charter schools, may choose to offer one or both of the retirement
incentives, but may not combine or use a portion of either
incentive. In addition, you cannot receive both retirement
incentives or pay the cost of the benefit in lieu of your
employer, and CalSTRS will not grant partial benefits, unless
you receive the 2+2 incentive and would reach the maximum
age factor.
The two years of service credit retirement incentive program
is reopened and becomes permanent effective January 1, 2004.
Employers may decide to offer the benefit at any point in
the future as the legislative authorization to grant two years
of service credit does not expire.
The governing board of a participating employer must take
formal action by adopting a resolution to offer the benefit
to all its employees who are DB Program members and eligible
to retire. You must retire during the “window period”
of 60 to 120 days, as specified in the formal action. The
window period must begin after the adoption of the board resolution.
The provisions of the two years of service credit and two
years of age incentive program 2+2 become effective January
3, 2004 and expire on December 31, 2004. Unfortunately, Chapter
313 is not clear whether a district can, prior to January
1, 2005, offer the retirement incentive for those members
who plan to retire beyond December 31, 2004. CalSTRS is currently
evaluating the appropriate interpretation of this provision
and expects that a decision on this matter will be included
in the employer directive. In the meantime, it is clear that
employers may designate window periods for the 2+2 retirement
incentive from January 3 to December 31, 2004.
An employer that grants the 2+2 benefit to employees who
are DB Program members and eligible to retire must either:
1) provide the benefit pursuant to a memorandum of understanding
between the employer and a representative employee organization,
or 2) in order to grant the benefit to members who are not
represented by an employee organization, have its governing
board take formal action to offer the benefit to all eligible
members of the DB Program.
The maximum age factor you can receive continues to be 2.4
percent, including the career factor and/or retirement incentive.
For members needing fewer than two additional years to reach
the maximum age factor, only the number of years necessary
to reach the maximum age factor will be added. Employers are
only required to pay for the actual increase in the benefit
amount. For those members ages 63 and older, or ages 61.5
and older with 30 or more years of service, no additional
years will be added to their age factor calculation, and will
not be used to calculate employer’s cost because those
members are already at the maximum age factor.
Every member’s situation is different. However, depending
on your age and years of credited service, these incentives
can represent a substantial boost to your retirement benefit.
Please see the following examples for a member earning $60,000
per year
*Includes applicable career factor and longevity bonus.
** For members age 63 or older or 61.5 with 30 years of service
credit, age/career factor is already at the maximum.
If you are able to retire with either the two-year service
credit or 2+2 incentive, a number of restrictions on post-retirement
employment affect your ability to keep the benefit, even if
you receive an exemption to the post-retirement earnings limit.
Members who retire and receive either of the retirement incentives
and then return to work would forfeit the benefit increase
received through either of the incentives. This includes:
- A retired member reinstates to active CalSTRS member
status. The additional incentive benefit is forfeited as
of your reinstatement date and will not be included in future
retirement benefit calculations.
- A member continues to receive his or her retirement benefit
and returns to work in any job for any California public
school district within one year of his or her retirement
date. The law does not provide any exemption from this restriction,
unlike exemptions from post-retirement earnings limits that
currently exist for those members who retire without receiving
a retirement incentive. Your benefit increase is forfeited
effective on the first day of the month in which you return
to work. You would thereafter begin to receive a retirement
benefit based on the reduced level of service credit you
had earned prior to retirement and being granted the retirement
incentive.
- A member continues to receive his or her retirement benefit
and returns to work in any job with the school district
that granted him or her the retirement incentive within
five years of retirement. The law also does not provide
for any exemption from this restriction. Your benefit increase
is forfeited effective on the first day of the month in
which you return to work. You would thereafter begin to
receive a retirement benefit based on the reduced level
of service credit you had earned prior to retirement and
being granted the retirement incentive.
In addition, if you receive unemployment insurance payments
within a year of your retirement date, you will forfeit the
benefit increase received through either incentive. Please
note that retired CalSTRS members are prohibited from performing
any classified service, even if they do not receive a retirement
incentive.
If your employer offers either of these incentive programs,
we encourage you to contact your local CalSTRS Benefits Counseling
office to schedule an appointment for a pre-retirement interview
in person or by telephone, or attend a benefit workshop. A
Benefits Counselor may provide you with an estimate based
on an additional two years of service credit and a conservative
estimate based on two years of service credit and two years
of age. Beginning in January, they will be able to provide
you with automated estimates on the amount of increase to
your retirement benefits either of these incentives may provide.
More information on the incentive programs, including online
calculators that can help you figure the potential boost to
your retirement benefit will soon be on the CalSTRS Web site,
www.calstrs.com. You can also check out the Frequently
Asked Questions on the retirement incentive programs or
contact CalSTRS toll-free at 800-228-5453.
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