The provisions of AB 2700 became effective July 1, 2002,
and enhances members' benefits by expanding the types of service
and compensation that are creditable to CalSTRS for retirement
purposes. Compensation for summer school and intercession
along with stipends for extra duties performed are now creditable.
In addition, contributions by the member and the employer
on compensation earned for service in excess of one year will
be credited to the member's Defined Benefit Supplement, or
DBS, account at the end of the fiscal year. Certain other
special compensation will also be credited to DBS. These additional
contributions will increase the member's DBS account and provide
a supplemental benefit without reducing the benefit payable
under the DB Program.
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The legislation affecting creditable compensation became
operational July 1, 2002.
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Beginning with service performed July 1, 2002, and later,
members will have 8 percent employee and 8.25 percent employer
contributions reported by their employer to CalSTRS on summer
school earnings. For example, if a member earns $2,500 for
summer school in July 2003, the employer will deduct $200
(8 % x $2,500 = $200) in employee contributions from the July
paycheck and contribute $206.25 (8.25 % x $2,500 = $206.25)
in employer contributions. These contributions will be sent
to CalSTRS. Whether these retirement contributions are credited
to DB or DBS depends on what other service the member performs
during that school year, and the rates of compensation.
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No, the summer school will be creditable service, but you
can still earn only one year of service credit during each
July-June school year. For example, if you taught summer school
in July and August 2002 and have a full-time assignment in
2002-03, your service credit will exceed one year. CalSTRS
will adjust your service credit at the end of the July-June
school year. Contributions on compensation in excess of one
year will be credited to your DBS account at that time, and
the DB account will be credited for one year of service.
However, in this situation, you could teach summer school
after June 2003, which is in the next school year, accrue
the .100 year of service credit to qualify for the longevity
bonus and retire at the completion of the summer school.
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No, compensation for unused vacation leave is specifically
excluded from creditable compensation under provisions of
the Teachers' Retirement Law.
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No, assuming that you work full time in your contract position.
As you perform additional duties during the year, you will
earn service credit for these duties in addition to service
credit you earn for your full-time position. At the end of
each school year (or at retirement if you retire during the
school year) CalSTRS determines if you have service credit
in excess of one year. If so, CalSTRS retains one year of
service credit earned at the highest pay rates in your DB
account and will credit the member and employer contributions
on the service in excess of one year to your DBS account.
In this case, contributions related to your $1,000 stipend
will be credited to your DBS account.
In general, if you work full time and receive stipends for
additional duties at the same or a lower pay rate than your
full-time position, the stipends will not affect your final
compensation but you will benefit by increasing your DBS account
balance.
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Yes. CalSTRS automatically uses the
most recent compensation in calculating a service retirement
allowance unless the member designates another period on the
Service Retirement Application. Therefore, your lower pay
rate just before retirement can lower your retirement benefit
if you do not designate a period when your pay rate was higher.
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Yes, if the pay rate for the summer school service is higher
than your contract salary it will used in the calculation
of your compensation earnable for the school year. You will
receive service credit for the summer school service in addition
to the service credit earned for your full-time position.
At the end of the school year, CalSTRS determines if you have
service credit in excess of one year. If you do, CalSTRS will
retain one year of service credit in your DB account earned
at the highest pay rates, and will credit the member and employer
contributions on the service in excess of one year to your
DBS account. If the summer school service was earned at a
higher pay rate, this compensation will be retained in your
DB account. In addition, the service credit from that service
will go toward the maximum one year of service credit you
can earn in a school year. In this case, calculation of your
compensation earnable for the year will be a weighted average
of your contract pay rate and your summer school pay rate.
In general, if you work full time in one position and have
another position at a higher pay rate than your full-time
position, the second position will raise your compensation
earnable for the school year.
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No, in accordance with AB 2700, contributions from you and
your employer for service in excess of one year will be credited
to your DBS account. Specifically, your 8 percent contributions
and 8 percent from your employer's percent contributions for
service in excess of one year will be credited to your DBS
account. Your employer also contributes another 0.25 percent,
which remains in the DB Program.
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Members who retire on or after July 1, 2002, and have earned
creditable compensation at multiple pay rates during a school
year may benefit from the ".900 rule." With the
".900 rule," if service credit at the highest pay
rate is at least .900 in a school year, then final compensation
will be determined as if all service credit for that school
year had been earned at the highest pay rate.
Here is an example:
Jessica teaches summer school and earns .095 service credit
during the summer at an annualized pay rate of $54,500 per
year. Additionally, she teaches full-time at the high school
except for a two week period when she takes an unpaid leave
to care for an elderly parent. She is paid for 170 days of
her 180 day high school full-time contract and earns .944
service credit for her contract position at a pay rate of
$57,800 per year. At the end of the school year, her service
credit is reviewed by CalSTRS and it is determined that she
has service in excess of one year even with her unpaid leave.
Part of her summer school service is retained in DB (.056
of the .095) to yield 1.000 (.944 + .056) year in her DB account,
and the contributions on her remaining summer school service
(.039 of the .095) are credited to her DBS account. However,
if Jessica retires at the end of the year, her compensation
earnable is calculated as if all of her service for the school
year was earned at the highest pay rate of $57,800.
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Yes. In most cases, these types of payments will be creditable
to CalSTRS if earned on or after July 1, 2002. Retirement
contributions for bonuses that are potentially recurring in
nature are generally credited to DB; retirement contributions
for bonuses of limited duration (e.g., one-time only) are
generally credited to DBS. Your employer has been provided
with reporting guidelines to determine whether to credit retirement
contributions for bonuses to DB or DBS.
Examples of bonuses are lottery, pay for performance, recruitment,
hazard pay, or perfect attendance. Beginning with the 2002-03
school year, if a bonus is reported as creditable compensation
to your DB account, it will be included in your compensation
earnable for the year. If the bonus is earned for a year that
is included in the determination of your final compensation,
your benefit will increase as a result of having received
a bonus. A member who receives 1.000 service credit for the
school year will not receive any more service credit as a
result of receiving the bonus. In the situation where the
member earns less than 1.000 service credit for the year,
the member will receive slightly more service credit due to
the inclusion of the bonus in the compensation earnable for
the year.
Retirement contributions for bonuses that are credited to
your DBS account will result in additional member and employer
contributions in your DBS account. Retirement contributions
for bonuses credited to DBS will not affect your final compensation
or service credit.
Here's an example using retirement contributions for a bonus
that is creditable to DB:
Mary works full-time as a middle school teacher, earns $55,000
during the school year and earns 1.000 year of service credit.
She also receives a bonus in June for $500 for having perfect
attendance during the school year. Her service credit remains
1.000. Her compensation earnable for the period is $55,500
instead of $55,000 and her final compensation would be $4,625.
If Mary is 60 and retires with 27 years of service her monthly
unmodified allowance would be:
That is an increase of $23 per month over the unmodified
allowance she would have received if the additional $500 were
not included in her compensation earnable for the school year.
Here is an example using retirement contributions for a bonus
that is creditable to DBS:
Mary works full-time as a middle school teacher, earns $55,000
in salary during the school year and 1.000 year of service
credit. She also receives a one-time $500 signing bonus in
September for accepting a position at a different school.
The signing bonus is creditable to DBS. Mary's contributions
of $40 based on the $500 bonus and her employer's contributions
of $40 would be credited to Mary's DBS account. Her DB retirement
allowance does not change in this example. Her DBS account,
however, would grow throughout the years, earning interest
and supplementing her retirement benefit or providing funds
if she leaves CalSTRS-covered employment.
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Allowances are recurring payments to members paid in addition
to their salary. Examples of allowances are monthly payments
to members for using a personal car for district business
purposes, monthly payments for the purchase of health benefits
and monthly cash paid in lieu of receiving health benefits.
Beginning with the 2002-03 school year, allowances that are
credited to your DB account will be included in your compensation
earnable for the year. If the allowance is credited for a
year that is included in the determination of your final compensation,
your benefit will increase as a result of having received
the allowance. A member who receives 1.000 service credit
for the school year will not receive any more service credit
as a result of receiving the allowance. In the situation that
they earn less than 1.000 service credit for the year, the
member will receive slightly more service credit due to the
inclusion of the allowance in the compensation earnable for
the year.
Here is an example using an allowance that is creditable
to DB:
Jean works full-time as a community college administrator,
earns $82,000 in salary during the school year and 1.000 year
of service credit. She also receives a car allowance of $50
per month for 12 months of the year to travel to off-campus
teaching sites. Her service credit remains 1.000. Her compensation
earnable for the period is $82,600, instead of $82,000, and
her final compensation would be $6,883.33. If Jean is 60 and
retires with 27 years of service her unmodified allowance
is:
That is an increase of $27 per month over the unmodified
allowance she would have received if the additional $600 were
not included in her compensation earnable for the year.
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All creditable earnings will be counted towards the post-retirement
earnings limitation. Therefore, any summer school earnings
and any cash payments you receive from your district in lieu
of health benefits will be considered as post-retirement earnings
and monitored against the limitation for the school year in
which they are earned.
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Since a member can only accrue one year of service credit
per school year, you would be eligible to purchase .300 of
a year of service credit or the difference between 1.000 and
.700, your earned service credit for the year.
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No. Prior to July 2002, statutory provisions excluded summer
school and intercession compensation from being creditable,
even for part-time employees who accrued less than one year
of service in the school year. Effective July 1, 2002, compensation
for summer school and intercession service are creditable.
However, this change is not retroactive.
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Most retirement incentives are only creditable to the member’s
Defined Benefit Supplement (DBS) account and have no effect
on the member’s service credit or final compensation
within the Defined Benefit Program. Member contributions and
employer contributions on a retirement incentive increase
the balance in a DBS account and therefore the benefit ultimately
paid from that account.
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In order to determine service credit for hourly
or daily service, you will need to know the full-time base
day/hour requirement for the position in the district in which
you are employed. This information normally appears in your
employment contract or collective bargaining agreement. You
should contact your employer if you do not have this information.
For teachers in K-12, full time is normally between 180 and
185 days at six hours per day. For example, assume your district
has base days or hours of 183 days or 1,098 hours based on
a six hour day:
| Service Credit for 1 Day: |
1/183 days = .0054 service credit |
| Service Credit for 1 hour: |
1/1098 hours = .0009 service credit |
| .100 service credit/.0009 service credit/hour
= 111.1 hours |
| 111.1 hours/6 hours/day = 18.5 or 19 days
(rounded up) |
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It depends on the timing of the additional service relative
to your unpaid leave. CalSTRS looks at service credit over
the July - June school year. If you were on unpaid leave in
April 2003, any additional service to replace lost April service
credit would need to be performed in the May-June 2003 service
period in order to count towards your 2002-2003 service credit.
So teaching summer school in July 2003 would not make up your
loss in service credit in the 2002-2003 school year. If you
had taught summer school in July 2002, however, you could
have made up your loss in service credit, because it is in
a school year in which you otherwise accrue less than 1.000
year of service credit.
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