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What is a consolidation of benefits?
A consolidation of benefits is a process CalSTRS can use
when a person who has benefit coverage under both the Defined
Benefit Program and the Cash Balance Benefit Program, and
meets eligibility requirements, to merge benefit coverage
under the DB Program.
When a member’s benefits are consolidated, CalSTRS
transfers the member’s contributions and interest from
the CB Benefit Program to the DB Program and closes the member’s
CB account. CalSTRS adds service credit to the member’s
DB account based on the time covered under the CB Benefit
Program that is “eligible CB service.” The contributions
and interest in the CB account are applied to the cost of
consolidating benefit coverage. Please refer to FAQ #4 for
a definition of “eligible CB service.”
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Who is eligible to consolidate benefits?
A DB Program member who has funds in a CB account from eligible CB service may consolidate benefits if he or she is
currently making contributions under the DB Program and is not contributing to his or her CB account.
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What advantages are there for me if I consolidate my benefits?
By consolidating your benefit coverage, you may increase
the amount of service credit that will be used to determine
your retirement benefit. In addition to increasing your monthly
retirement allowance, credit for your eligible CB Benefit
Program service may be used toward eligibility for benefit
enhancements, such as one-year final compensation and career
factor.
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What is eligible CB service?
Eligible CB service is part-time employment that was covered
under the CB Benefit Program. For purposes of consolidating
benefit coverage, however, eligible CB service does not include
overtime that, prior to July 1, 2002, was covered under the
CB Benefit Program.
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My CB account contains contributions and interest from overtime, as well as rollover
funds from other qualified plans. Can these funds be used
to consolidate my benefit coverage?
No. If the only funds in your CB account are from overtime
service and/or rollover funds, you are not eligible to consolidate
benefits. You must have eligible CB service to be eligible
to consolidate benefits. Please refer to FAQ #4.
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What will happen when
my benefits are consolidated?
When your benefits are consolidated, CalSTRS will determine
the service credit that can be added to your DB account, and
will apply the contributions and interest in your CB account
toward the cost of covering your eligible CB service under
the DB Program. In many cases, CB Benefit Program contributions
and interest will not cover the full cost of all eligible
CB service that you performed. However, if you have contributions
from overtime, or rollover funds in your CB account, those
funds may also be applied to the cost of covering your eligible
CB service. When there are more funds in your CB account than
are required to cover the cost of your eligible CB service,
then you have additional options to consider. In this case,
see FAQ #10.
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Why might my CB contributions
and interest not be enough to cover the cost of my eligible
CB service under the DB program?
The current cost to convert CB service into DB service credit
is figured on a tiered rate formula based upon your age at
the time CalSTRS receives your request. Because the contribution
rate for CB Benefit Program participants and employers is
usually 8%, approximately half the contribution rate for the
DB Program, the contributions and interest available in the
participant’s CB Benefit Program account may not cover
the full cost of service credit under the DB Program.
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Can I receive credit
for only the amount of service that my CB account balance
will cover?
Yes. If the funds in your CB account do not cover the entire
cost of your eligible CB service under the DB Program, the
service credit to be added to your DB account can be prorated
based on the funds available in your CB account.
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My CB account balance
is insufficient to cover the cost of my eligible CB service.
Can I receive full credit under the DB Program for the remaining
CB eligible service that I performed?
You may contribute personal funds toward covering the remaining
cost of your eligible CB service. To do so, you must request
a separate billing for the cost of covering the remaining
CB time. You may choose from several payment alternatives,
including a lump-sum payment, payroll deduction, monthly installments
over a specified period or a rollover from a qualified plan.
For additional information, refer to the Purchase Additional Service Credit brochure.
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What if the funds in
my CB account exceed the amount that is necessary to cover
my eligible CB service under the DB Program?
CalSTRS must transfer all funds from your CB account when
your benefits are consolidated and your account must be closed.
All of your CB funds must first be applied to the consolidation
of your eligible CB service under the DB Program. After your
CB funds have been applied to the cost of covering your eligible
CB service, you may have CalSTRS:
- apply any remaining funds to any outstanding
debt you might have to CalSTRS that is not being paid through
a tax-deferred payroll deduction; and/or
- apply any remaining funds to the cost of
other service credit that you are eligible to purchase;
and/or
- transfer the remaining funds to your DBS
account.
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What other types of
service credit can my excess funds be used to cover?
Any remaining funds can be applied toward the cost of the
following types of service credit:
- Nonqualified service (also known as “air
time”)
- Time from sabbatical, maternity, paternity
or family care and medical leave
- Certain military service
- Service credit for activities such as out-of-state
teaching
- Redeposit of previously withdrawn contributions
For more information and a full explanation of the types
of service credit that may be purchased, refer to the Purchase Additional Service Credit brochure.
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Can I apply only a portion
of the funds in my CB Benefit Program account to cover the
cost of my eligible CB service, and then apply remaining funds
to cover the cost of other service credit, or to redeposit,
or for credit to my DBS account?
The funds in your CB account must first be applied to cover
the cost of all eligible CB service that you have performed.
If additional funds remain in your CB account after all of
your eligible CB service has been consolidated, then you may
specify how you wish the remaining funds to be applied, toward
the cost of other service credit, a redeposit, or transferred
to your DBS account.
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Is there any advantage
to consolidating benefits early in my career rather than later?
There could be. The cost to purchase DB service credit depends
on your highest earnable salary and the DB Program contribution
rate. If the contribution rate and/or your earnable salary
increases, the cost to purchase additional service credit
could be substantially higher later in your career.
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When I request a consolidation
of benefit coverage, may I continue to participate in the
CB Benefit Program?
No. In order to be eligible to consolidate benefit coverage,
you cannot be contributing to a CB Benefit Program account.
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May I participate in the CB Benefit Program after consolidating my benefits?
Yes. You may participate in the CB Benefit Program in the
future. However, in most cases, it would be in your best interest
to continue to accrue service credit under the DB Program
to further increase your DB benefits.
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While I was employed
in a full-time position under the DB Program, I was concurrently
employed part-time in a position covered under the CB Benefit
Program. Is this CB service eligible for consolidation?
No. The service that was covered under the CB Benefit Program
while you were employed full-time under the DB Program was
considered overtime service, which cannot be consolidated.
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If I am not eligible
to purchase credit for other types of service under the DB
Program, can the funds in my CB account be consolidated with
my Defined Benefit Supplement account?
No. CB funds cannot be consolidated with your DBS account
if there has not been any application of CB funds to the cost
of covering eligible CB service under the DB Program.
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I am already purchasing
service credit under the DB Program. Can I apply the funds
in my CB account to this purchase?
Under certain circumstances, yes. After your CB funds have
been applied to the consolidation of your benefits, you may
have CalSTRS apply any remaining CB funds to a purchase of
service credit that is already in process, as long as you
are not making payments on the service credit purchase through
a tax-deferred payroll deduction.
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I previously purchased
my eligible CB service with personal funds, so a balance of
funds still remains in my CB account. Am I eligible to have
my benefits consolidated?
In this case, your benefits have already been consolidated.
If you previously purchased your eligible CB service and the
funds in your CB account were not used for that purpose, CalSTRS
must re-allocate your CB funds. The law prohibits the same
service from being covered under more than one plan, or more
than one program within a plan. Contact CalSTRS Customer Service
at 800-228-5453 for additional information.
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I performed eligible
CB service, but received a termination benefit and my CB account
was closed. Am I eligible to have my benefits consolidated?
No. Since you do not have any funds in your CB account, there
are no benefits to consolidate. However, you may purchase
credit under the DB Program for any eligible CB service you
performed.
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I never performed eligible
CB service. I received a termination benefit and my CB account
was closed. Am I eligible to have my benefits consolidated?
No. Because you never performed any eligible CB service,
there is no service to convert. However, as a DB Program member,
there may be other service you are eligible to purchase. Refer
to the Purchase Additional Service Credit brochure for more information
about the types of service credit you may be eligible to purchase.
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Can I have my benefits
consolidated if I previously participated in the CB Benefit
Program for service in the same position that is now covered
under the DB Program?
Yes, if you are currently contributing to the DB Program
and not to the CB Benefit Program, you may elect to consolidate
your benefits.
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Can I have my benefits
consolidated if I am both a CB Benefit Program participant
and a DB Program member under the same employment?
Yes, if you are currently contributing to the DB Program
and not to the CB Benefit Program, you could elect to consolidate
your benefits.
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I understand that a
CB Benefit Program participant must wait 12 months after termination
of employment to receive a termination benefit. Does the 12-month
waiting period apply when consolidating benefits?
No, a consolidation of benefits is different from a distribution
of benefits and does not require a 12-month waiting period.
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How do I make a request
for consolidation of my benefits?
You must complete and submit a Request to Consolidate Benefits
form. You can download the
Request
to Consolidate Benefits form, together with an information
sheet on the process and form instructions for completing
the request here. You must also complete and have each of
your former CB employers sign a
CB
Employment Certification form; and complete and have your
current employer sign the
DB
Employment Certification form. The entire package of necessary forms can be downloaded
here.
Completed forms should be mailed directly to:
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