The Teachers’ Retirement Board declared a credit to the Defined Benefit Supplement and Cash Balance Benefit programs on May 10, 2018, for fiscal year 2016-17 due to the programs showing substantial investment earnings.
The Teachers’ Retirement Board has the statutory authority to declare a credit when the funded status of the Defined Benefit Supplement program and the Cash Balance Benefit program surpasses certain thresholds after periods of substantial investment earnings. The programs met the thresholds for a credit for the fiscal year ending June 30, 2017. The board declared the credit on May 10, 2018.
Additional Earnings Credits are based on a percentage of an eligible member’s or participant’s balance of credits as of June 30, 2017.
The amount of the Defined Benefit Supplement account credit for active and inactive members is calculated as 4.12 percent of the balance of credits (account balance) as of June 30, 2017.
The amount of the Cash Balance Benefit program credit for active and inactive members is calculated as 3.62 percent of the balance of credits (account balance) as of June 30, 2017.
If you received a form with your letter, your credit is rollover eligible. Fill out the form if you want to roll over all or a portion of the payment to a qualified IRA or eligible employer plan or if you do not want California income tax withheld from your payment.
If you elect to receive a direct payment with federal and California state income tax withheld, no action is required on your part and you do not need to fill out the form. Your payment will be issued according to your payment preference indicated on your account.
CalSTRS will begin processing your payment 90 days from the date of your letter. Please allow up to 14 business days for your funds to be received. Your payment will be issued according to your payment preference indicated on your account.
Open a Pension2 account before submitting your rollover application by going online at Pension2.com or calling 888-394-2060. If you enroll online, your account will typically be established in two to three days. CalSTRS will obtain the required signatures for the rollover on your behalf.
CalSTRS must receive your properly completed form within 60 calendar days of the date on the letter or we will issue a payment to the address on file and withhold both federal and state income tax. CalSTRS is required to withhold 20 percent federal income tax and will withhold 2 percent California state income tax.
Yes. You can request a duplicate copy of this letter by contacting the CalSTRS Contact Center.
You may hand deliver, mail, overnight deliver or fax your completed form. Specific details can be found on page 2 of the instructions included with your form.
The rollover will occur approximately 90 days from the date on the letter.
The net payment you receive is the amount of the credit plus interest minus any outstanding amount you may owe CalSTRS. If that amount is less than $200, your payment will not be eligible for direct rollover and will be paid directly to you.
You may still roll over the money by depositing it into a qualified IRA or eligible employer plan that will accept it. You have 60 days after you receive your CalSTRS payment to make the deposit without tax consequences. For additional information, see the Tax Considerations for Rollovers booklet.
By Internal Revenue Code regulations, CalSTRS is required to provide at least 60 days from the date on the letter to return the form. Based upon the volume expected, it will take CalSTRS staff at least 30 days to process these payments once the form is received. All payment recipients who are eligible for a rollover were sent a dated letter and a rollover form.
The net payment you receive will be the amount of the credit plus interest, minus any outstanding amount you may owe CalSTRS, tax withholding or deductions.
If you do not roll over all of your credit, your payment will be issued according to your payment preference on file with your account: either as a direct deposit or paper check.
Once your payment is issued, the payment method cannot be changed. You may still do a rollover by making a deposit into a qualified IRA or eligible employer plan that will accept it. You will have 60 days after you receive your CalSTRS payment to make the deposit. For additional information, see the Tax Considerations for Rollovers booklet.
No. The payment eligibility is based on your Defined Benefit Supplement or Cash Balance account balance as of June 30, 2017, and your account status at the time the credits were posted.
Yes. All payments will be reflected on Form 1099-R for the year the payment was issued.
California Education Code states that the credits shall be paid to members on a date specified by the board. The Teacher’s Retirement Board approved the credit in May 2018. CalSTRS is required to send a lump-sum payment to all eligible recipients, regardless of the amount.
The credit will be applied to eligible active and inactive members who had a balance of credits (account balance) in the Defined Benefit Supplement or Cash Balance Benefit programs, or both, as of June 30, 2017.
All recipients will receive the credit at the following rates:
- 4.12% credit for funds in a Defined Benefit Supplement account
- 3.62% credit for funds in a Cash Balance Benefit account
If you are an active or inactive member and eligible to receive the credit, the credit appears in your 2019 Retirement Progress Report.
If you were eligible to receive the credit but retired after June 30, 2016, but before May 10, 2018, you will receive a payment equal to the credit.
If you were eligible to receive the credit but began receiving an annuity on or after May 10, 2018, your Defined Benefit Supplement or Cash Balance annuity, or both, may be recalculated to include the credit.
You will receive an adjustment letter detailing the recalculation of your benefit.
If you were eligible to receive the credit but have since refunded your account, you will receive a one-time payment in 2019.
For additional information, see the Additional Earnings Credit Frequently Asked Questions.