AD96-04 Earnings Limitation for the 1996-97 School/Fiscal Year for STRS Members Retired for Service
(Supersedes Administrative Directive 95-05)

Administrative Directive

TO:

All County Superintendents of Schools
District Superintendents of Schools
Community College Districts
Other Employing Agencies.

FROM:

EXECUTIVE OFFICE

SUBJECT:

Administrative Directive 96-04
Earnings Limitation for the 1996-97 School/Fiscal Year
for STRS Members Retired for Service.
(Supersedes Administrative Directive 95-05)

PURPOSE

The purpose of this directive is to inform employers of the adjusted post-retirement earnings limitation for specified service performed during the 1996-97 school/fiscal year, and to provide references to the Education Code Sections which apply to the conditions under which members of the State Teachers’ Retirement System (STRS) who are retired for service may perform creditable service. This Directive reflects changes in the law that have occurred due to the implementation of Assembly Bill (AB) 948 (Chapter 394, Statutes of 1995).

SCOPE

This directive impacts all County Superintendents of Schools, school districts, community college districts, and other employing agencies for whom STRS retired members perform creditable service.

DISCUSSION

Education Code Section 24214 establishes a limitation on the amount of compensation that a retired member may earn while performing creditable service as defined in Section 22119.5 of the Education Code. For purposes of this Directive, a member retired for service earns compensation when the work is performed, not when payment is made for the services. The amount of the limitation is adjusted each year on July 1 to reflect the change in the California Consumer Price Index. The limitation on post-retirement earnings for the 1996-97 school/fiscal year (July 1, 1996 through June 30, 1997) is $17,850.

The limitation applies to retired members who perform creditable service as an employee of the school district, as an independent contractor, or through an independent third party. The exceptions are contained within Education Code Section 24216, established under the authority of AB 948. A separate administrative directive is being prepared detailing such exemptions.

Refer to Education Code Section 24215 for STRS members who retired from the California State University.

Education Code Section 24214 (f) requires STRS to reduce the member’s retirement allowance by the excess compensation. The amount of the reduction may be less than or equal to the gross monthly allowance payable, depending on the amount of the excess. The member’s allowance will continue to be reduced dollar-for-dollar from the gross monthly allowance until the excess compensation has been paid in full. The maximum excess compensation that STRS may collect is the amount of the retirement allowance payable for that school/fiscal year.

Example:

Mr. Smith retires, then returns to employment performing creditable service in the California Public school system in September 1996. The earnings limit for the 1996-97 school/fiscal year is $17,850.

He earns $1,450 from district #1 and $1,000 from district #2 for a total of $2,450 per month. By the end of April 1997, his excess earnings are $1,750 ($2,450 x 8 = $19,600 – $17,850 = $1,750).

With a gross monthly retirement allowance of $1,500, assuming that Mr. Smith stops working at the end of April 1997, his excess earnings of $1,750 would be collected from his gross monthly retirement allowance as follows:

Category June 1997 July 1997 August 1997
Gross Monthly Allowance. $1,500 $1,500 $1,500
Excess earnings deduction.
(up to 100 % of gross monthly allowance)
-1,500 -250 -0
Amount available to Mr. Smith. 0 $1,250 $1,500

In the example, Mr. Smith’s gross monthly allowance will be deducted at 100 percent in June 1997. This may result in the cancellation of payroll deductions for health insurance premiums, association dues, taxes, etc.

ACTION

An employer is required by Education Code Section 22461 to advise any STRS service retired member who performs creditable service, as defined in Education Code Section 22119.5, of the earnings limit. The employer is also required to maintain accurate records of the retired member’s earnings and to report those earnings monthly to STRS and the retired member.

Questions regarding the post-retirement earnings limitation should be directed to Marlene Wilgus at (916) 229-4664.

Signed,

JAMES D. MOSMAN
Chief Executive Officer