AD97-07 Issued 6-6-97 Contribution Rates and Regular Interest Rate for 1997/98

Administrative Directive

TO:

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

FROM:

EXECUTIVE OFFICE

SUBJECT:

Administrative Directive 97-07
Contribution Rates and Regular Interest Rate for 1997/98

PURPOSE

The purpose of this directive is to inform employers of the Regular Interest Rate, Employer Contribution Rate for Reduced Workload Program, Employer Contribution Rate for Elected Officer of an Employee Organization, and the Present Value Factor for Excess Sick Leave Service Credit that were adopted by the Teachers’ Retirement Board for the fiscal year beginning July 1, 1997 and ending June 30, 1998.

SCOPE

This directive applies to all county superintendents of schools, school districts, community college districts and other employing agencies that employ persons to perform creditable service under the State Teachers’ Retirement System (STRS) Defined Benefit Plan.

DISCUSSION

Each member of the Defined Benefit (DB) Plan must contribute to STRS a specified percentage of the member’s creditable compensation under the DB Plan. Each employer must also contribute to STRS a specified percentage of the total creditable compensation earned by employees who are members of the DB Plan. The following member and employer contribution rates are set in statute and do not vary by fiscal year:

Description
Rate
Education Code Section
Member Contribution Rate 8.00% 22901
Employer Contribution Rate 8.25% 22950 & 22951

Each year the Teachers’ Retirement Board adopts the Regular Interest Rate for the new fiscal year. The Regular Interest Rate is used by the System to charge interest on previously refunded contributions when a member elects to redeposit, and to charge interest on the installment payments for a member’s redeposit or purchase of additional service credit. The Regular Interest Rate is also used to charge employers for late remittance of contributions to the DB Plan and to penalize employers for late submission or submission of an unacceptable Monthly Report of Retirement Contributions (F-496). The rates for 1997/98 are as follows:

Description Rate For FY 1997/98 Education Code Section
Regular Interest Rate 6.50% 22162
Interest Rate for Late Remittance of Contributions 6.50% 23003
Penalty Rate for Late or Unacceptable Monthly Report Greater of 6.50% of the sum of the member and employer contributions required by the report or $500 23006

Each year the Teachers’ Retirement Board adopts employer contribution rates for members who participate in the Reduced Workload Program, and for members who are on a compensated leave of absence to serve as an elected officer of an employee organization during the new fiscal year. The rates for 1997/98 are as follows:

Description Rate For FY 1997/98 Education Code Sectin
Employer Contribution Rate – Reduced Workload Program 12.50% 22713
Employer Contribution Rate – Elected Officer of Employee Organization 12.50% 22711

The Teachers’ Retirement Board also adopts the present value factor used to calculate the amount of money needed on the member’s retirement date to reimburse STRS for the cost of the member’s allowance attributable to unused excess sick leave days. The present value factor for unused sick leave service credit for 1997/98 is as follows:

Description Factor For FY 1997/98 Education Code Section CA Code of Regulations
Present Value Factor for Excess Sick Leave Credit 0.241
(24.1%)
22718 23000-23005

Please refer questions concerning the application of any of the contribution rates to your assigned STRS Reporting Section Technician or Analyst. Any questions concerning the Present Value Factor for Excess Sick Leave Credit should be directed to the STRS Service Retirements Division.
Signed,

JAMES D. MOSMAN
Chief Executive Officer