Ask Jack

Ask Jack

Overview
Chief Executive Officer of CalSTRS, Jack Ehnes

Ask Jack is an online communication channel offered by CalSTRS CEO, Jack Ehnes. This Web forum solicits questions about the sustainability and administration of the CalSTRS Defined Benefit Program. Not all will be posted directly, but Jack’s responses will be inclusive of views and perspectives.

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Ask Jack Jack Ehnes

Does any of the money earned from working an extra period (extended contract) count toward my retirement?

Yes, compensation earned from extra duty assignments, summer school, overload or extended contract teaching is credited to the cash balance component of your retirement benefit known as the Defined Benefit Supplement Program if you otherwise work in a full-time assignment. This compensation is not included in final compensation used to establish pension benefits associated with the traditional Defined Benefit Program. At retirement, disability, death or six months following termination of CalSTRS-covered employment, the funds in your account will be available to you or your beneficiary, whichever is applicable.

Ask Jack Jack Ehnes

Is CalSTRS membership mandatory and how does this impact Social Security benefits earned from previous employment?

CalSTRS membership is mandatory for full-time California public school preK-12 teachers, community college instructors and public school administrators. Regardless of any previous employment, California public school educators do not contribute to Social Security. Thus, they do not receive Social Security for their CalSTRS-covered employment.

Ask Jack Jack Ehnes

Are media reports that declare CalSTRS needs $4.5 billion more a year true? On what basis are these claims being made?

Recent media articles that state CalSTRS needs $4.5 billion more annually to meet future obligations lack context, but accurately cite the cost of a particular approach. The needed increase refers to the CalSTRS projected $70 billion funding shortfall and represents a total dollar amount necessary close this gap by increasing contributions in 2014 up to the amount needed to fully fund CalSTRS over 30 years.

Ask Jack Jack Ehnes

What exactly is the reason for the separation from service for six months?

The separation from service requirement seeks to curb the practice of retiring from a position and drawing a pension benefit from that service while returning to the same or similar position and earning a salary in that position. This practice is often referred to as double dipping and was a major concern of the Legislature and the Governor as they discussed pension legislation last year.

Ask Jack Jack Ehnes

Can I borrow or cash out any of my CalSTRS retirement benefits while I am still working in CalSTRS-covered employment?

No, California law does not allow you to take a partial refund or borrow against your accumulated contributions and interest on account with CalSTRS. Under the law, only members who are no longer employed by a CalSTRS-covered employer are eligible for a refund of accumulated retirement contributions. If you are eligible for a refund, the consequences should be carefully considered as you’ll no longer be a CalSTRS member.

Ask Jack Jack Ehnes

Will my final compensation include any overload teaching, such as any course in addition to my regular full-time load?

If a member has completed their full-time load, the compensation earned from extra duty assignments, summer school or overload teaching is credited to the cash balance component known as the Defined Benefit Supplement Program and is not included in final compensation used to establish pension benefits associated with the Defined Benefit Program. (If a member earns less than a full year of service, such as when they retire in the middle of the school year, this additional service will be credited to the Defined Benefit Program, and will affect the final compensation.) A cash balance plan acts like a hybrid plan that contains features of a 401(k) plan and defined benefit plan. Contributions to the cash balance program component are made by both the employer and employee.

Ask Jack Jack Ehnes

Would CalSTRS consider a 125/Cafeteria type plan to help retirees by providing for pre-tax dollars used for medical expenses? This would be a great help to many who have high medical expenses.

Under current pension codes, 125/Cafeteria plans apply to active members and are not a viable offering for retirees. However, in 2008-09 CalSTRS explored the implications of offering health care reimbursement plans and programs that would allow active members to set aside money for health care expense reimbursement for use after retirement.

Ask Jack Jack Ehnes

In May 2012, you responded to a question about what you were doing to get CalSTRS on solid financial footing. Any update? This includes the board’s actions as well.

By law CalSTRS has a fixed contribution rate, thus the responsibility to adopt a funding solution rests with the Governor and the Legislature—not the CalSTRS board. Moreover, only the Legislature and the Governor can change the benefit structure, not the board.  As a result, CalSTRS has been working for some time to raise awareness of the Legislature and successive governors of our funding shortfall, the cost of waiting to address it and the ultimate risk failing to do so presents to the state’s General Fund.

Ask Jack Jack Ehnes

If I take a job with a salary less than I make now, do I lose my highest three-year’s salary cap at my present job when I retire?

If your final compensation for retirement purposes is based on your highest average three consecutive years of compensation and your highest three consecutive years of compensation are not the last three years you worked, CalSTRS would then use your highest three consecutive years of compensation instead of your last three to calculate your final compensation amount.

Learn more about how final compensation is calculated.

Ask Jack Jack Ehnes

Is my CalSTRS retirement plan a qualified or unqualified plan?

CalSTRS administers a qualified retirement plan. A qualified retirement plan satisfies specific requirements of the Internal Revenue Code in both form and operation, and receives special certification by the IRS. Requirements for qualified plans set forth by the Internal Revenue Code include things such as participant eligibility, the tax treatment of contributions and corresponding interest, the payout of distributions, the rollover eligibility of funds, etc.

Ask Jack Jack Ehnes

What institution guarantees CalSTRS pensions? Is it an insurance agency operated by the federal government?

The State of California is the plan sponsor of the CalSTRS Defined Benefit Program. According to current law, CalSTRS core pension benefits (retirement, disability and survivor benefits) are guaranteed by the U.S. and California constitutions. If the CalSTRS fund were to become depleted, the State, as plan sponsor, would be obligated to step in and pay the difference between the benefits paid and the contributions received by CalSTRS.

Ask Jack Jack Ehnes

Does the 180-day separation apply to members whose district offers voluntary early retirement via a stipend or medical benefits?

Yes, the 180-day separation-from-service requirement applies to anyone who retires on or after January 1, 2013, and includes individuals who may be offered a voluntary early retirement with a stipend or medical benefits. This separation requirement applies to what is considered CalSTRS-covered employment under existing laws.

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If I retire before January 1, 2013 will I have to wait six months to work at any job, including substitute teaching?

That depends upon your age and where you take a job; for example, if you are under the normal retirement age of 60 years, there currently is a six month separation from service requirement that applies to you and any member under normal retirement age who retires and returns to work under CalSTRS-covered employment. Returning to work under CalSTRS-covered employment before the six month separation from service requirement is fulfilled means you will have your retirement benefit reduced dollar for dollar, up to your annual benefit amount, for any compensation earned.