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

If I have less than 5 years of service am I still able to purchase nonqualified service credit or air time?

With the recent passage of Assembly Bill 340, the Public Employees’ Pension Reform Act of 2013, all purchases of nonqualified service credit, also known as ‘air time’, will be prohibited beginning January 1, 2013. Members who have earned at least five years of service credit are eligible to purchase up to five additional years of nonqualified service credit or ‘air time.’

Ask Jack Jack Ehnes

I am still making payments on my air time purchase. Under the new law, will my purchase be canceled or can I continue payments?

Prior to January 1, 2013 you may purchase up to five years of nonqualified service credit if you are a CalSTRS member with at least five years of qualified service credit. Nonqualified service credit is not connected to any specific prior employment. You cannot use the purchase of nonqualified service credit, or air time, to qualify for the career factor benefit enhancement or one-year final compensation, but you can use it to retire as early as age 50 by helping you reach 30 years of service credit.

Ask Jack Jack Ehnes

Under all the new laws, AB 340 & AB 178, how soon can I return for part-time work after retirement? Must I wait 6 months?

Recently passed legislation changes the postretirement earnings limit, postretirement employment and reinstatement. Under AB 178, which became effective July 1, 2012, the postretirement earnings limit formula is now based on one-half of the median final compensation for recently retired members instead of what was approximately one-half of the average annual salaries of all active members.

Ask Jack Jack Ehnes

When will the CalSTRS Home Loan Program return?

Last fall 2011, the previous CalSTRS Home Loan Program master servicing agent/program administrator made a strategic decision to cease mortgage originations via its correspondent lending channel nationwide. As a result, CalSTRS temporarily suspended its Home Loan Program and began the process of finding a new partner.

Ask Jack Jack Ehnes

Have there been any changes to the postretirement earnings limit or employment requirements since June 30, 2012?

The postretirement earnings limit has changed with the passage of Assembly Bill 178 on July 17, 2012. The new law applies to CalSTRS retired members and sets new conditions for the earnings limit and limited-term appointment exemptions. It also permits a third-party exclusion provision and allows retired members to reinstate and re-retire within the same year.

Ask Jack Jack Ehnes

Is a teacher’s defined benefit pension guaranteed by the California Constitution and protected by the U.S. Constitution?

In California, public pensions enjoy protections under both the U.S. and California constitutions.

Article 1, Section 10, Clause 1 of the U.S. Constitution, known as the “Contract Clause,” prohibits states from enacting any law that impairs contract rights. Article 1, Section 9 of the California Constitution provides essentially the same protection.

Ask Jack Jack Ehnes

What forms of compensation allowed in postretirement employment are not subject to the earnings limitation of $31,020?

Any service that would have been creditable for CalSTRS before your retirement is subject to the earnings limitation, irrespective of whether you are employed directly by a school district or by a third party contractor. Non-creditable compensation including a fringe benefit, such as free parking, is excluded from the earnings limitation.

Ask Jack Jack Ehnes

Does CalSTRS provide protection from creditor attachments like federal ERISA plans?

Although CalSTRS is not subject to the anti-assignment rules of ERISA or Internal Revenue Code Section 401(a)(13), the Teachers’ Retirement Law does provide protection from creditor attachments or what is referred to as an anti-assignment provision under Section 22006. This section of the law offers an exemption from creditors attempting to seek payment for debt by using a member’s pension benefit as payment.

Ask Jack Jack Ehnes

Why have all the postretirement earnings limitation exemptions been eliminated?

The postretirement earnings limitation exemptions are set by the Teachers’ Retirement Law and contain a sunset date. That date is June 30, 2012. When a law contains a sunset date, it will expire or sunset on the determined date unless an extension in the law or the enactment of a new law occurs.

In the case of the postretirement earnings limit exemptions, legislation to extend the exemptions has not been enacted

Ask Jack Jack Ehnes

What forms of compensation allowed in postretirement employment are not subject to the earnings limitation of $31,020?

Any service that would have been creditable for CalSTRS before your retirement is subject to the earnings limitation, irrespective of whether you are employed directly by the school district or by a third party contractor. Non-creditable compensation including a fringe benefit, such as free parking is excluded from the earnings limitation.

Ask Jack Jack Ehnes

The Governor’s 12-point pension proposal seeks to eliminate purchasing nonqualified service credit, when could this take effect?

The year 2013 is the earliest any of the provisions within the Governor’s 12-point pension reform proposal could go into effect, including elimination of purchasing non-qualified service credit; that’s if the measures are adopted as written.

It’s important to keep in mind that while the Governor has introduced specific pension reform measures, all measures must first go through the legislative process before anything is certain.

Ask Jack Jack Ehnes

If passed, would the Governor’s 12-point proposal eliminate postretirement employment and would it include college instructors?

Currently the Teacher’s Retirement Law restricts the amount you can earn in a CalSTRS-covered position after you retire without it affecting your retirement benefit. For example, if you return to work in a CalSTRS-covered position, you are subject to an earnings limitation of $31,020 per school year for 2011-12 unless you have an exemption from the earnings limit. However, the exemptions will expire June 30, 2012.