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Assembly Bill 1667 employer FAQ

On September 29, 2022, Governor Newsom signed AB 1667 (Cooper, Chapter 754, Statutes of 2022), a bill relating to CalSTRS benefit overpayments, the delivery of creditable compensation and creditable service reporting guidance, and the employer audits and appeal processes.

Although benefit overpayments affect a small portion of our benefit recipients, the recoupment of overpaid amounts can be difficult for those affected. The passage of AB 1667 provides relief prospectively for CalSTRS retirees affected by benefit overpayments resulting from errors that were not their own.

AB 1667 is also intended to improve reporting and reduce future errors by providing additional resources to clarify creditable compensation and creditable service requirements. In addition, the legislation creates more transparency around the employer audits process through additional communications and posting of final audit reports and improves equity for members by ensuring appeal rights.

When did AB 1667 take effect? 

AB 1667 largely became effective January 1, 2023. The bill requires us to provide an advisory letter process and additional resources for employers and local union organizations to interpret and clarify creditable compensation and creditable service by July 1, 2023.

How will employers be billed for benefit overpayments that result from employer reporting? 

We will bill counties and employers that report directly to us on a quarterly basis for amounts overpaid due to incorrect information provided by the county or the employer (report unit) that reports through that county. Counties will see an itemized listing of the overpaid amounts categorized by report unit and in some instances may collect those amounts directly from their report units. Counties and employers who report directly to us are required to pay the amount due within 30 days of receiving the invoice.

The first few invoices may take longer than anticipated for employers to receive while we implement the new billing process. We will communicate additional details on this process prior to the first billing date, which will tentatively be October 30, 2023.

How will employers be billed for benefit overpayments that result from a CalSTRS error? 

Employers are responsible for 15% of the cost of benefit overpayments resulting from CalSTRS error, and counties and employers who report directly to us will receive a separate annual bill for these overpayments. All amounts overpaid due to an error by us will be recovered, with interest, beginning July 1, 2024.

The first billing cycle will include benefit adjustments that take place between January 1, 2023, and June 30, 2023, in amounts proportionate to each employer’s share of contributions for that fiscal year and will continue each fiscal year after that. The amount to be recovered will also include regular interest from the date the member was originally overpaid to the date of recovery.

Counties will see an itemized listing of the overpaid amounts by report unit proportionate to each employer’s share of contributions for that fiscal year. There may be instances in which the county may collect those amounts directly from their report units.

How does AB 1667 affect the employer audit and appeal processes for employers? 

AB 1667 prescribes a new process that begins with CalSTRS sending an engagement letter to an employer alerting them they are being audited. At that time, we will request the employer provide us the names and email addresses for all exclusive representatives, generally local union organizations, that represent CalSTRS members who could be impacted by the audit. We will email those local union organizations with a copy of the engagement letter.

We will conduct the necessary fieldwork for the audit and compose a draft audit report. We will send a copy of the draft audit report by email to the employer and the local union organizations. These parties will have 60 days to review the draft audit and provide any additional information that may affect the audit. We will review and provide feedback on that information and adjust any preliminary audit findings as needed.

We will compose the final audit report and post it at CalSTRS.com/employer-audits. We will also email the final audit report to the employer and the exclusive representatives.

The final audit report triggers:

  • A 90-day window from the date of the final audit report for the employer to appeal the audit findings and request an administrative hearing.
  • A 60-day window from the date of the final audit report for the employer to submit a complete list of members impacted by the audit findings to CalSTRS
Which employer audits are affected by the bill? 

We are implementing the requirements for the new employer audits and appeal processes under AB 1667 at each step in the employer audit process.

  • All employer audit engagement letters we sent to employers in 2022 followed the pre-AB 1667 process. All engagement letters we send on or after January 1, 2023, are subject to the new employer engagement letter process and will be sent to employers requesting they submit a list of local union organizations’ contact information.
  • All draft audit reports we sent in 2022 follow the pre-AB 1667 process. All draft audit reports we send on or after January 1, 2023, are subject to the new draft audit process and are sent to employers and local union organizations, giving both parties 60 days to provide any additional information for us to take into consideration when drafting the final audit report.
  • All final audit reports we sent in 2022 follow the pre-AB 1667 process. All final audit reports we send on or after January 1, 2023, are subject to the new final audit process and are sent to employers and local union organizations. The date of the final audit report begins the 60 days those employers must submit the complete list of impacted members for each finding in the audit to us; it also begins the 90 days employers have to request an administrative hearing. As we implement these provisions of the bill, further detailed information will be communicated.

If members have questions about how the audits and appeal processes under AB 1667 will impact them, they can learn more at CalSTRS.com.

Employer audit engagement letters we send on or after January 1, 2023, are labeled an EA23-XXXX audit, or with the appropriate corresponding calendar year, and will completely follow the new employer audit process required by AB 1667.

When must employers submit the list of impacted members to CalSTRS? 

All members affected by an employer audit with a final audit report sent on or after January 1, 2023, will have administrative hearing rights. For final audit reports sent on or after January 1, 2023, employers are required by law to submit a list of members impacted by that audit to us within 60 days after the date of the final audit report.

When will additional information be provided? 

We committed to implementing AB 1667 in a manner that continues our collaboration with our member and employer groups. We will update this FAQ page as implementation progresses. Additional details on the new advisory letter process and creditable compensation and creditable service resources will be available closer to the July 1, 2023 effective date.