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 CalSTRS’ 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.
A benefit overpayment occurs when a member or other CalSTRS benefit recipient is paid an amount more than what is due to them. An overpayment may occur due to various reasons, such as when we receive additional information from your employer that changes the calculation of your benefit. An overpayment may also occur when a benefit recipient makes changes to their retirement date or beneficiary information or untimely notifications of death or other information affecting the benefits owed. When we discover a benefit has been overpaid, we are required to adjust the monthly benefit to the correct amount for future benefit payments and recover any amounts already overpaid.
For additional information on benefit overpayments, see the Adjustments and overpayments FAQ.
AB 1667 requires that when a benefit is overpaid, the party responsible for the error that caused the overpayment must pay CalSTRS the full amount of the resulting overpayment. In instances of CalSTRS error, the overpayment must be recovered from the state and employers. This means that when a benefit overpayment occurs, retired members and other benefit recipients will see their benefit reduced to the correct amount for future benefit payments, but they will not be responsible for paying back overpayments, except in the case of overpayments that result from information submitted by a member.
AB 1667 was largely effective on 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.
No, the provisions of AB 1667 are not retroactive. If you received an award or adjustment letter notifying you of a benefit overpayment prior to January 1, 2023, the bill does not apply to you. We will continue to deduct a portion of your monthly benefit until your overpayment is paid in full.
AB 1667 prescribes a new process for certain notifications to employers and local union organizations during the employer audit process and requires employers to send us the list of all members impacted by an employer audit. The bill also requires us to provide notice of administrative remedy process rights to all impacted members and a 90-day window to appeal the audit findings.
The most significant change for members with regard to employer audits is ensuring all members affected by an audit receive CalSTRS administrative remedy rights. Members we know are affected by an audit finding, typically referred to as sampled members, will no longer receive draft audit reports during an employer audit. But all members affected by an audit will receive communication from us with the final audit report and notification of appeal rights. Members will also be able to view all final employer audit reports completed on or after January 1, 2023 on CalSTRS.com.
All audit reports sent on or after January 1, 2023, are subject to AB 1667. Members affected by employer audits will fall into one of three categories:
- Employer audits with a final audit report issued on or before December 31, 2022, follow CalSTRS’ pre-AB 1667 notification and appeal processes.
- Employer audits that begin in 2022 with a final audit report completed on or after January 1, 2023, follow the notification and appeal processes required by AB 1667.
- Employer audits that begin on or after January 1, 2023, follow the notification and appeal processes required by AB 1667.
We are 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.