Employer Directive

ED98-01 Issued 7-1-98 Contribution and Interest Rates for 1998/99

TO:

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

SUBJECT:

Employer Directive 98-01
Contribution and Interest Rates for 1998/99

PURPOSE

The purpose of this directive is to inform employers of the Regular Interest Rate, Credited Interest Rates, Minimum Interest Rate for the Cash Balance Plan, Employer Contribution Rate for Reduced Workload Program, Employer Contribution Rate for Elected Officer of an Employee Organization, and the Present Value Factor for Unused Excess Sick Leave Service Credit that were adopted by the Teachersí Retirement Board for the fiscal year beginning July 1, 1998 and ending June 30, 1999.

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 Teachersí Retirement System (STRS) Defined Benefit and Cash Balance Plans.

DISCUSSION

Each employer must contribute to STRS a specified percentage of the total creditable compensation earned by the employees who are members of the Defined Benefit (DB) or Cash Balance (CB) Plans. The employer and member contribution rates for the CB Plan may be negotiated through the collective bargaining process and may vary by employer. For the DB Plan, the following member and employer contribution rates are set in statute and do not vary by fiscal year:

Defined Benefit Contribution Rates 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 and Credited Interest Rates for the new fiscal year. The Regular Interest Rate is used by STRS to charge interest on previously refunded contributions when a member elects to redeposit, and to charge interest on the installment payments for a memberís 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). Credited Interest Rate is the interest that is credited to members’ accumulated retirement contributions for service performed after June 30, 1935, excluding all accumulated contributions while being paid an allowance. For the CB Plan, the Teachers’ Retirement Board adopts a Minimum Interest Rate which is used to credit employee and employer accounts during the plan year. The rates for 1998/99 are as follows:

  Rate for FY 1998/99 Education Code Section
Regular Interest Rate 6.75% 22162
Credited Interest Rate-Defined Benefit Plan 6.00% 22216
Minimum Interest Rate-Cash Balance Plan 6.50% 26604
Interest Rate for Late Remittance of Contributions 6.75% 23003
Penalty Rate for Late or Unacceptable Monthly Report 6.75% 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 are as follows:

  Rate for FY 1998/99 Education Code Section
Employer Contribution Rate – Reduced Workload Program 8.25% 22713
Employer Contribution Rate – Elected Officer of Employee Organization 12.28% 22711

The Teachersí Retirement Board also adopts the present value factor used to calculate the cost of the memberís allowance attributable to unused excess sick leave days. The cost of unused excess sick leave service credit must be paid to STRS by the employer before the member can receive the benefit. The present value factor for unused excess sick leave service credit for 1998/99 is as follows:

  Factor for FY 1998/99 Education Code Section CA Code of Regulation
Present Value Factor for Unused Excess Sick Leave Service Credit 0.241 22718 23000-23005

ACTION

Please refer questions to concerning the Defined Benefit Plan to STRS Membership Division Reporting Contact, questions concerning the Present Value Factor for Unused Excess Sick Leave Service Credit to the STRS Service Retirements Division at (916) 229-3574 and questions concerning the Cash Balance Plan to the STRS Governmental Affairs and Program Development Branch at (916) 229-3874.

Signed,

JAMES D. MOSMAN

Chief Executive Officer

Employer Directives [ED] convey legal requirements and prohibitions and document CalSTRS policy for school district and community college employers.

Commands