ED98-02 Issued 7-8-98 Earnings Limitation for the 1998-99 School/Fiscal Year for Members Retired for Service from State Teachers’ Retirement System (STRS)

Employer Directive

TO:

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

SUBJECT:

Employer Directive 98-02
Earnings Limitation for the 1998-99 School/Fiscal Year for Members Retired for Service from State Teachers’ Retirement System (STRS)

PURPOSE

The purpose of this Employer Directive is to (1) inform employers of the adjusted post- retirement earnings limitation for the 1998/99 school year, (2) provide Education Code section references pertaining to members of the STRS Defined Benefit Plan who are retired for service and performing creditable service, and (3) refer to exemptions from the post-retirement earnings limitation under Education Code sections 24216 and 24216.5.

SCOPE

This directive applies to county superintendents of schools, school districts, community college districts, and the employing agencies that employ STRS retired members to perform creditable service.

DISCUSSION

NOTE: All Section references are to the Education Code.

Section 22119.5 defines activities considered to be creditable service when performed for an employer under specified circumstances.

Section 24214 establishes a limitation on the amount of compensation that a retired member may earn for performing creditable service in the California public school system. The limitation is adjusted each year on July 1, to reflect the increase in the All Urban California Consumer Price Index. The limitation on post-retirement earnings for the 1998/99 school year (July 1, 1998 through June 30, 1999) is $18,750. The limitation applies regardless of whether a retired member performs creditable service as an employee of the employer, as an independent contractor, or as an employee of a third party.

Section 24214(f) requires STRS to reduce the memberís retirement allowance by the compensation earned in excess of the annual dollar limit. The amount of the reduction may be less than or equal to the gross monthly allowance payable, depending on the amount of the excess compensation earned. The memberís allowance will be reduced dollar-for-dollar from the gross monthly allowance until the amount withheld equals the excess earnings amount, however, the reduction will be no more than the amount of the annual allowance.

EXAMPLE:

Mr. Taylor retires receiving a gross monthly allowance of $1,500. He returns to employment in the California public school system in September 1998. By April 1999, he has earned $12,800 from District 1 and $7,700 from District 2, for a total of $20,500, which is $1,750 in excess of the earnings limitation. Assuming that Mr. Taylor stops working at the end of April 1999, his excess earnings of $1,750 would be collected from his monthly retirement allowance as follows:

Description June 1999 July 1999 August 1999
Monthly retirement allowance $1,500 $1,500 $1,500
Excess earnings deduction at 100 percent of monthly allowance -1,500 -250 -0-
Allowance available to Mr. Taylor -0- $1,250 $1,500

*Note the reduction in monthly allowance starts in June since the excess earnings were reported to STRS in May of 1999.

Exemptions from the post-retirement earnings limitation are stipulated in Sections 24216 and 24216.5. Section 24216 addresses the exemptions relating to limited-term or emergency appointments for administrators. STRS Administrative Directive 97-01 contains instructions and forms for requesting an exemption under the provisions of Section 24216. The instructions and forms for certifying an exemption under Section 24216.5, Class-Size Reduction, are contained in STRS Administrative Directive 97-03.

ACTION

The employer is required to maintain accurate records of the retired membersí earnings and to report those earnings monthly to STRS and to the retired members regardless of the method of payment or the fund from which the payments were made.

The employer is required by Section 22461 to advise STRS retired members who perform creditable service of the annual limitation on earnings for performing such service.

All information provided to STRS is subject to audit by STRS Office of Audits pursuant to Section 22206.

Questions regarding the post-retirement earnings limitation should be directed to the Benefit Adjustments Unit of STRS at (916) 229-4664.

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.

For an accessible version of this directive, contact ADACoordinator@CalSTRS.com.