2013 Additional Annuity Credit and Additional Earnings Credit
I received a letter indicating I was eligible to receive an Additional Earnings Credit/Additional Annuity Credit. What is this?
The Teachers’ Retirement Board has the statutory authority to declare a credit when the Defined Benefit Supplement program and Cash Balance Benefit program show substantial investment earnings. The programs met the thresholds for a credit for the fiscal year ending June 30, 2013. The board declared the credit on April 3, 2014.
On what amount is this credit based?
Additional Earning Credits are based on a percentage of the eligible member’s balance of credits as of June 30, 2013.
Additional Annuity Credits are applied to eligible members and beneficiaries who were receiving a Cash Balance or Defined Benefit Supplement annuity, or both, as of June 30, 2013. This credit is based on the value of the annuitized benefit as of June 30, 2013.
How is the credit calculated?
The amount of the Defined Benefit Supplement program is calculated as 3.61 percent of the balance of credits (account balance) as of June 30, 2013, if the member is active, inactive or died while an active member.
The amount of the Cash Balance program credit is calculated as 3.25 percent of the balance of credits (account balance) as of June 30, 2013, if the member is active, inactive or died while an active member.
I received a form with my letter. Do I need to fill out the form?
If you received a form with your letter, your credit qualifies for a rollover. Fill out the form if you want to roll over all or a portion of the payment to a qualified IRA or eligible employer plan or if you do not want California income tax withheld from your payment.
If you elect to receive a direct payment with federal and California state income tax withheld, no action is required on your part and you do not need to fill out the form.
I want to roll over all or a portion of my payment into CalSTRS Pension2. What do I need to do?
Open a Pension2 account before submitting your rollover application by going online at Pension2.com or calling 888-394-2060. If you enroll online, your account will typically be established in two to three days. CalSTRS will obtain the required signatures for the rollover on your behalf.
Is there a deadline to return the form?
CalSTRS must receive your properly completed form within 60 calendar days of the date on the letter or we will issue a payment to the address on file and withhold both federal and state income tax. CalSTRS is required to withhold 20 percent federal income tax and will withhold 2 percent California state income tax.
How do I return the form?
You may hand deliver, mail, overnight deliver or fax your completed form. Specific details can be found on page 2 of the instructions included with your form.
I received a letter from CalSTRS regarding my eligibility to receive an Additional Earnings Credit or Additional Annuity Credit payment and I accidentally threw it away. Can I get a duplicate copy?
Yes. You can request a duplicate copy of this letter by calling the CalSTRS Contact Center at 800-228-5453.
If I elect to rollover this money and return the form, when will the money be rolled over?
The rollover will occur approximately 90 days from the date on the letter.
I received a form along with my letter saying my payment was eligible for a rollover. I completed the form and returned it by the deadline date but still received a payment. Why?
The net payment you receive is the amount of the credit and interest earned minus any outstanding amount you may owe CalSTRS, tax withholding or deductions. If the net amount is less than $200, your payment is not eligible for direct rollover and will be paid directly to you.
You may still rollover your money into a qualified IRA or eligible employer plan that will accept it. You have 60 days after you receive your CalSTRS payment to make the deposit. For additional information see the Tax Considerations for Rollovers booklet at CalSTRS.com.
Why do I need to wait 90 days to receive a payment?
All payment recipients who are eligible for a rollover were sent a dated letter and a rollover form. By Internal Revenue Code regulations, CalSTRS is required to provide at least 60 days from the date on the letter to return the form. Based upon the expected volume, it will take CalSTRS staff at least 30 days to process these payments once the form is received.
What will be deducted from this payment?
The net payment you receive will be the amount of the credit minus any outstanding amount you may owe CalSTRS, tax withholding or deductions.
How will my payment be issued?
Your payment will be issued according to your payment preference on file with your account: either as a direct deposit or paper check.
Why is the amount of my payment different than what was stated in the letter?
Additional Earning Credits will be the amount of the credit, plus interest minus any outstanding amount you may owe CalSTRS, tax withholding or deductions.
Additional Annuity Credits will be the amount of the credit minus any outstanding amount you may owe CalSTRS, tax withholding or deductions.
If I receive a payment and decide that I want to roll it over, can I return it to CalSTRS to do so?
Once your payment is issued, the payment method cannot be changed. You may still rollover your money by depositing it into a qualified IRA or eligible employer plan that will accept it. You have 60 days after you receive your CalSTRS payment to make the deposit. For additional information see the Tax Considerations for Rollovers booklet at CalSTRS.com.
Did everyone receive a payment?
No. The payment eligibility is based on your account balance as of June 30, 2013 and your account status at the time the credits were posted.
Will this payment affect my 2015 taxes?
No, this payment will not affect your 2015 taxes. All payments issued in the 2016 calendar year will be reflected on the 2016 Form 1099-R.
My check is for a small amount. Why did you spend money, postage and time sending me a check for so little?
California Education Code states that the credits shall be paid to members and annuity beneficiaries on a date specified by the board. The Teacher’s Retirement Board approved the credit in April 2014. CalSTRS is required to send a lump-sum payment to all eligible recipients, regardless of the amount.
Why are you providing this credit to me now when they were approved in 2013?
The Teacher’s Retirement Board approved the credit in April 2014. After the credit was approved, CalSTRS began working on the administrative and technological components to determine eligibility of each account. Internal system processes and procedures were developed and have since been implemented for payment distribution. All efforts were made to distribute credits and payments in a timely manner.