2014 Additional Earnings Credit
I received a letter indicating I was eligible to receive an Additional Earnings Credit. What is this?
The Teachers’ Retirement Board has the statutory authority to declare a credit when the funded status of the Defined Benefit Supplement program and the Cash Balance Benefit program surpasses certain thresholds after periods of substantial investment earnings. The programs met the thresholds for a credit for the fiscal year ending June 30, 2014. The board declared the credit on June 11, 2015.
On what amount is this credit based?
Additional Earnings Credits are based on a percentage of an eligible member’s or participant’s balance of credits as of June 30, 2014.
How is the credit calculated?
The amount of the Defined Benefit Supplement account credit for active and inactive members is calculated as 4.5 percent of the balance of credits (account balance) as of June 30, 2014.
The amount of the Cash Balance Benefit program credit for active and inactive members is calculated as 4.0 percent of the balance of credits (account balance) as of June 30, 2014.
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. Your payment will be issued according to your payment preference indicated on your account.
When will I receive my direct payment?
CalSTRS will begin processing your payment 90 days from the date of your letter. Please allow up to 14 business days for your funds to be received. Your payment will be issued according to your payment preference indicated on your account.
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.
I received a letter from CalSTRS regarding my eligibility to receive an Additional Earnings 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 contacting the CalSTRS Contact Center.
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.
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 plus interest, minus any outstanding amount you may owe CalSTRS. If that amount is less than $200, your payment will not be eligible for direct rollover and will be paid directly to you.
You may still roll over the 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 without tax consequences. For additional information see the Tax Considerations for Rollovers booklet.
Why do I need to wait 90 days to receive a payment?
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 volume expected, it will take CalSTRS staff at least 30 days to process these payments once the form is received. All payment recipients who are eligible for a rollover were sent a dated letter and a rollover form.
What will be deducted from this payment?
The net payment you receive will be the amount of the credit plus interest, minus any outstanding amount you may owe CalSTRS, tax withholding or deductions.
Why is the amount of my payment different than what was stated in the letter?
The estimated gross credit amount listed on your letter is based on the interest rates through June 2016. If your credit is issued after July 1, 2016, your gross credit amount will be updated to reflect the 2016/17 interest rate
s. In addition, the amount of your net payment will be the gross credit amount plus interest, minus any outstanding amount you may owe CalSTRS, tax withholding or deductions.
How will my payment be issued?
If you do not roll over all of your credit, your payment will be issued according to your payment preference on file with your account: either as a direct deposit or paper check.
If I receive a payment and decide 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 do a rollover by making a deposit into a qualified IRA or eligible employer plan that will accept it. You will have 60 days after you receive your CalSTRS payment to make the deposit. For additional information see the Tax Considerations for Rollovers booklet.
Did everyone receive a payment?
No. The payment eligibility is based on your account balance as of June 30, 2014, and your account status at the time the credits were posted.
Will this payment affect my 2016 taxes?
Yes, 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 on a date specified by the board. The Teacher’s Retirement Board approved the credit in June 2015. 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 it was approved in 2015?
The Teacher’s Retirement Board approved the credit in June 2015. After the credit was approved, CalSTRS began working on the administrative and technological components to determine eligibility of each account. Internal 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.