CalSTRS Finds One Million Dollars Overpaid to Cajon Valley Union School District Retirees
Retirement incentive payments were improperly added to final compensation affecting 77 retirees.
WEST SACRAMENTO, CA. – The California State Teachers’ Retirement System (CalSTRS) today announced that incorrect payroll data reported by the Cajon Valley Union School District resulted in pension overpayments of more than $1 million affecting 77 district retirees.
The district erroneously reported the retirement incentives to 78 educators’ Defined Benefit (DB) Program accounts, resulting in overstated final compensation amounts for 77 of the 78 employees. Final compensation is a key factor, along with time of service and age at retirement, when calculating CalSTRS core pension benefits.
“The effects of these kinds of errors, in which no one has abused the system, yet pensions are improperly paid out, are painful to the members involved, costly to the school districts and deplete the pension system resources serving more than 262,000 benefit recipients,” said CalSTRS Chief Executive Officer Jack Ehnes.
Contributions based on the incentives should have been reported to the affected members’ Defined Benefit Supplement accounts, which act more like a 401(k) and include contributions based on supplemental pay.
The error took place over an eight-year period, from the 2004-05 to 2011-12 school years. The amount reported in error by the Cajon Valley Union School District to the members’ DB accounts was slightly more than $48,880. As of October 31, 2012, the resulting overpayment in core pension benefits totaled approximately $1,071,600.
“CalSTRS’ long-standing efforts to prevent, detect and correct pension errors and abuse were stepped up in 2011 with the establishment of a pension abuse hotline, the formation of the Compensation Review Unit and, in 2012, the addition of staff and leadership to our Employer Audits Unit,” Ehnes said. “We expect these and added employer education efforts will do more to prevent errors in the long term to reduce the necessity of painful future corrections.”
The affected members’ monthly pensions were overstated by amounts ranging from $26 to $566. CalSTRS will begin collecting the overpayments from the members at a rate set by law and not to exceed 5 percent of the adjusted monthly benefit.
In some cases, CalSTRS calculates it will not be able to collect the entire overpayment amounts from members over their lifetimes. In such instances, CalSTRS will collect the remainder from the district in accordance with the law. CalSTRS is in the process of determining who among the affected members falls into this category.
The California State Teachers’ Retirement System, with a portfolio valued at $161.4 billion as of January 31, 2013, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans, as well as disability and survivor benefits. For 100 years, CalSTRS has served California’s public school educators and their families, who today number 862,000 from the state’s 1,600 school districts, county offices of education and community college districts.