Low Inflation Means Reduced or Eliminated Supplemental Payments
Retired recipients of quarterly supplemental payments will see changes beginning October 1.
WEST SACRAMENTO, CA – Low inflation is usually a good thing for California’s retired educators because it means basic CalSTRS benefits are keeping up with costs. But for those who have been receiving supplemental benefit payments, it will also mean reduced or no payments beginning Oct. 1, 2009.
The quarterly supplemental benefit payments, established in 1989, were designed to keep retirement income in line with inflation and to maintain the purchasing power of retirement benefits at 85 percent of their initial amounts. But because inflation is at very low levels today, those quarterly payments will be reduced or eliminated for the next year.
The changes do not affect retired members’ monthly benefit payments or their annual benefit adjustments.
Why the change? From July 1, 2008 to June 30, 2009, inflation failed to reach 2 percent, according to the California Consumer Price Index, the measure CalSTRS uses to determine its quarterly supplemental benefit payments.
That means the 2-percent automatic annual benefit adjustment will more than offset the effects of inflation. Annual benefit adjustments, calculated at 2 percent of a member’s initial benefit, are added to monthly retirement checks starting with the Oct. 1 payment.
Beginning Oct. 1, 2009, the two groups most likely to be affected are:
- Members who retired before 1990 and who will see a reduction in their quarterly supplemental benefit payments this coming year.
- Members who retired between 1990 and 1994 and who began receiving quarterly payments in the last year or two. They will not receive a quarterly supplemental benefit payment this coming year.
To answer questions or concerns about these changes, members may contact CalSTRS.
The California State Teachers’ Retirement System with a $123.8 billion portfolio, is the second largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California’s 833,000 public school educators and their families from the state’s 1,400 school districts, county offices of education and community college districts.