California Public Employees Pension Reform Act:
What does it mean to us who plan to retire soon, and those down the line?
by Marcia Walerstein-Sibony
Garfield Guild Steward
It was late in August when I started getting emails from CFT personnel to contact my congressperson and say I’m against the pension reform legislation AB340. A few days later, August 31st, it was law: The Calilfornia Public Employees Pension Reform Act of 2013. No discussion in the legislature, no discussion with the participants, although STRS assured me that they had been announcing ongoing negotiations for over a year. Perhaps you are like me and don’t make it a habit of searching STRS ‘s web page to find news when you don’t expect any news.
That’s water under the bridge. The pension reform act passed. Much of it was needed, some parts may be beneficial, and some came as a shock, so here it is. With the recent economic crisis and budget crisis in the state of California, CalSTRS no longer looked to be sustainable. Recent exposes of incredible abuses of the CalPers, or government workers pension, especially by a few people who employed themselves in the little town of Bell, have made the public, aka taxpayers, demand more accountability and less possibility to “spike” a pension the last years to make it cozier for the retirees. It is important to be aware of the changes, whether you are going to retire in a short while or thirty years down the line.
There are, according to STRS, 11 major changes. Most of these are for people just coming into the STRS program, but two cover everyone and will take place January 1, 2013, so those who are planning on retiring soon must be aware that certain changes can only be made until the end of this year, December 31, 2012. I am quoting from a CalSTRS Fact Sheet, which I received in a kit, but these changes can be found under CalSTRS.com.
A. “11. Prohibit the purchase of nonqualified service, or airtime for requests submitted on or after January 1, 2013. Presently current members may purchase up to five years of nonqualified service, as allowed by the IRS and pay the entire cost based on the actuarial assumptions.” This will be for current active and new members.
While buying service time was a possibly a good deal for younger members, if they had the funds to buy it, it was so expensive for older members that for many it did not pay to invest in it. At the workshop I attended through LACCD, a STRS advisor said that to buy one year of air time for someone close to retirement would cost about 25% of their annual salary. One could see that it would take years to recoup the investment, and it may not be worth it at all. For a younger member the investment is much less, so it could be more profitable. If you are interested in it, you’ll only have until the end of this year to do it.
B. “7. Limit Post-Retirement Employment. Extends the $0 earnings limit to all members during the first 180 days of retirement. Extends a very limited earnings limit exemption until June 30, 2014, and includes additional restrictions based on the receipt of retirement incentives.”
This means that as of January 1, the individual is expected not to earn anything outside of the pension in a public position for 180 days (not working days, but actual days, including summer or vacations). While at first I found this a real shock for someone in my position of planning retirement in the near future, upon further inquiry, it does not seem so bad. It does not say that you cannot work during those 180 days; rather, if you do work in the public sector during that time, you will not get your pension for that period, although you are officially retired and on pension. If your other job in the private sector, that is not affected at all.
Also, the current earning limit has great increased. It will now be $40,011, an increase of about $9,000 over last year. This is based on 50% of the median final compensation for recently retired members.
For example, let’s say you retire next June. You are supposed to wait 180 days, but instead you go back to teach in the fall, because, guess what, you need the money. You can teach in the fall, but you will not get your pension during the time you earn a salary for 180 days. After that you may continue to teach and get the pension, but not earning more than $40,011 during that year from salaries from the public sector. Anything after that will be reduced from your pension, dollar for dollar, as it has been in the past.
Adjuncts want to know—are we going to lose our rehire rights if we do not work during those 180 days? Do our chairs have the right to dismiss us if we don’t show up during that period? The answer is no. As I am writing this, wording is being discussed to insure that anyone who does not work those 180 days cannot lose their place on the rehire rights list.
Thus, not “working” for 180 days is not such a loss as it looked like at the beginning, especially for the many who planned to continue to work part-time some more years. You may continue to work; you just can’t get both public sector salary and pension for 180 days. On the other hand, the amount you may earn annually has increased substantially and may offset that initial loss.
It is vital. however, that you understand this change, and that also our department chairs are fully aware of this change, and absence from work during that period is not a reason to lose the former status concerning rehire rights.
If you cannot live with that, then it might be worth it to quickly retire before December 31, 2012. Then you will get your pension as you continue to teach for those first 180 days. Of course you lose some money by retiring earlier, and if you are receiving social security and have not worked for close to thirty years, you will have major reductions in your social security from that date on. The $40,011 earnings/year will be in effect, but then it’s much higher than last year.
C. The major changes for the new employees include a higher percentage of contribution, a later age of retirement to receive maximum benefits, the calculation based on the highest three years for everyone now, rather than just one for full-timers, places a cap on compensation used to calculate a defined benefit, and several other other factors.
In October, at the request of adjuncts, Phyllis Eckler arranged a workshop on retirement for adjuncts. Although most of her workshop focused on what rules already existed, and how for some who also are getting social security benefits it may not be worth getting into STRS at all, she did cover what seemed to be the impact of these change in rules. She emphasized that this is not only a subject for those close to retirement, but for those who need to plan out the long haul towards retirement, too. Her power point presentation can be located on the Guild/adjunct issues section of the GCC website: “Which retirement plan is right for you?” Although this is not a recent change, all those who will be receiving social security should thoroughly study the loss in social security payments you and your spouse/other get whether you’re alive or dead. This is due to a powerful law the U.S. government defines as “windfall” (see socialsecurity.gov, specifically http://www.ssa.gov/pubs/10045.html, about “windfall”, and for survivors, the Government Pension Offset.)
There are many factors to consider, and each one of us has our own individual background and needs for retirement. The bottom line is that everyone should sign up on line at CalSTRS.com to track their own retirement. You can also make an appointment at the new CalSTRS office:
505 North Brand Blvd., Suite 200
Glendale, CA 91203
At this time of the year appointments are not easy to get, but plan ahead and do it. Surely you’ll return several times before this is straight. There are people who will answer small, specific questions on a walk-in basis, but they won’t help you make a complete retirement plan without an appointment in person or an appointment on phone.
At LACCD they recommend that you start to think about your retirement 6 months before you plan to do it, and have most of your paperwork done 3 months before. If you are a freeway flyer and adjunct elsewhere, you must transfer all your sick leave days to one District, and record that before your retire. It was recommended that you see which college gives you the most credit for sick leave and transfer it all to that account.
Know what are the most recent changes, evaluate them for your own situation, and make an educated choice.
A register to vote and voter education rally was held October 17 in the courtyard. While many of the students are not yet citizens in the ESL department, some in the business/ed section were unregistered citizens, or people who moved recently and had to reregister. While Garfield did not have a rapper and breakdancers at its rally, the information was translated into Spanish, Armenian, Farsi, and Arabic by staff for the students in their steps forward to becoming citizens and participating in democracy. Representatives of ASGCC came down, including President Arman Marukyan, who spoke both in English and Armenian. The design of the new Mariposa building and courtyard proved very beneficial for structuring such an event.
Congratulations! The Student Success Center honored 15 GED graduates and 2 Adult High School graduates at its October graduation. ESL Students also work towards certificates, and there will be a ceremony November 19 to honor those who have achieved the various levels and requirements to get this State-sponsored certificate. These demonstrate their progression through "momentum points" that lead them towards higher level academic achievements. The certificates and GED tests are "intermediate measures" along their pathway, fulfilling the goals stated in SSTF.
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