Retirement

CTA and Retirement Coalition Educate Lawmakers About Public Pension System, Express Concerns About Governor’s Proposed “Hybrid” Retirement Plan

 

CTA-Retired President Ed Foglia (gesturing) warns about the effects on the classroom and students of the governor’s proposal to raise the standard retirement age to 67. Other representatives included higher education faculty and members from United Teachers Los Angeles. They met width Assembly Member Warren Furitani’s staff (at photo left) and other legislative staff later in the day.

(SACRAMENTO, Calif.) 7 February 2012 – A coalition of pro-education groups brought about 100 educators to the state capitol on Tuesday to educate legislators about the vital role a sound public retirement system plays in recruiting and retaining highly qualified instructional and support personnel.

The California Retirement Coalition, whose members include the California Teachers Association, United Teachers Los Angeles, the California Retired Teachers Association, the Association of California School Administrators, the Faculty Association of the California Community Colleges, the Los Angeles College Faculty Guild, the Small School Districts’ Association, and Delta Kappa Gamma, told lawmakers that they support Gov. Jerry Brown’s vision of a strong retirement system.  At the same time, the group expressed concerns about the governor’s pension proposals.

Coalition members want to ensure that any changes made to the California State Teachers’ Retirement System do not diminish the state’s ability to recruit teachers to our communities’ schools.

 

Photo and Story by Len Feldman

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Our Concerns with the Governor's Pension Proposal

Yesterday, Governor Brown proposed a 12-point plan to reform public employee pensions. Changes in his plan include:

  • Increasing the retirement ago to 67
  • A hybrid plan for new employees
  • Redefining “final compensation” as last three-years
  • Limiting post-retirement employment
We share in the governor’s vision of having a strong retirement system for educators, but we have questions and concerns on some of these proposals and are looking forward to further clarification of the proposal and what the impact will be on the retirement benefits of educators, public education and the economic stability of California.

Budget cuts have already made it harder to attract and retain teachers in our classrooms and we want to ensure that the plan doesn’t further diminish our ability to recruit teachers to our neighborhood schools. It’s important to remember that educators have been paying half of their retirement for over 40 years.

We will continue to work width the governor and the Legislature on measures to sustain our state's retirement system, and continue to act as partners width taxpayers in finding solutions to help rebuild our state’s working class.

“Hybrid” Risk-Sharing Pension Plan: New Employees. This plan requires all new employees to participate in a combination Defined Benefit (DB) plan, Defined Contribution (DC) plan and Social Security, which teachers do not participate in. • The governor’s hybrid plan aims to limit teacher retirement benefits to 75 percent of what they made in the classroom. Currently teachers earn approximately 62 percent of what they earned in the classroom. • The governor’s plan would reduce the current formula of 2 percent at age 60 to 1.43 percent at age 67, reducing the current replacement ratio from 62 percent to approximately 50 percent. • This means the DC portion must achieve a 25 percent replacement ratio. Anyone who has been paying attention to the stock market recently understands how difficult that would be to achieve. • How the governor’s “hybrid” will achieve a 75 percent replacement ratio width a lower DB formula, in concert width a new DC plan, is unclear, especially when CalSTRS members do not participate in Social Security.

Increase Retirement Age: New Employees. This will require new educators to retire at age 67. • The normal retirement age for CalSTRS is 60, but the average retirement age for CalSTRS members is closer to 62. • This second tier of new employees would be required to work longer for a reduced benefit.

Require Three-Year Final Compensation to Stop Spiking: New Employees. • This already exists for educators who work less than 25 years. • If an educator works 25 years or more, their retirement calculation is based upon their highest year of compensation. This has been an effective tool for incentivizing educators to stay in the classroom longer.

Calculate Benefits Based on Regular, Recurring Pay to Stop Spiking: New Employees. • Educators have not been able to supplement their retirement benefits width overtime, because all additional pay over and above the normal working year is shifted into the CalSTRS Defined Benefit Supplement plan. This has been effective in preventing spiking.

Limit Post-Retirement Employment: All Employees. • The governor’s proposal is based on hours. The CalSTRS system is based on a fixed dollar amount, which works for those in the classroom. • CalSTRS already has limitations on the amount of time retirees can come back to work provided they sit out for six months and are under 60 years of age, width special exemptions such as special education and English-Language Arts instructors.

Prohibit Retroactive Pension Increases: All Employees. • Inequities exist between retirees in the CalSTRS system. Should the system ever be more than fully funded, this proposal would eliminate our ability to address inequities.

Prohibit Pension Holidays. • Educators and school districts have not been given pension contribution holidays. • Educators have been paying 8 percent contributions for over 40 years. • School districts have been contributing 8.25 percent contributions for over 20 years. • The state continues to pay a reduced contribution of 2.5 percent to CalSTRS, which was previously 4.6 percent.

You can also stay informed about pension developments at www.cta.org/retirement.

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Pension Truth Squad Visits Modesto

30 representatives of the Californians for Retirement Security’s Pension Truth Squad shared personal stories in Modesto this week to set the record straight about proposals to gut public pensions in California and across the nation.

“We are not the wealthy people making headlines. We are taxpayers, parents, grandparents and members of this community working to retire width dignity,” said Charlie Young, a retired Modesto public school teacher “We spent our careers serving the public and now we spend our pension checks, modest as they are, in our local neighborhoods.”
Modesto is one of several California communities where public servants are being targeted. These ballot box measures to steal the power to negotiate their retirement benefits amount to a misguided government power grab and a broken promise to public servants.

California retired teachers, who do not collect Social Security, earn an average $3,300-a-month after an average 27 years in the classroom.

Public employee pensions amount to just 3% of California’s budget and public employees have agreed to pay more into their pensions and other changes that have saved the state $600 million over two years. Overhauling the public pension system will not help the state’s current budget shortfall and, according to analyses, likely would strap taxpayers width the bills for costly legal challenges and added demand on government social services.

“A few vocal factions are spreading falsehoods and sensationalizing extreme cases to scapegoat us,” said Modesto Firefighter Tim Tietjen. “The reality is that most of us earn modest wages and pensions, contribute to our retirements throughout our careers and have forgone pay raises and willingly made other concessions over the years in order to protect our pensions."

Protect Retirement Security Get the latest news about retirement security & join the effort to protect California's middle class. Go to www.letstalkpensions.org.

The next Pension Truth Squad will be on Tuesday, September 27, in San Jose at 11:30 am in front of City Hall.

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CalSTRS to question corporations on political spending

The California State Teachers’ Retirement System (CalSTRS), the 2nd largest pension fund in the country, has just announced it may push corporations to disclose their political donations, under a policy adopted by the CalSTRS investment committee.

The new CalSTRS policy would declare that corporate boards are responsible for political spending by their companies and that contributions should be “in the best interest of shareholders".

CalSTRS hopes to set the standard and that other pension systems will follow their lead in adopting this policy.

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