Governor Gray Davis has signed a series of bills that will greatly enhance the retirement benefits for both current and future retirees.
CTA, working with other members of the Retirement Coalition, designed the package and worked for its passage in the Legislature. Some of the bills work in concert with bills passed as part of the Budget Act.
Unless otherwise indicated, the provisions become effective Jan. 1.
Highest year compensation (AB 821) - Members of STRS who have at least 25 years of service credit will have their benefits based on the highest year compensation for 12 consecutive months. Currently, benefits are based on the average of the highest three consecutive years of compensation. A member may not count accumulated sick leave in order to reach the 25-year threshold.
Longevity bonus (AB 1933) - Members with 30 or more years of service will receive a longevity bonus: for 30 years of service, $200 per month; for 31 years of service, $300 per month; for 32 years of service, $400 per month. A COLA will be added in future years.
In order to qualify, an STRS member must have 30 or more years of service prior to Jan. 1, 2011. The member does not have to retire by that date and may continue to accumulate service credit beyond that date. There is no minimum age requirement in order to qualify for the longevity bonus.
[Note: The "Rule of 85" was deleted from this legislation.]
Medicare Part A (SB 1435) - Medicare Part A (hospitalization) premiums will be paid by STRS for those retired members who otherwise are not eligible for such coverage either from their own service or from that of a spouse. The member must purchase Medicare Part B (physician service). The payment will include any penalties that may be due because the member did not enroll by age 65. The premium for Part A in 2000 is $301 per month.
This part of the benefit will apply to those STRS members who retired prior to Jan. 1, 2001, and are not eligible for Medicare Part A without payment of a premium; were hired prior to April 1, 1986; are at least 65 years of age; and enrolled in Medicare Parts A and B at the age of 65 or as of July 1, 2001, whichever is later.
This benefit also applies to members retiring on or after Jan. 1, 2001, who are eligible for Medicare Part A without payment of a premium; were hired prior to April 1, 1986; enrolled in Medicare Parts A and B at age 65; and retired from a school district that either:
- Prior to Jan.1, 2001, conducted an election to allow its employees hired by the current district of employment prior to April 1, 1986, to elect Medicare coverage; or
- On or after Jan. 1, 2001, completed or is in the process of conducting such an election, and the member elected to be covered by Medicare, if he or she is less than 58 years of age at the time of the election.
The retiree must authorize that the premium for Medicare Part B will be deducted from the member's retirement allowance.
Creditable compensation (AB 2700) - This provision works in conjunction with AB 1509, the Defined Benefit Supplement program (DBS) that was passed by the Legislature and signed into law in July. Regular retirement payments are made to retirees under the Defined Benefit (DB) program. AB 1509 provided a supplement to that amount.
Beginning Jan. 1, 2001, each member of STRS will continue to contribute 8 percent of salary towards retirement. However, 25 percent of those contributions (2 percent of salary) will be allocated to a DBS program account established for the member, and the remaining 6 percent will go towards the DB program. When the STRS member is no longer in the retirement system, either because of retirement, disability, death or resignation from employment, the member will receive the amount in the account (plus interest) either in a lump sum or as an annuity.
AB 2700 makes all compensation received for service such as summer school, intercession, department chair, coaching, performance awards, and so on, part of the DBS account. The contributions that both the STRS member and the employer make for compensation for service over and above salary schedule compensation will be credited to the member's DBS account.
This provision becomes effective either July 1, 2002, or July 1, 2003, depending on the increase in school funding in 2001-02.
The allocation of contributions to the DBS program will not affect any benefits available under the Defined Benefits program to the STRS member or to those persons already receiving benefits.
Ad hoc benefits for current retirees (AB 429) - AB 429 provides an ad hoc increase in the retirement allowance for current retirees, depending on the year of retirement. This one-time increase will be added to the current allowance and will be subject to STRS' simple 2 percent COLA adjustment. If the calendar year in which retirement or death occurred was 1998-2000, there is no increase; for 1997, the increase is 1 percent; for 1995-1996, 2 percent; 1990-1994, 3 percent; 1985-1989, 4 percent; 1975-1984, 5 percent; 1974 or earlier, 6 percent.
Minimum Pension Guarantee (SB 1505) - Last year's legislation increased benefits for members and beneficiaries whose total retirement benefit on Jan. 1, 2000, was less than $15,000 if the member had 20 years of credited service. The benefit was increased by $500 per year up to $20,000 for 30 years or more service. SB 1505 will extend this benefit guarantee to members and their beneficiaries who were receiving a benefit on Jan. 1, 2000, and who meet at least one of the following criteria:
- Were inactive at the time of retirement, but had at least 20 years of service;
- Were disabled, but would have had 20 years of credited service if they had worked until age 60;
- Retired before March 21, 1974, with 19.5 or more years of credited service;
- Retired on or after March 21, 1974, with sufficient unused sick leave to reach 20 years of credited service;
- Had at least 20 years of credited service, including service credit awarded to an ex-spouse in a community property settlement;
- Retired before age 55 with at least 20 years of credited service.
The benefit will take effect Jan. 1, 2001, and will start being paid by Sept. 1, 2001, with a lump-sum payment for the period of time since Jan. 1, 2001.
CTA anticipates that STRS will be communicating with members of the retirement system in the near future to more fully detail the elements of the package. In the meantime, for more information, visit the STRS Web page [http://www.calstrs.ca.gov/] or the CTA Web page [http://www.cta.org/].
