The California State Teachers’ Retirement System has recalculated the amount retirees can earn this year without triggering a reduction in their pension payments. The post-retirement earnings limit is $27,060 for the 2006-07 fiscal year, $880 less than it was in each of the last two years when CalSTRS inadvertently overstated the earnings limit in teachers’ favor.
The earnings limits for 2004-05 and 2005-06 are not being adjusted retroactively, nor will any penalties be assessed for those years. Earnings limits on members who receive disability benefits or disability retirement are not affected because the calculation is done differently.
The post-retirement earnings limit applies to retirees who go back to work part time or full time and perform “creditable service” requiring a credential, certificate or permit at any California public school, kindergarten through community college. If members exceed the limit, CalSTRS reduces the monthly benefit dollar for dollar by the amount of excess earnings, up to the amount of the individual’s annual retirement allowance.
The earnings limit is intended to hold down the actuarial impact on the defined benefit retirement program and comply with Internal Revenue Service regulations. IRS does not allow CalSTRS to distribute retirement benefits to members who are actively working for CalSTRS-covered employers unless the member has reached normal retirement age.
Ironically, retirees may accept employment in any capacity outside the California public school system with no limitation on their earnings. The Education Code prohibits employment of CalSTRS retirees in classified positions in the public schools. CTA’s Retirement Committee is working with CalSTRS to craft legislation addressing the inequities.
Retirees are exempt from the earnings limit if they perform no creditable service for at least 12 consecutive months before returning to CalSTRS-covered employment. They’re also exempt if they retired on or before Jan. 1, 2004, and return to provide direct remedial education in a classroom for grades 2-12. More information on these and other exemptions is available through the CalSTRS website [www.calstrs.com].
To avoid exceeding the limit:
- Track earnings on a monthly basis through your employer’s human resources department or payroll office. Although the employer reports earnings to CalSTRS, there is a delay of up to two months before the stategets the data.
- Notify the employer that you do not want to exceed the earnings limit before you accept a job that earns creditable compensation.
- Consider limiting your search for employment to private industry or waiting 12 months before you return to teaching in California’s public schools.
For more information, contact CalSTRS at (800) 228-5453 or e-mail CalSTRS from the website [www.calstrs.com].