Retirement Plans/Issues

April 25, 2014

AgendaWhich Retirement System Are You?

Defined Benefit vs Defined Contribution

STRS• Contributions

• Qualifications

Election Process• Reporting to STRS

• Compensation

Creditable/Non Creditable

Agenda

• Penalties• Service Credit

Furlough Implications

• Retirees

PERS• Contribution

• QualificationsExclusions

Agenda• Compensation

Special CompensationNon-Reportable

• Overtime

• Service CreditFurlough Implications

• Election Process

• RetireesOASDI/Medicare Qualification

Questions

Agenda

Next “Concept” Classes• Beginning Fall of 2014

Salary ComputationPayroll Deductions/WithholdingsPaying EmployeesEmployee Leaves/BenefitsRetirement Systems

• Open Labs after Each Concept Class

Which Retirement System?

Based on Position not the Person• STRS:

Requires Credential, Permit or Certificate Teachers, Administrators, Nurses, Psychologist

• PERS:Non-Credential, Meets PERS Qualification

Bus Drivers, Office Staff, Instructional Aides Director of Human Resources, Chief Financial Officer

See Circular in Concepts Docs for Examples

Which Retirement System?• Alternate Retirement/Social Security

Does Not Meet STRS or PERS Requirements Part Time Employees - Less Than 20 Hours

• Dual RetirementMember in One System, Non-member in the

Other, or Member in bothWorking in both Classified and Certificate

must have 2 Escape retirement tabsSpecial Requirements

Defined Benefit vs Defined Contribution

Defined Benefits Plans:• STRS/PERS • Promised Benefit Based on the Following

Factors:–Age

–Years of Service

–Highest Final Compensation Pay

Defined Benefit vs Defined Contribution

Defined Contribution Plans:• 457B/403B

–Employee Contributions and Interest

–Employer Can Participate

STRS - Contributions

California State Teachers Retirement System (STRS)

Common name CalSTRS or STRS• Employee Contributions Currently 8%

Requires Legislation to Change

• Employer Contribution Currently 8.25%

• Reduced Workload Currently 10.276% for Employer

STRS - Qualifications

(See Retirement Qualification Rules)

Full Time• Immediately with Full Time 100% Contract

Part-time • 50% - 99%

• Month following or• STRS Permissive Election (Form ES 350) from

day one - Election can be made at anytime

STRS Retirement Qualification Rules

STRS - Qualifications

Substitute - Long Term/Daily/Hourly• 100 Days/600 Hours

• With a Single District

• 1st of the Following Month

• During Same FY

• Escape Report Retire01

STRS - QualificationsLess Than 50% of Contract/Daily/Hourly

• After 60 Hours/10 Days

• 1st of Following Month, unless the following pay period is in the new FY

• With a Single District

• Escape Report Retire02

Funds on Deposit From Previous STRS Employment• Compulsory Membership Regardless of the Type of

Employment Less Than Half Time

STRS - Election

CalSTRS Audits Election Procedures Permissive Election

• Form ES 350 for Election

• Form is Irrevocable All Future Certificated Work is STRS

• No Earlier than 1st Day of Pay Period in which Form is Signed

• Forward Form to County Office New – Need Employee 99 (Used to be NOPA)

STRS - Election (See Join CalSTRS? Join CalPERS?)

•CalSTRS Member in PERS Qualifying Classified Position

• 60 Days to Elect to Stay in STRS

• New ES-372 Form for Election

CalPERS Member in STRS Qualifying Certificated Position

• 60 Days to Elect to Stay in PERS

• New ES-372 Form for Election

STRS - Election

Required to Ensure Employees have been Given the Election Form

Recommended that Districts Retain Written Acknowledgement (ES-373):

• Employees Advised Concerning Form

• Employees Given Form-372

Forward Form-372 to County Office for Review

(See Various Certificated Retirement Scenarios)

STRS - Reporting

Issues:• Assignments Coding

–Are They Reporting Correctly

»Daily or Hourly

• Special Compensation–Pension Spiking

»Enhancing Member’s Benefits

–Watch Contract Language

–Requires Backup to County Offices

STRS - Reporting

For “New” Members‾ Only Creditable Special Compensation is

Longevity (See “T -chart”)‾ Reported with Code “72”

SEW• Secure Employer Web Site (SEW)

• To Check Retirement Status:– https://sew.calstrs.com/CalSTRSSewWebUI/

Registration/Pages/Register.aspx

STRS – Compensation

(See CalSTRS Directive 2014-01)

Creditable: Ed Code 22119.5, 22119.2 and 22119.3 (PEPRA has been added)

• Contributions on Service in Excess of One Year:

Creditable to the Defined Benefit Supplemental (DBS) Program

Not Used in the Calculation for Final Compensation Purposes

CalSTRS Directive 2014-01 p.1 (See Handout)

STRS – Compensation

(See Employers’ Creditable Compensation Guide for existing members)

STRS Creditable Compensation Guide• Lists What Types of Compensation

To Creditable ServiceTo Defined Benefit Program (DBS)

STRS – Compensation

Non Creditable: • Position is Not Eligible for State

Apportionment

• Position Does Not Require Credential, Certificate or Permit

• Position Does Not Meet Community College StandardsWalk On Coaches are an example

Walk On vs Contract (does not have a STRS position with the Disrtict)

STRS – Compensation

Compensation Cap for CalSTRS 2% at 62-Employee Portion Only• Cap on Compensation is Equal to 120% of the 2013

Social Security Wage Base

• Will be Adjusted Annually Based on Changes to the Consumer Price Index for All Urban Consumers

• Beginning July 1, 2013, the Compensation Cap for CalSTRS 2% at 62 is $136,440

STRS – Service Credit

STRS Service Credit Calculation:Pay Code Service Credit Formula

0 Earnings divided by Pay Rate

1 Earnings divided by Pay Rate divided by 12

2 Earnings divided by Pay Rate divided by 11

3 Earnings divided by Pay Rate divided by 10

Examples:

Pay Rate Cd Earnings Service Credit

32,445.84 0 99.68 0.0030

*2,187.50 3 1,093.75 0.0500

*1,093.75/2,187.50 = .5 then divided by 10 = .0500

STRS – Service CreditCertificated Mandatory Furlough

• Preserve Pay RateReduces Service Credit

• Preserve Service CreditChange CalendarsChange Salary SchedulesDo Not Choose as Final Compensation Year

• For K-12, Reduction Cannot Result in Less than:175 Days for Teachers190 Days for Program Managers, Principals,

Administrators

STRS – Retirees

CalSTRS Retirees can Work:• Earnings Limitations

• FY13/14 = $39,903

• FY14/15 = $40,173

• After January 1, 2013, must wait 180 days before returning to work with a CalSTRS employerWill reduce their retirement benefit dollar for dollar

by an amount equal to their earnings

• Can Work as Classified Instructional Aide Only (Ed Code 45134)Watch Payroll Reporting

STRS – RetireesUnused and Excess Sick Leave At Retirement

• Basic Sick LeaveOne Day’s Paid Leave of Absence per Pay Period

• Excess Sick LeaveNumber of Days in Excess of Basic Sick LeaveEmployer Pays Present Value for Excess Sick Leave

• Service Credit: (Basic Days + Excess Days) /Contract Base Days

• Employers Required to Report Basic & Excess Separately at Retirement

(See Express Benefit Form SR0554E)

PERS - Contributions

California Public Employees’ Retirement System (CalPERS)• Classic Member Currently 7%

• New Members Currently 6%

• Employers Contribution Currently 11.442%Changes every fiscal year base on Actuary

AssessmentPERS rate is an employer pool rate

PERS – Qualifications

Membership Qualifications:• Permanent Full-Time (40 hours per week)

• Part-Time Averaging at Least 20Hrs/Wk for at least one year

• Full-Time Temp Assignment in Excess of 6 Months

• Currently a Member

PERS – Qualifications

Member Reciprocal Self-Certification Form (PERS-CASD-801)• Form is for employers to identify if new

employees are classic members due to reciprocity

• Employers need to properly identify status of members at the time of hire

(See Circular Letter 200-063-12 in Concepts Docs)

PERS - Qualifications

Temporary, Seasonal, On Call, Emergency, Substitute or Irregular Basis:• Qualifies When Worked 1000 Hrs or 125

Days in Fiscal Year

• OT Hrs. ARE Included for Qualifying Purposes

• Escape Report Retire09

PERS - Exclusions

Membership Exclusions: (Notice of Exclusion - AESD-139)

• Independent Contractors

• Elected or Appointed Officers (effect July 1, 1994)

• Students employed by a school district they attend in a position established for students only

PERS Retirement Verification

PERS–Enrollment/Change Form

New Procedure • Log into PERS

• Verify the employees PERS status

• Verify employees enrollment level

• Classic or New

• Print a snap shot of PERS record in PERS

• Log into Escape Employee Management• Go to Retirement tab (based on PERS info)

• Setup employee’s retirement status

• Setup employee’s retirement level

PERS–Enrollment/Change Form

New Procedure• Forward to Maria in Business Services

• Required Prior to First Payroll• PERS snap shot of employees PERS status/level

• Form example in Concepts – Retirement documentation

• Member Self - Certification Form• Form example in Concepts - Retirement documentation

• PERS Enrollment/Change Form• Form example in Concepts - Retirement documentation

PERS - CompensationCompensation:

• Pay Rate – Member’s Normal Rate of Pay or Base Pay

• Report as Earned According to Job Classification

• Must be Reflected in Pay Schedule or Bargaining Unit Agreement

• PERS Members Can Be Paid on Monthly Basis, Hourly Basis or Daily Basis

PERS - CompensationCalPERS Compensation Cap for New Members

(Employee Portion Only)

• Members Participating in Social Security• Compensation Capped at the Social Security Wage Base

• For 2014 the Compensation Cap is $260,000

• Members Not Participating in Social Security • Compensation Capped at 120% of the Social Security Wage

Base

• For 2014 the Compensation Cap is $138,077

PERS - Compensation

CalPERS Compensation Cap for Classic Members (Employee Portion Only)

• For 2014 the Compensation Cap is $126,000

• CalPERS Circular Letter 200-007-14• Copy provided in Concepts – Retirement

Documentation

PERS - Reporting

Special Comp/Additional Pay• Limited to Labor Policy

• Reported in Addition to and Separately from Pay Rate

PERS - Reporting Special Compensation

Commonly used Special Comp Pay• Educational Pay

Includes educational incentive pay

• Incentive Pay Includes bonus pay and longevity

• Premium/Temporary Upgrade Pay Includes working out of class

• Holiday Pay When employees are required to work during scheduled

holidays and paid over and above normal salary• Additional Examples Available in Concepts Docs

PERS - Reporting Special Compensation

• Uniform Allowances (Classic Members Only)

Compensation paid or reimbursed for monetary value of purchasing, renting and maintaining required clothing

Clothing must be a substitute for personal attire clothing

Excludes items considered safety equipment:

• Protective vests, pistols, bullets and steel-toed boots

PERS - Non-Reportable Compensation

Non-Reportable Compensation:• Automobile/Mileage Allowance

• OT Over 40hrs in a Week

• Cafeteria Plans

• Cash in Lieu of Health Benefits

• Health Benefits/Fringe Benefits

• API Awards

• Lump Sum Vacation to Clear Books

• Severance Pay

PERS – Reporting Overtime

Circular Letter #200-211-05 • Proper Reporting of OT Pay Rates

• Employees paid “overtime” rates for hours between “regular work week” and 40 hours/week

– Report “straight-time” rate

– Report “straight-time” earnings

» May require two different addons

PERS – Service Credit

Service Credit:• Member in full-time employment will be

credited one year service credit

• 10 months of work

• 215 days of work

• 1,720 hrs. of work in a fiscal year

PERS - Service Credit

How Service Credit is Earned:• Fiscal Year Basis: July 1 – June 30

• Earned by tenths: 10 Months = 1 Year

• Pro-rated for part-time employees based on 1,720hrs = 1 Year

• Service Credit = earnings divided by full time pay rate for each service period

PERS - Service CreditPERS SERVICE CREDIT

Earnings Divided by Pay Rate Equals Service Credit:Example: 1. Member Earnings = $2,400 = 1.000 month of

Monthly Pay Rate $2,400 service credit

2. Member Earnings = $1,200 = .500 month of

Monthly Pay Rate $2,400 = service credit

3. Member Earnings = $1,200 = 80 hours of

Hourly Pay Rate $15.00 service credit

4. Member Earnings = $1,200 = 20 days of

Daily Pay Rate $60.00 service credit

PERS - Furlough Days

Furlough Days:• Salary Roll Back or Docking Days

• Should never change Pay Rate

• Impact to Retirement

PERS - ElectionQualifying Elections:

• Cal-PERS member hired for qualifying certificated STRS position

• 60 days to elect to stay in Cal-PERSMust meet other requirements

• Use Form ES-372 Not required to return form unless electing into Should retain written acknowledgement of form

(ES-373)

• Forward Form to County Office for Review

PERS-Retiree

Cal-PERS Retiree (Circular Letter #200-002-14)• Make sure the retiring employee is aware of rules

before they retire

• After January 1, 2013, Retiree Must Wait 6 Months (180 days) before They Can Return to Work with a CalPERS Employer

• Can Be Hired for Temp Assign during Emergency or Has Special Skills – Critically needed position

• No Exception if a Golden Handshake/employer incentive has been given

PERS-Retiree

Cal-PERS Retiree• There Cannot be an Agreement to Return to

Work between the Member and the CalPERS Employer Prior to Retirement

• Can Work Up to 960 Hours in a Fiscal Year.

• Compensation must be comparable to other employees doing similar duties

• Must be enrolled as retired annuitant• Pay rate with hours worked reported

PERS-Retiree/Unemployment

Retiree/Unemployment:• Cannot Hire Retired Annuitant that

Received Unemployment Insurance Payments within the Previous 12 Months as Retired Annuitant

• Annuitant Must Sign Affidavit as Such

PERS-Retiree/Disability

Disability Retiree:• Temporary Position

• 960 hours

• No approval required

• Permanent Position:• Employment must be in a different position

• CalPERS approval required before accepting employment

• Earnings limitation applies

Retiree OASDI/Medicare

Retiree OASDI/Medicare Issues:• STRS Retiree-rehired in a PERS position

Yes Medicare and Yes OASDI

• PERS Retiree-rehired in a PERS positionYes Medicare and No OASDI

• PERS Retiree-rehired in a STRS positionYes Medicare and Yes OASDI

Next Payroll Concept Class

Next “Concept” Classes• Beginning Fall of 2014

Salary ComputationPayroll Deductions/WithholdingsPaying EmployeesEmployee Leaves/BenefitsRetirement Systems

• Open Labs After Each Concepts Class