Part-time Faculty Part-time Faculty Retirement WorkshopRetirement Workshop

By Deborah Dahl ShanksBy Deborah Dahl Shanks

FACCC Retirement CommitteeFACCC Retirement Committee

What are the available options?What are the available options?

STRS: STRS: State Teacher’s Retirement SystemState Teacher’s Retirement System

Cash Balance Cash Balance

Defined BenefitDefined Benefit Social SecuritySocial Security IRAs, 403(b), 457(b), IRAs, 403(b), 457(b), Tax-sheltered AnnuityTax-sheltered Annuity

State Teachers Retirement SystemState Teachers Retirement System

Cash BalanceCash Balance, a hybrid defined benefit plan, , a hybrid defined benefit plan, available to PT faculty only available to PT faculty only

Defined Benefit, Defined Benefit, a full defined plan which is a full defined plan which is available to ALL teachers regardless of status available to ALL teachers regardless of status as FT or PT.as FT or PT.

Both may affect Social Security benefits, both Both may affect Social Security benefits, both primary and survivor: WEP & GPOprimary and survivor: WEP & GPO

STRS STRS CCash ash BBalance Planalance Plan

STRS Cash BalanceSTRS Cash Balance- - employee contributes 4% (negotiable)employee contributes 4% (negotiable)- employer contributes 4%- employer contributes 4%- Immediate vesting; - No Service Credit- Immediate vesting; - No Service Credit

Cash OutCash Out [Lump Sum (pay taxes)] [Lump Sum (pay taxes)] over 55 – immediateover 55 – immediate under 55 – 6 month wait under 55 – 6 month wait

AnnuityAnnuity ConvertibleConvertible to STRS DB service creditto STRS DB service credit

Why CB plan?Why CB plan?

The Cash Balance plan is for PT CCC The Cash Balance plan is for PT CCC faculty who would not ordinarily “vest”.faculty who would not ordinarily “vest”.

Good for PT faculty only teaching one classGood for PT faculty only teaching one classor starting late in career after private sector or starting late in career after private sector career.career.

Not good for PT faculty teaching 60% or Not good for PT faculty teaching 60% or more or will need a substantial monthly more or will need a substantial monthly pension or want to convert unused accrued pension or want to convert unused accrued sick leave.sick leave.

Retiring with Cash BalanceRetiring with Cash Balance

STRS will ask you what you want to do STRS will ask you what you want to do with your Cash Balance account.with your Cash Balance account.

Choices include:Choices include:1. Roll into a private annuity or IRA 1. Roll into a private annuity or IRA 2. Cash out lump sum [paying all the tax]2. Cash out lump sum [paying all the tax]3. STRS annuity [life or time specific – 3. STRS annuity [life or time specific – see the DBS calculator] see the DBS calculator]

Typical life annuity: $50,000 at age 63 Typical life annuity: $50,000 at age 63 pays approx. $500 a month for life. pays approx. $500 a month for life.

OPT IN or OUT of CBOPT IN or OUT of CB

You may be in both CB and DB. You may be in both CB and DB. What to do?What to do?

You may choose to:You may choose to:1. stay in CB and then cash out your DB 1. stay in CB and then cash out your DB money once no longer employed. money once no longer employed.

2. move to DB and then roll your CB money 2. move to DB and then roll your CB money into that plan to retrieve service credit. into that plan to retrieve service credit.

3. opt out of CB and move to Social Security 3. opt out of CB and move to Social Security [if offered] at the end of a semester [when [if offered] at the end of a semester [when “unemployed”]. Basic cash out rules “unemployed”]. Basic cash out rules apply or roll into other tax-exempt plan. apply or roll into other tax-exempt plan.

Conversion from CB to DBConversion from CB to DB

You should consider converting if you:You should consider converting if you:1. plan on being a career teacher or 1. plan on being a career teacher or foresee your ability to vest 5 FTE foresee your ability to vest 5 FTE years. years.2. teach 40% or more each semester2. teach 40% or more each semester3. work in more than one district3. work in more than one district4. want a larger life-time STRS 4. want a larger life-time STRS

pension and want to convert unused pension and want to convert unused sick leave hours. sick leave hours.

STRS STRS DDefined efined BBenefit Planenefit Plan

Required for all FT K-14 teachersRequired for all FT K-14 teachers and an and an option for all PT/hourly teachersoption for all PT/hourly teachers

STRS Defined BenefitSTRS Defined Benefit- 8% employee contribution- 8% employee contribution (2% to DBS supplement to 2010) (2% to DBS supplement to 2010)- 8.25% employer contribution- 8.25% employer contribution .25% sick leave conversion .25% sick leave conversion- VEST: 5 years FTE service credit- VEST: 5 years FTE service credit

Monthly Retirement based upon formulaMonthly Retirement based upon formula

STRS DB BenefitsSTRS DB Benefits

Survivor Benefits and Beneficiaries Survivor Benefits and Beneficiaries Disability BenefitsDisability Benefits Inflation ProtectionInflation Protection CB to DB conversion, re-deposits, permissive CB to DB conversion, re-deposits, permissive

purchase of time, air time, sick leave conversionpurchase of time, air time, sick leave conversion 403(b) savings program403(b) savings program CalSTRS Home Loan ProgramCalSTRS Home Loan Program Long Term-Care Program through CalPERSLong Term-Care Program through CalPERS STRS DB Supplement account STRS DB Supplement account

What is needed?What is needed?

Three parts to the DB retirement formula:Three parts to the DB retirement formula:

SC X age factor X final earnable/12SC X age factor X final earnable/12

Service CreditService Credit: history of work record based : history of work record based upon load.upon load.Age FactorAge Factor: a factor dependent upon age at : a factor dependent upon age at retirement as per STRS Handbook.retirement as per STRS Handbook.Final Earnable/12Final Earnable/12: typically final 3 averaged : typically final 3 averaged years divided by 12 for monthly benefit.years divided by 12 for monthly benefit.

Service CreditService Credit

SERVICE CREDIT = FTE years serviceSERVICE CREDIT = FTE years service Reflect % of teaching/work load historyReflect % of teaching/work load history Converts MONEY into SERVICE CREDITConverts MONEY into SERVICE CREDIT Computation: actual earnings divided byComputation: actual earnings divided by “ “earnable”: FTE hours X $ hourly rateearnable”: FTE hours X $ hourly rate

example: $22,950 [actual] div. by example: $22,950 [actual] div. by earnable $36,750 [525 X $70/hr] = .625 SC earnable $36,750 [525 X $70/hr] = .625 SC [ex. includes Office Hour & substitute pay] [ex. includes Office Hour & substitute pay]

(Earnings/earnable are reported monthly by (Earnings/earnable are reported monthly by district payroll for all creditable service district payroll for all creditable service.).)

What is my FTE?What is my FTE?

““Full Time Equivalent” in yearly hours based Full Time Equivalent” in yearly hours based on contract work classificationon contract work classification

FT faculty weekly teaching hours X 35FT faculty weekly teaching hours X 35 In CCCCD [examples] hours per weekIn CCCCD [examples] hours per week English Comp. = 12 FTE [525 min.]English Comp. = 12 FTE [525 min.]

Lecture = 15 FTE [525] Lecture = 15 FTE [525] Lab/Tutorial = 20 FTE [700] Lab/Tutorial = 20 FTE [700] PE = 22 FTE [770] PE = 22 FTE [770]

Lib./Counselor are at 1050 minimumLib./Counselor are at 1050 minimum

Calculating my “earnable”Calculating my “earnable”

Your FTE X hourly pay rate equals your Your FTE X hourly pay rate equals your earnable in a single classificationearnable in a single classificationExamples: Examples: 525 X $50 = $26,250.00 [Lecture] 525 X $50 = $26,250.00 [Lecture] 770 X $50 = $38,500.00 [PE]770 X $50 = $38,500.00 [PE]

Earnable in multiple classifications:Earnable in multiple classifications:PE and teach history averages the twoPE and teach history averages the two $32,375. $32,375.

How can I accumulate Service How can I accumulate Service Credit?Credit?

Classroom instruction [FTE] % loadClassroom instruction [FTE] % load Unused Sick Leave Hours Unused Sick Leave Hours

[converted at retirement] [converted at retirement] SubstitutingSubstituting Office Hours [FTE X rate = SC]Office Hours [FTE X rate = SC] Permissive Buy Back of TimePermissive Buy Back of Time

Buy service based on Buy service based on creditablecreditable time time not previously contributed to STRS not previously contributed to STRS

Air Time: Non-teaching time (expensive)Air Time: Non-teaching time (expensive)

Permissive Buy BackPermissive Buy Back

Retrieval of previous years of creditable Retrieval of previous years of creditable service from in/out of California [public service from in/out of California [public service]: as teaching, counseling, service]: as teaching, counseling, substituting, military (more see Handbook)substituting, military (more see Handbook)

Earnable X % [age category] is cost of one Earnable X % [age category] is cost of one year Service Credit. (Same formula is used year Service Credit. (Same formula is used for the CB to DB conversion.) for the CB to DB conversion.)

You can pay out of pocket, from another You can pay out of pocket, from another pre-tax retirement account (IRA) or on time.pre-tax retirement account (IRA) or on time.

Permissive Service Credit CostsPermissive Service Credit Costs

Cost to buy permissive service credit is based Cost to buy permissive service credit is based upon age.upon age.

This scale is used for general permissive & This scale is used for general permissive & Cash Balance buying of service credit.Cash Balance buying of service credit.

AGE YRS RATE SALARY COSTAGE YRS RATE SALARY COST 20-29 1.0 18.6% $50,000 $ 9,30020-29 1.0 18.6% $50,000 $ 9,300 30-39 1.0 18.8% $ 9,40030-39 1.0 18.8% $ 9,400 40-49 1.0 19.5% $ 9,75040-49 1.0 19.5% $ 9,750 50-59 1.0 23.9% $11,950 50-59 1.0 23.9% $11,950 60 + 1.0 27.7% $13,850 60 + 1.0 27.7% $13,850

Permissive Buy Back: CB to DBPermissive Buy Back: CB to DB

Formula: “earnable” X permissive % rate = Formula: “earnable” X permissive % rate = cost of 1 year of service credit cost of 1 year of service credit

““annual earnable” = FTE X hourly pay rateannual earnable” = FTE X hourly pay rate Two options: Two options:

1. money in account buys direct SC as 1. money in account buys direct SC as much as will cover [approx. ½ of actual] much as will cover [approx. ½ of actual] 2. total “permissive” SC converted to cost 2. total “permissive” SC converted to cost using CB money + secondary source or using CB money + secondary source or may pay in installments. may pay in installments.

Converting Option OneConverting Option One

Total money in CB account used to buy Total money in CB account used to buy as much Service Credit as can without as much Service Credit as can without out-of-pocket expense to self. out-of-pocket expense to self.

Example: Account has $8157.00Example: Account has $8157.00 earnable = 525 X $50 = $26,250 earnable = 525 X $50 = $26,250

Age of member: 35 Age of member: 35 Member’s earnable = $26,250Member’s earnable = $26,250

$26,250 X 18.8% = $4935 = 1 SC$26,250 X 18.8% = $4935 = 1 SC Account purchases direct SC of 1.65 years Account purchases direct SC of 1.65 years

[$8157 div. by $4935][$8157 div. by $4935]

Converting Option TwoConverting Option Two

““Permissive” SC buy back using CB account Permissive” SC buy back using CB account to purchase the total service creditto purchase the total service credit

Period of CB account = 3.5 SC earnedPeriod of CB account = 3.5 SC earned Cost of 3.5 SC = $17,272.50Cost of 3.5 SC = $17,272.50

(3.5 SC years X $4935) (3.5 SC years X $4935) Member contributes balance of $9115.50Member contributes balance of $9115.50

for full service credit. May be done onfor full service credit. May be done onmonthly payment plan or a direct roll-over monthly payment plan or a direct roll-over from an acceptable pre-tax account from an acceptable pre-tax account [ex: 403 (b), 401 (k), IRA] (not a Roth IRA)[ex: 403 (b), 401 (k), IRA] (not a Roth IRA)

Sick Leave Hour ConversionSick Leave Hour Conversion

Unused Sick Leave converted at time of Unused Sick Leave converted at time of retirement is added to your service credit retirement is added to your service credit history (only available for DB members)history (only available for DB members)

6 hours = 1 SC day [Ed Code 22717]6 hours = 1 SC day [Ed Code 22717] Example: 525 hours [1 FTE year] Example: 525 hours [1 FTE year]

converts by dividing by 6 = 85 day converts by dividing by 6 = 85 day An academic year = 85/175 days = .5 SCAn academic year = 85/175 days = .5 SC

What is the Age Factor and What is the Age Factor and when can I retire?when can I retire?

Age Factor = Pre-determined factor in Age Factor = Pre-determined factor in STRS handbook at time of retirementSTRS handbook at time of retirement

Examples of factors:Examples of factors: age 55 = 1.4 age 55 = 1.4 age 60 = 2.0 age 60 = 2.0 age 63 = 2.4 [maximum] age 63 = 2.4 [maximum]

Earliest retirement age = 55Earliest retirement age = 55

Final CompensationFinal Compensation

Final Computation = average of 3 finalFinal Computation = average of 3 final years “earnable” salary or 3 highest years “earnable” salary or 3 highest earnable consecutive years. earnable consecutive years.

Final computation earnable = actual gross Final computation earnable = actual gross payment divided by % load teaching.payment divided by % load teaching.

Example: $25,000 3 year average grossExample: $25,000 3 year average grossdivided by .60 [% load] = $41,666 earnabledivided by .60 [% load] = $41,666 earnable

Computing my retirementComputing my retirement

Service credit X age factor X final compensation = Service credit X age factor X final compensation = ““unmodified benefit”unmodified benefit”

Check your Service Credit record and project Check your Service Credit record and project work load to retirement age plus sick leave hours.work load to retirement age plus sick leave hours.

Check STRS book for age factor for the projected Check STRS book for age factor for the projected age you want to retire.age you want to retire.

Calculate approximate Final earnable income [div. Calculate approximate Final earnable income [div. by 12]by 12]

Use the CalSTRS website calculatorsUse the CalSTRS website calculators

Example: Basic RetirementExample: Basic Retirement

JOHN: Basic PT Retiree started work JOHN: Basic PT Retiree started work post 1996 (the year is 2021).post 1996 (the year is 2021).

History: 25 years at 60%, retires age 65History: 25 years at 60%, retires age 65 avg. earnings at $25,000/year avg. earnings at $25,000/year

Final comp. = 25,000/.60 = 41,666 Final comp. = 25,000/.60 = 41,666 earnable divide by 12 = $3472earnable divide by 12 = $3472

15 yrs. SC X 2.4 age X $3472 = 15 yrs. SC X 2.4 age X $3472 = $1249.92 $1249.92 unmodified monthly benefitunmodified monthly benefit

Supplemental AccountSupplemental Account

Defined Benefit Supplement Account adds Defined Benefit Supplement Account adds an additional contribution to a secondary an additional contribution to a secondary account from anything over 100% [DBS].account from anything over 100% [DBS].

Your supplemental account also Your supplemental account also accumulates 2% of your 8% basic accumulates 2% of your 8% basic contribution (up to 2010).contribution (up to 2010).

If that account is more than $3500 then it If that account is more than $3500 then it can be paid out as an added benefit or can be paid out as an added benefit or cashed out at retirement.cashed out at retirement.

AB 1586AB 1586

Law to fix impairment to PT retirees Law to fix impairment to PT retirees whose service record pre-dates 1996 law whose service record pre-dates 1996 law change.change.

Computes years of service before 1996 Computes years of service before 1996 and years of service after 1996 and give and years of service after 1996 and give the PT member the best retirement the PT member the best retirement based upon their service record.based upon their service record.

STRS is currently formulating a computer STRS is currently formulating a computer program to accomplish this.program to accomplish this.

STRS & FACCC Task ForceSTRS & FACCC Task Force

What we have accomplished:What we have accomplished:

1. 1. New PT SectionNew PT Section in the STRS Handbook in the STRS Handbook Clearer information and more user friendly Clearer information and more user friendly 2.2. Impairment CalculationsImpairment Calculations [AB 1586] [AB 1586] Underway and retroactive. Underway and retroactive.3.3. Change Mandatory DB enrollmentChange Mandatory DB enrollment [AB3076 (Mullin)] No longer can a PTer be [AB3076 (Mullin)] No longer can a PTer be forced into DB against his/her will as long as forced into DB against his/her will as long as defined as a “temporary” employee defined as a “temporary” employee4.4. CB to DB Service Credit ConversionCB to DB Service Credit Conversion

STRS/FACCC: What’s next?STRS/FACCC: What’s next?

1. 1. Change/Simplify District ReportingChange/Simplify District Reporting to require to require FTE compliance to law FTE compliance to law

2.2. Improve STRS DB StatementsImprove STRS DB Statements: separate : separate districts and classifications for ease of districts and classifications for ease of tracking tracking

33. . Sick Leave conversion calculations:Sick Leave conversion calculations: tie to tie to the FTE classifications standards (525 min.) the FTE classifications standards (525 min.)

44. . Possible New PT only DB programPossible New PT only DB program

STRS ContactsSTRS Contacts

STRS website STRS website www.calstrs.comwww.calstrs.com for information, forms and statementsfor information, forms and statements

STRS Ombudsman: Tom BarrettSTRS Ombudsman: Tom Barrett tbarrett@calstrs.comtbarrett@calstrs.com

STRS toll-free phone: 800-228-5453STRS toll-free phone: 800-228-5453 Call to request CB to DB conversion Call to request CB to DB conversion

request form or have a membership request form or have a membership review.review.

Social Security & TeachersSocial Security & Teachers

Social SecuritySocial Security- Federal Defined Benefit Plan- Federal Defined Benefit Plan- Employee contribution- Employee contribution- District contribution- District contribution- Qualify: 40 quarters; earning & age- Qualify: 40 quarters; earning & age- - Not all districts offer Social SecurityNot all districts offer Social Security- yearly statement gives history & - yearly statement gives history & estimated benefits, earnings record estimated benefits, earnings record

Can be affected if receive STRS benefits.Can be affected if receive STRS benefits.

WEP and GPO Off-setsWEP and GPO Off-sets

These are known as the Windfall These are known as the Windfall Elimination Provision (employee) andElimination Provision (employee) and

The Government Pension Off-set The Government Pension Off-set (survivor benefit).(survivor benefit).

These can affect Social Security benefits These can affect Social Security benefits for teachers and spouses (who were for teachers and spouses (who were teachers) if they do not have 30 years teachers) if they do not have 30 years significant earnings in the SS system.significant earnings in the SS system.

Windfall Elimination ProvisionWindfall Elimination Provision

Teachers and other Public EmployeesTeachers and other Public Employees Effective January 1, 1986Effective January 1, 1986 WEP reduces first $695 from 90% to WEP reduces first $695 from 90% to

40% if less than 20 years of 40% if less than 20 years of substantial substantial earningsearnings (amount changes each year) (amount changes each year)

21 years factored at 45%21 years factored at 45%25 years factored at 70%25 years factored at 70%30 or more years of substantial earnings 30 or more years of substantial earnings at full factor of 90% [NO OFF-SET] at full factor of 90% [NO OFF-SET]

Example of WEPExample of WEP

1. teaches PT CCC and pays into STRS1. teaches PT CCC and pays into STRS2. works PT private sector pays into SS2. works PT private sector pays into SS

only 4 years of substantial earnings only 4 years of substantial earnings under Social Security so full WEPunder Social Security so full WEP

Example: $800 average SS earningsExample: $800 average SS earnings40% of first $ 695 = $ 278.0040% of first $ 695 = $ 278.0032% of next $2398 = $ 62.0032% of next $2398 = $ 62.0015% of remainder = 015% of remainder = 0

Total SS benefit with WEP = Total SS benefit with WEP = $340.00$340.00

Significance and effectsSignificance and effects

Full Social Security would have beenFull Social Security would have been $678 $678

WEP benefit is $340WEP benefit is $340An off-set [loss] of $338An off-set [loss] of $338

NOTENOTE: : The off-set cannot be more than ½ The off-set cannot be more than ½ of the STRS pension.of the STRS pension. So if STRS pension is So if STRS pension is less than $676.00 then the off-set will be less.less than $676.00 then the off-set will be less.

WEP does not apply if 30 years as a FT WEP does not apply if 30 years as a FT worker and substantial earnings paid.worker and substantial earnings paid.

How would that work?How would that work?

Original SS benefit was $678Original SS benefit was $678 The Full WEP off-set = $338The Full WEP off-set = $338 If STRS monthly pension is $600.00 If STRS monthly pension is $600.00

then the off-set cannot exceed $300.00 then the off-set cannot exceed $300.00 Social Security benefits would then beSocial Security benefits would then be

$378 [instead of the previous $340]$378 [instead of the previous $340] So it is important to know or project the So it is important to know or project the

STRS pension and compare to projected STRS pension and compare to projected SS benefits.SS benefits.

Calculating WEPCalculating WEP

Calculating WEP is one of the most Calculating WEP is one of the most complex of the Social Security entitlement complex of the Social Security entitlement provisions. There is now a hand-dandy provisions. There is now a hand-dandy chart that shows how your benefits can be chart that shows how your benefits can be affected by WEP on the Social Security affected by WEP on the Social Security website. And you don’t even have to touch website. And you don’t even have to touch a calculator.a calculator.

http://www.socialsecurity.gov/retire2/wep-chart.http://www.socialsecurity.gov/retire2/wep-chart.htmhtm

Government Pension Off-setGovernment Pension Off-set

• Affects Spousal Benefits of FT private Affects Spousal Benefits of FT private sector employees whose spouses are in sector employees whose spouses are in the public sector.the public sector.

• Age 65 spouse receives 50% of PIAAge 65 spouse receives 50% of PIA“Primary Insurance Amount”“Primary Insurance Amount”

• Age 64 – 45.8% of PIAAge 64 – 45.8% of PIA• Age 63 – 41.7% of PIAAge 63 – 41.7% of PIA• Age 62 – 37.5% of PIAAge 62 – 37.5% of PIA

STRS Pension & the GPOSTRS Pension & the GPO

Social Security spousal and widow benefit Social Security spousal and widow benefit reduced by 2/3 of the STRS pensionreduced by 2/3 of the STRS pension

Dennis receives $1612 in SS at age 65Dennis receives $1612 in SS at age 65Leslie [wife] would receive $806 [50%]Leslie [wife] would receive $806 [50%]

Leslie is a teacher and receives STRSLeslie is a teacher and receives STRSpension of $900; 2/3 = $600 [off-set]pension of $900; 2/3 = $600 [off-set](Regardless of SS Leslie might receive)(Regardless of SS Leslie might receive)

$806 spouse - $600 STRS = $206 benefit$806 spouse - $600 STRS = $206 benefit

GPO Widow Off-setGPO Widow Off-set

Leslie, a teacher, becomes a widowLeslie, a teacher, becomes a widow Widow receives 100% of spouse benefitWidow receives 100% of spouse benefit $1612 = widow’s SS benefit$1612 = widow’s SS benefit

- 600 = 2/3 of STRS pension offset- 600 = 2/3 of STRS pension offset$1012 = Social Security Widow Benefit$1012 = Social Security Widow Benefit

Total retirement as a widow isTotal retirement as a widow is$900 STRS + $1012 SS widow = $900 STRS + $1012 SS widow = $1912 [GPO is not affected by the ½ rule] $1912 [GPO is not affected by the ½ rule]

What does this all mean?What does this all mean?

Knowledge is Power: Be InformedKnowledge is Power: Be Informed Know your Options: Ask QuestionsKnow your Options: Ask Questions Consider where you are now & the futureConsider where you are now & the future Support the organizations who advocate Support the organizations who advocate

for your rights & attend workshops. for your rights & attend workshops. Deborah Dahl Shanks, Deborah Dahl Shanks,

FACCC Retirement CommitteeFACCC Retirement Committee deborahadahl@aol.comdeborahadahl@aol.com; (510) 724-2631; (510) 724-2631

THE ENDTHE END

Faculty Association of Faculty Association of

California Community CollegesCalifornia Community Colleges

““Part-time Faculty Part-time Faculty

and and

Retirement Committees”Retirement Committees”