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Part-time Faculty Retirement Options

Part-time Faculty Retirement Options. By Deborah Dahl Shanks FACCC. What are the available options?. STRS: State Teacher’s Retirement System Defined Benefit Cash Balance [negotiable] Social Security [not in all districts]

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Part-time Faculty Retirement Options

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  1. Part-timeFaculty Retirement Options By Deborah Dahl Shanks FACCC

  2. What are the available options? • STRS: State Teacher’s Retirement System Defined Benefit Cash Balance [negotiable] • Social Security [not in all districts] • Other possible plans [negotiable][Apple, PARS, Banner, Insurance Co] • IRAs, 403(b), 457(b), Tax-sheltered Annuity

  3. What is right for me? • Considerations: Age Other jobs Spouse Plans in teaching in the next 5, 10, 15 years • Know the plans and the impact they have on each other. • Decide what you expect out of retirement • Consider when you want to retire.

  4. State Teachers Retirement System • Cash Balance, a hybrid defined benefit plan, available to PT faculty only (negotiable) • Defined Benefit, a full defined plan which is available to ALL teachers regardless of status as FT or PT. • Both can affect Social Security benefits, both primary and survivor, through WEP and GPO due to district contributions in the benefit.

  5. STRS Cash Balance Plan • STRS Cash Balance- employee contributes 4% (negotiable)- employer contributes 4%- Immediate vesting- No Service Credit required • Cash Out [Lump Sum (pay taxes)]over 55 – immediate under 55 – one year wait • Annuity:monthly will be basis for SS off-set • Lump Sum: SS projects a 10 year annuity off-set • Convertibleto STRS DB service credit

  6. Defining Cash Balance • Cash Balance is not a Defined Contribution plan. A DC plan has a defined amount of money in it that can be exhausted. • Cash Balance is a Hybrid plan in which a “defined” pension is set based upon the STRS DBS calculator, and the monthly pension amount is guaranteed for life (you cannot outlive the benefit)

  7. Why CB plan? • The Cash Balance plan is for PT CCC faculty who would not ordinarily “vest” in the STRS Defined Benefit plan. • You contribute less (about ½ of DB plan), so more money in your pocket now; but less payout later. • Good for PT faculty only teaching one classor starting late in career after private sector career. • Not good for PT faculty teaching 60% or more • Not good if you will need a substantial monthly pay out or want to convert unused accrued sick leave.

  8. Retiring with Cash Balance • At retirement or leaving teaching, STRS will request a pension preference • Choices include: Roll into a private annuity or IRA account Cash out lump sum [paying all the tax] Roll into a STRS annuity • Typical life annuity: $50,000 at age 63 paysout approx. $500 a month for life. • One year break in service required to return to teaching upon taking a monthly CB pension

  9. IN or OUT of Cash Balance • Check your once a year a statement from STRS showing your contributions, the district contributions and interest. • You may be in both CB and DB if your are receiving two statements. What to do? • You may choose to stay in CB and then cash out your DB money once no longer employed. • You may choose to move to DB and roll your CB money into that plan to retrieve service credit. • You may choose to opt out of CB and move to Social Security [if offered] at the end of a semester [when “unemployed”]. Basic cash out rules apply or roll into other tax-exempt plan.

  10. Can I be forced out of CB? • NO! Not as long as you are PT and your basis of employment is “temporary”. • AB3076 protects your right to stay in CB. • Signed into law in 2004 • Effective as of July 1, 2005 • So if you need or want to change plans, AB3076 allows you to choose the plan that best suits your needs based on what is offered in your district.

  11. Conversion from CB to DB • You should consider converting if: • You plan on being a career teacher • You teach 40% or more each semester • If you work in more than one district • If you want a larger life-time STRS pension • And if will be able to vest 5 years by the time you want to retire.

  12. When & why should I convert? • You may request to be put into the STRS Defined Benefit Plan at any time. • Once a DB member you can request a consolidation of your CB account into DB. • WHY? • CB money converts into service credit • The more service credit – the higher pension • Service credit needed for vesting

  13. STRS Defined Benefit Plan • Required for all FT K-14 teachersand an option for all PT/hourly teachers [basis of employment] • STRS Defined Benefit- 8% employee contribution (2% to DBS [supplement to 2010])- 8.25% employer contribution .25% sick leave conversion- VEST: 5 years FTE service credit • Monthly Retirement based upon formula:Service Credit X age factor X final compensation

  14. STRS DB Benefits • Survivor Benefits and Beneficiaries • Disability Benefits • Inflation Protection • CB to DB conversion, re-deposits, permissive purchase of time, air time, sick leave conversion • 403(b) savings program • CalSTRS Home Loan Program • Long Term-Care Program through CalPERS • STRS DB Supplement account for annual work load exceeding 100%

  15. Defining Defined Benefit • STRS Defined Benefit planned is so called because it is based upon a defined formula. • The three components are: • Service Credit (history of work load) • Age Factor (a factor in the formula) • Earnable (typically the average earnable of your last three years of service --- but technically your 3 highest consecutive earnable years)

  16. What is my Service Credit? • Service Credit is reported to STRS by your district payroll department • It is based upon monthly earnings divided by earnable (typically your hourly rate X 525 or a number appropriate for your classification and defined in your locally bargained contract) • Service Credit covers ALL creditable service in all semesters/quarters, including inter-sessions and summer session up to a maximum of 100% or 1 year SC

  17. Is my Service Credit correct? • Check your yearly STRS statement • Compute your actual yearly earnings • Compute your “earnable” salary[actual divided by load %] • Divide “actual” by “earnable” = SERVICE CREDIT for the year • If not close to the LOAD you actually worked then CALL District, Union & STRS • Should be slightly higher than load if includes office hours and substituting.

  18. Accumulating Service Credit • Classroom instruction [FTE] % load • Unused Sick Leave Hours [given at retirement] • Substituting • Office Hours [FTE X rate = SC] • Permissive Buy Back of TimeBuy service based on creditable time not previously contributed to STRS • Air Time: Non-teaching time (expensive) • Golden Handshake [negotiable by district]

  19. Permissive Buy Back • Good for retrieving previous years of creditable service. • Anything creditable from in/out of California [public service]: teaching, counseling, substituting and administrating, Sabbatical Leave, Active Military, UC/CSU service, Maternity/family care/medical, and School for Blind/Deaf. • Earnable X % [age category] is cost of one year Service Credit. Same formula is used for the CB to DB conversion. • You can pay out of pocket, from another pre-tax retirement account (IRA) or on time.

  20. Permissive Service Credit Costs • Cost to buy permissive service credit is based upon a flexible scale based upon age. • This scale is used for general permissive and Cash Balance buying of service credit. • AGE YRS RATE SALARY COST • 20-29 1.0 18.6% $50,000 $ 9,300 • 30-39 1.0 18.8% $ 9,400 • 40-49 1.0 19.5% $ 9,750 • 50-59 1.0 23.9% $11,950 ** • 60 + 1.0 27.7% $13,850 **

  21. Permissive Buy Back: CB to DB • Formula: “earnable” X permissive % rate = cost of 1 year of service credit [see permissive chart] • “annual earnable” = FTE X hourly pay rate • Two options to use CB money to buy back DB service credit: [have 35 days from time of letter] 1. money in account buys direct SC as much as will cover [aprox. ½ of actual]2. total “permissive” SC converted to cost using CB money + secondary source or may pay in installments.

  22. Sick Leave Hour Conversion • Unused Sick Leave converted at time of retirement (only available for DB members) • Current law converts sick leave hours at 6 hours = 1 SC day [Ed Code 22717] • Example: 525 hours converts by dividing 525 by 6 hours = 85 days An academic year = 176/85 days = .5 SC

  23. Age Factor and retirement • Age Factor = age at time of retirement as listed in the STRS handbook • Examples of factors: age 55 = 1.4 age 60 = 2.0 age 63 = 2.4 [maximum] • Earliest retirement age = 55 • You may retire and return to work with a break in service, but will be classified as a working retiree while receiving a pension

  24. Retirement Date • You may choose to stop working if vested and delay collecting retirement until older to gain age factor in monthly computation • If under the age of 60, there is a 180 day (6 month) break in service requirement to return to teaching. (This will probably be extended to all retirees) • If you return to teaching part-time you will not contribute to STRS as long as you are receiving a pension. You will be subject to an earnings limitations as defined by STRS

  25. Computing my retirement • Service credit X age factor X final compensation/12 • Check your Service Credit record. Know what you have now, what you expect to gain until projected retirement age plus sick leave hours converted into annual SC • Check STRS book for projected age factor • Calculate approximate Final earnable compensation (based on projected 3 years averaged) [div. by 12] • Use the STRS calculator on website

  26. Final Compensation Earnable • Final Computation = average of 3 final years “earnable” salary or 3 highest earnable consecutive years. • Final computation earnable = actual gross payment divided by % load teaching. • Example: $25,000 3 year average grossdivided by .60 [% load] = $41,666 earnable

  27. Retirement with DB Supplement • Your supplemental account [DBS] accumulates money from anything over 100% for the year. • The DBS account also accumulated 2% of your 8% basic contribution (2000 -2010) • If that account is more than $3500 then it can be annuitized and paid out as an added benefit or cashed out in full. • Example $15,000 would add $150 per month for life added to your final STRS benefit.

  28. AB 1586 • Law to fix impairment to PT retirees whose service record pre-dates 1996 law change. • Purpose is to compute years of service before 1996 and years of service after 1996 and give the PTer the best retirement based upon their service record. • Calculate pre-1996 on 1050 standard • Calculate post-1996 on FTE service div. half • Double the Final compensation to 1050 standard.

  29. STRS and FACCC Task Force • What we have accomplished:1. New PT Section in the STRS Handbooks (done)2.Impairment Calculations1050/525 [AB 1586](done)3.Change Mandatory DB enrollment [AB3076](done)4.CB to DB Service Credit Purchase (done) • What next or still working on:1. Change/Simplify District Reporting to require FTE compliance to law [FACCC spot bill 2005 for FTE]2.Improve STRS DB Statements: separate districts and classifications for ease of tracking3. Sick Leave conversion calculations4. Possible New PT only DB program

  30. Social Security & Teachers • Social Security- Federal Defined Benefit Plan- Employee contribution- District contribution- 40 quarters; earning & age- Not all districts offer Social Security- yearly statement gives history & standing estimated benefits, earnings record • Affected if receive STRS benefits & have less than 30 years substantial SS contributions

  31. Windfall Elimination Provision • Teachers and other Public Employees • Effective January 1, 1986 • WEP reduces first $711 from 90% to 40%if less than 20 years of substantial earnings21 years factored at 45%25 years factored at 70%30 or more years of substantial earnings at full factor of 90% [NO OFF-SET]

  32. Calculating WEP • Calculating WEP, which affects mostly federal, state and local government employees [including teachers], is one of the most complex of the Social Security entitlement provisions. • There is now a hand-dandy chart that shows how your benefits can be affected by WEP on the Social Security website. And you don’t even have to touch a calculator. • http://www.socialsecurity.gov/retire2/wep-chart.htm

  33. Government Pension Off-set • Affects Spousal Benefits of FT private sector employees whose spouses are in the public sector. • Age 65 spouse receives 50% of PIA“Primary Insurance Amount” • Age 64 – 45.8% of PIA • Age 63 – 41.7% of PIA • Age 62 – 37.5% of PIA

  34. Social Security and PT Faculty • Check SS Statement of Earnings • See covered earnings year-by-year credits [40 quarters needed]Benefits listed will not reflect WEP or GPO • Find out if you are contributing or have contributed years of “substantial earnings” • 30 years of substantial earnings will not be off-set by WEP or GPO; between 20 and 30 years a sliding scale of off-set percentages. • SS Disability: need 27 credits, with 20 earned in the last 10 years

  35. What are the “other” plans? • Other Plans:Apple, Banner, PARS • How do they work? - Employee contribution (some with district contributions, usually less than STRS DB or Social Security)- Similar to an IRA or DC plan- No SS Off-set ONLY if no district contribution.- If no longer contributing to a plan, you may roll into an IRA, 403(b), CB or use for DB purchase. Typically you must wait 12 to 24 months before allowed to do so by the plan.

  36. What does this all mean for you? • Knowledge is Power: Be Informed • Know your Options: Ask Questions • Consider where you are now & the future • Stop and figure out all implications and What is best for YOU • Join organizations like your Union, FACCC & CPFA who advocate for your rights, and • Attend STRS & FACCC workshops

  37. Contacts • STRS website www.calstrs.com has information, forms and statements • STRS Ombudsman: Tom Barretttbarrett@calstrs.com • STRS toll-free phone: 800-228-5453 • You can call STRS to request a CB to DB consolidation form or membership review. • Deborah Dahl Shanks, FACCC Retirementdeborahadahl@aol.com; (510) 724-2631

  38. THE END Faculty Association of California Community Colleges “Part-time Faculty and Retirement Committees”

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