Parttime Faculty Retirement Workshop

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Part-time Faculty Retirement Workshop

• By Deborah Dahl Shanks
• FACCC Retirement Committee

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What are the available options?

• STRS State Teachers Retirement System Cash
  Balance
• Defined Benefit
• Social Security
• IRAs, 403(b), 457(b),
• Tax-sheltered Annuity

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State Teachers Retirement System

• Cash Balance, a hybrid defined benefit plan,
  available to PT faculty only
• Defined Benefit, a full defined plan which is
  available to ALL teachers regardless of status as
  FT or PT.
• Both may affect Social Security benefits, both
  primary and survivor WEP GPO

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STRS Cash Balance Plan

• STRS Cash Balance- employee contributes 4
  (negotiable)- employer contributes 4-
  Immediate vesting - No Service Credit
• Cash Out Lump Sum (pay taxes) over 55
  immediate under 55 6 month wait
• Annuity
• Convertible to STRS DB service credit

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Why CB plan?

• The Cash Balance plan is for PT CCC faculty who
  would not ordinarily vest.
• 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 or
  will need a substantial monthly pension or want
  to convert unused accrued sick leave.

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Retiring with Cash Balance

• STRS will ask you what you want to do with your
  Cash Balance account.
• Choices include1. Roll into a private annuity
  or IRA 2. Cash out lump sum paying all the
  tax3. STRS annuity life or time specific
  see the DBS calculator
• Typical life annuity 50,000 at age 63 pays
  approx. 500 a month for life.

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OPT IN or OUT of CB

• You may be in both CB and DB.
  What to do?
• You may choose to1. stay in CB and then cash
  out your DB money once no longer employed.
• 2. move to DB and then roll your CB money
  into that plan to retrieve service credit.
• 3. 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.

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Conversion from CB to DB

• You should consider converting if you1. plan
  on being a career teacher or foresee your
  ability to vest 5 FTE years.2. teach 40
  or more each semester3. work in more than one
  district4. want a larger life-time STRS
• pension and want to convert unused
  sick leave hours.

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STRS Defined Benefit Plan

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

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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

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What is needed?

• Three parts to the DB retirement formula
• SC X age factor X final earnable/12
• Service Credit history of work record based
  upon load.Age Factor a factor dependent upon
  age at retirement as per STRS Handbook.Final
  Earnable/12 typically final 3 averaged years
  divided by 12 for monthly benefit.

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Service Credit

• SERVICE CREDIT FTE years service
• Reflect of teaching/work load history
• Converts MONEY into SERVICE CREDIT
• Computation actual earnings divided by
• earnable FTE hours X hourly rate
  example 22,950 actual div. by earnable
  36,750 525 X 70/hr .625 SC ex. includes
  Office Hour substitute pay
• (Earnings/earnable are reported monthly by
  district payroll for all creditable service.)

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What is my FTE?

• Full Time Equivalent in yearly hours based on
  contract work classification
• FT faculty weekly teaching hours X 35
• In CCCCD examples hours per week
• English Comp. 12 FTE 525 min. Lecture
  15 FTE 525 Lab/Tutorial 20
  FTE 700 PE 22 FTE 770
• Lib./Counselor are at 1050 minimum

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Calculating my earnable

• Your FTE X hourly pay rate equals your earnable
  in a single classificationExamples 525 X 50
  26,250.00 Lecture
  770 X 50 38,500.00 PE
• Earnable in multiple classificationsPE and
  teach history averages the two 32,375.

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How can I accumulate Service Credit?

• Classroom instruction FTE load
• Unused Sick Leave Hours converted at
  retirement
• Substituting
• Office Hours FTE X rate SC
• Permissive Buy Back of Time Buy service based
  on creditable time not previously contributed
  to STRS
• Air Time Non-teaching time (expensive)

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Permissive Buy Back

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

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Permissive Service Credit Costs

• Cost to buy permissive service credit is based
  upon age.
• This scale is used for general permissive 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

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Permissive Buy Back CB to DB

• Formula earnable X permissive rate cost of
  1 year of service credit
• annual earnable FTE X hourly pay rate
• Two options
• 1. money in account buys direct SC as
  much as will cover approx. ½ of actual 2.
  total permissive SC converted to cost
  using CB money secondary source or may
  pay in installments.

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Converting Option One

• Total money in CB account used to buy as
  much Service Credit as can without
  out-of-pocket expense to self.
• Example Account has 8157.00 earnable 525
  X 50 26,250
• Age of member 35
• Members earnable 26,25026,250 X 18.8
  4935 1 SC
• Account purchases direct SC of 1.65 years
  8157 div. by 4935

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Converting Option Two

• Permissive SC buy back using CB account to
  purchase the total service credit
• Period of CB account 3.5 SC earned
• Cost of 3.5 SC 17,272.50 (3.5 SC years X
  4935)
• Member contributes balance of 9115.50for full
  service credit. May be done onmonthly payment
  plan or a direct roll-over from an acceptable
  pre-tax account ex 403 (b), 401 (k), IRA (not
  a Roth IRA)

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Sick Leave Hour Conversion

• Unused Sick Leave converted at time of retirement
  is added to your service credit history (only
  available for DB members)
• 6 hours 1 SC day Ed Code 22717
• Example 525 hours 1 FTE year converts by
  dividing by 6 85 day An academic year 85/175
  days .5 SC

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What is the Age Factor and when can I retire?

• Age Factor Pre-determined factor in STRS
  handbook at time of retirement
• Examples of factors age 55 1.4 age
  60 2.0 age 63 2.4 maximum
• Earliest retirement age 55

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Final Compensation

• 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

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Computing my retirement

• Service credit X age factor X final compensation
  unmodified benefit
• Check your Service Credit record and project work
  load to retirement age plus sick leave hours.
• Check STRS book for age factor for the projected
  age you want to retire.
• Calculate approximate Final earnable income div.
  by 12
• Use the CalSTRS website calculators

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Example Basic Retirement

• JOHN Basic PT Retiree started work post 1996
  (the year is 2021).
• History 25 years at 60, retires age 65
  avg. earnings at 25,000/year
• Final comp. 25,000/.60 41,666 earnable divide
  by 12 3472
• 15 yrs. SC X 2.4 age X 3472 1249.92
  unmodified monthly benefit

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Supplemental Account

• Defined Benefit Supplement Account adds an
  additional contribution to a secondary account
  from anything over 100 DBS.
• Your supplemental account also accumulates 2 of
  your 8 basic contribution (up to 2010).
• If that account is more than 3500 then it can be
  paid out as an added benefit or cashed out at
  retirement.

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AB 1586

• Law to fix impairment to PT retirees whose
  service record pre-dates 1996 law change.
• Computes years of service before 1996 and years
  of service after 1996 and give the PT member the
  best retirement based upon their service record.
• STRS is currently formulating a computer program
  to accomplish this.

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STRS FACCC Task Force

• What we have accomplished1. New PT Section in
  the STRS Handbook Clearer information and
  more user friendly 2. Impairment Calculations
  AB 1586 Underway and retroactive.3. Change
  Mandatory DB enrollment AB3076 (Mullin)
  No longer can a PTer be forced into DB
  against his/her will as long as defined as a
  temporary employee4. CB to DB Service Credit
  Conversion

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STRS/FACCC Whats next?

• 1. Change/Simplify District Reporting to
  require FTE compliance to law2. Improve
  STRS DB Statements separate districts and
  classifications for ease of tracking3.
  Sick Leave conversion calculations tie to
  the FTE classifications standards (525 min.) 4.
  Possible New PT only DB program

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STRS Contacts

• STRS website www.calstrs.com for information,
  forms and statements
• STRS Ombudsman Tom Barrett
  tbarrett_at_calstrs.com
• STRS toll-free phone [phone]
• Call to request CB to DB conversion request form
  or have a membership review.

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Social Security Teachers

• Social Security- Federal Defined Benefit Plan-
  Employee contribution- District contribution-
  Qualify 40 quarters earning age- Not all
  districts offer Social Security- yearly
  statement gives history estimated benefits,
  earnings record
• Can be affected if receive STRS benefits.

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WEP and GPO Off-sets

• These are known as the Windfall Elimination
  Provision (employee) and
• The Government Pension Off-set (survivor
  benefit).
• These can affect Social Security benefits for
  teachers and spouses (who were teachers) if they
  do not have 30 years significant earnings in the
  SS system.

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Windfall Elimination Provision

• Teachers and other Public Employees
• Effective January 1, 1986
• WEP reduces first 695 from 90 to 40 if less
  than 20 years of substantial earnings (amount
  changes each year)
• 21 years factored at 4525 years factored at
  7030 or more years of substantial earnings
  at full factor of 90 NO OFF-SET

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Example of WEP

• 1. teaches PT CCC and pays into STRS2. works PT
  private sector pays into SS
• only 4 years of substantial earnings under Social
  Security so full WEP
• Example 800 average SS earnings40 of first
  695 278.0032 of next 2398
  62.0015 of remainder 0
• Total SS benefit with WEP 340.00

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Significance and effects

• Full Social Security would have been 678
• WEP benefit is 340An off-set loss of 338
• NOTE The off-set cannot be more than ½ of the
  STRS pension. So if STRS pension is less than
  676.00 then the off-set will be less.
• WEP does not apply if 30 years as a FT worker and
  substantial earnings paid.

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How would that work?

• Original SS benefit was 678
• The Full WEP off-set 338
• If STRS monthly pension is 600.00 then the
  off-set cannot exceed 300.00
• Social Security benefits would then be378
  instead of the previous 340
• So it is important to know or project the STRS
  pension and compare to projected SS benefits.

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Calculating WEP

• Calculating WEP 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 dont even have to
  touch a calculator.
• http//www.socialsecurity.gov/retire2/wep-chart.ht
  m

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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 PIAPrimary
  Insurance Amount
• Age 64 45.8 of PIA
• Age 63 41.7 of PIA
• Age 62 37.5 of PIA

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STRS Pension the GPO

• Social Security spousal and widow benefit reduced
  by 2/3 of the STRS pension
• Dennis receives 1612 in SS at age 65Leslie
  wife would receive 806 50
• Leslie is a teacher and receives STRSpension of
  900 2/3 600 off-set(Regardless of SS
  Leslie might receive)
• 806 spouse - 600 STRS 206 benefit

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GPO Widow Off-set

• Leslie, a teacher, becomes a widow
• Widow receives 100 of spouse benefit
• 1612 widows SS benefit- 600 2/3
  of STRS pension offset1012 Social
  Security Widow Benefit
• Total retirement as a widow is900 STRS
  1012 SS widow 1912 GPO is not affected by
  the ½ rule

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What does this all mean?

• Knowledge is Power Be Informed
• Know your Options Ask Questions
• Consider where you are now the future
• Support the organizations who advocate for your
  rights attend workshops.
• Deborah Dahl Shanks, FACCC Retirement Committee
• deborahadahl_at_aol.com [phone]

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THE END

• Faculty Association of
• California Community Colleges
• Part-time Faculty
• and
• Retirement Committees