BILL ANALYSIS
AB 506
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 506 (Furutani)
As Amended June 25, 2009
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |79-0 |(May 4, 2009) |SENATE: |35-0 |(August 17, |
| | | | | |2009) |
-----------------------------------------------------------------
Original Committee Reference: P.E.,R.& S.S.
SUMMARY : Prohibits, as of July 1, 2010, retirees of the
California State Teachers' Retirement System (CalSTRS) from
working in any CalSTRS-related service for the first six months
after they retire, extends the sunset date of the CalSTRS
post-retirement earnings limit exemptions from June 30, 2010 to
June 30, 2012, and expands eligibility, where applicable, by one
year to members who retired on or before January 1, 2009.
Specifically, this bill :
1)Prohibits retirees under age 60 from working in any
CalSTRS-related service for the first six calendar months
after they retire. After this break-in-service, they would be
able to return to work under the existing earnings limit.
2)Extends the sunset dates of the existing CalSTRS
post-retirement earnings limit exemptions by two years, to
June 30, 2012, and moves forward the eligibility date for some
exemptions to encompass those members retired for service as
of January 1, 2009.
3)Clarifies that the vacant administrative position emergency
exemption cannot be applied to a retiree whose retirement is
the basis for the vacancy.
The Senate amendments made technical changes to the bill to
correct a drafting error that would have inadvertently allowed
the existing earnings limit exemptions to exempt retirees from
the six-month break as well.
EXISTING LAW limits the amount of post-retirement income that
may be earned in teaching employment by a retired CalSTRS
member. Currently, when a member of CalSTRS retires and returns
to teaching in a CalSTRS-covered position, the member is subject
AB 506
Page 2
to an annual post-retirement earnings limit ($29,700 in
2008-09). CalSTRS members who earn in excess of this limit
experience a dollar-for-dollar reduction in their retirement
allowances.
Current law provides K-12 service specific exemptions to the
earnings limit, until June 30, 2010, for members who retired on
or before January 1, 2007 and who meet any of the following
criteria:
1)Provide direct remedial instruction in a classroom for grades
2-12.
2)Provide direct K-12 classroom instruction.
3)Support the Beginning Teacher Support and Assessment Program.
4)Support student teachers, the Pre-Internship Teaching Program,
and alternative certification program or the School
Paraprofessional Teacher Training Program.
5)Provide instruction or pupil services in a special education
program.
6)Provide instruction in an English language learner program.
In addition, existing law exempts from the earnings limit
CalSTRS retirees who:
1)Abstain from performing CalSTRS-covered employment for a
period of at least 12 months after retiring. (Currently
scheduled to sunset June 30, 2010, but would be extended until
June 30, 2012 by this bill).
2)Are appointed as a trustee or administrator by a
superintendent of public instruction, or who fill an
administrative position left vacant due to emergency for up to
one-half of the full-time position. (Currently scheduled to
sunset June 30, 2010, but would be extended until June 30,
2012 by this bill.)
AS PASSED BY THE ASSEMBLY, this bill was substantially similar
to the version approved by the Senate.
FISCAL EFFECT : According to the Senate Appropriations
AB 506
Page 3
Committee, "Administrative expenses to CalSTRS will be minor and
absorbable. The actual loss of savings to the Teachers'
Retirement Fund (TRF) will be based on the number of teachers
currently working under the exemptions, and who would, without
the extension of the sunset, continue to work and earn more than
the limitations, which would result in a corresponding reduction
in their retirement allowance and a savings in that amount to
the TRF. Although no data exists as to how many members would
continue to work if their retirement allowance was reduced
dollar for dollar, it is anticipated to be very few."
COMMENTS : According to the sponsor, CalSTRS:
"In May 2007, the Internal Revenue Service (IRS) issued final
regulations providing guidance to help plans determine the
acceptability of a 'normal retirement age.' These regulations
also included a strengthened definition of retirement that has
contributed to a reassessment of CalSTRS' current
post-retirement employment provisions. Specifically, the
regulations set forth that 'retirement does not include a mere
reduction in the number of hours that an employee works.' The
regulations go on to state that 'accordingly, benefits may not
be distributed prior to normal retirement age solely due to a
reduction in the number of hours that an employee works.' As a
result, CalSTRS must establish additional controls to prevent
those members who currently work under the earnings limit from
receiving what may be considered an in-service distribution.
In addition, various factors drive the existing structure of
CalSTRS' post-retirement earnings limit. For example, the
Legislature has recognized that the need for high-quality,
experienced educators cannot be filled by the existing available
workforce and, therefore, has created program-specific and
curriculum-specific exemptions to CalSTRS' post-retirement
earnings limit. CalSTRS also recognizes that permitting members
to work after retirement may provide the member an important
source of income while simultaneously increasing the pool of
experienced, knowledgeable educators and administrators
available to California's schools."
According to the author, this bill additionally "?works to limit
the potential abuse that could occur if an individual creates an
emergency administrative vacancy by retiring and then returns to
work in the same position under the related exemption. AB 506
would state that the vacant administrative exemption shall not
AB 506
Page 4
apply to a retiree whose retirement is the basis for the vacant
administrator position."
Supporters state, "The shortage of teachers and support
personnel is amplified by the significant and anticipated
retirement in the next ten year of many career teachers. At the
other end of the age spectrum, hundreds of teachers have no more
than two or three years of experience in their current classes.
In order to comply with the staffing requirements of the
Williams settlement and other state and No Child Left Behind
mandates, school districts must take action to ensure that
schools are staffed with fully credentialed, experienced
teachers and school administrators, particularly in Deciles 1-3
schools."
AB 2390 (Karnette), Chapter 494, Statutes of 2008, extended the
sunset date of the existing post-retirement earnings limit
exemptions by one year to June 30, 2010, and expanded
eligibility for the exemptions, where applicable, by one year to
members who retired on or before January 1, 2007.
SB 901 (Padilla), Chapter 353, Statutes of 2007, extended the
sunset date of the post-retirement earnings limit exemptions by
18 months to June 30, 2009, and made conforming eligibility
changes.
AB 2554 (Pavley), Chapter 934, Statutes of 2004, extended the
sunset date on the existing K-12 service-specific exemption to
January 1, 2008, and extended the date a member must retire by
to qualify for this exemption to January 1, 2004; expanded the
K-12 exemption to include members providing instruction in
special education and English language learner programs; and
provided a two-year limit on the emergency administrator or
trustee exemption.
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0001941