BILL ANALYSIS
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: SB 280
Lou Correa, Chair Hearing date: April 27, 2009
SB 280 (Calderon) amended 4/22/09 FISCAL: YES
STRS: GOLDEN HANDSHAKE: MODIFICATION OF PENALTIES FOR
RETURNING TO WORK UNDER CERTAIN CIRCUMSTANCES
HISTORY :
Sponsor: author
Prior legislation: SB 1488 (Calderon) 2008
(Died Senate PE&R Committee)
SB 879 (Calderon) 2007
(Died Senate PE&R Committee)
SUMMARY :
Would provide that a California State Teachers Retirement
System (STRS) retiree who received a Golden Handshake and who
subsequently returned to the classroom (which is prohibited
for a specified period of time) shall not have their Golden
Handshake revoked, and shall not be required to make
specified restitution if they submit a notarized affidavit
stating:
a) that they were unaware of the prohibition on certain
STRS-covered employment, and
b) they were asked to return to work by their former
employer.
BACKGROUND :
1) What is the STRS Golden Handshake and who pays for it ?
The STRS Retirement Incentive (Golden Handshake) is a program
that school districts, community college districts, or county
offices of education may offer that adds 2 years of service
credit to eligible members' monthly benefit.
David Felderstein
Date: 4/22/09 Page 1
To qualify, STRS members must retire for service within an
employer-specified time period. The additional service credit
given in the incentive program does not count toward
eligibility for service retirement or other STRS benefit
enhancements such as one-year final compensation, career
factor and longevity bonus.
Employers pay STRS the administrative and actuarial cost of
the additional benefit, with the option of paying over time
(up to 8 years) .
David Felderstein
Date: 4/22/09 Page 2
2) Existing STRS law includes restrictions on Golden
Handshake participants
The committee is advised that the existing STRS Golden
Handshake program includes restrictions intended to ensure
that participating members actually stop working for their
employer.
STRS members lose the Golden Handshake benefit increase if
they do any of the following:
a) terminate their retirement benefit and reinstate to
active STRS-covered employment,
b) return, within 5 years of retirement, to STRS-covered
employment with the school district that granted the
benefit, or
c) file for unemployment within a year of retirement.
3) What does STRS do to educate members and school districts
about the restrictions on Golden Handshake participants ?
The committee is advised that:
a) STRS indicates that they educate districts and members
through several publications regarding the retirement
incentive program and restrictions on post-retirement
earnings,
b) employer directives address the Golden Handshake
program provisions, and employer information circulars
specific to the Golden Handshake program also outline
restrictions on returning to work, and
c) when the STRS member retires with a Golden Handshake,
they sign a form letter which includes information on the
post-retirement employment restriction.
ANALYSIS :
1) This bill would provide that a STRS retiree who received
David Felderstein
Date: 4/22/09 Page 3
a Golden Handshake and who subsequently returned to the
classroom:
a) shall not have their Golden Handshake revoked or be
required to make specified restitution if they submit a
notarized affidavit stating that they were unaware of the
prohibition on employment and they were asked to return to
work by their former employer, and
b) shall recover from STRS any restitution payments made
or monthly benefit reductions incurred in this regard.
David Felderstein
Date: 4/22/09 Page 4
2) This bill also provides that, after the effective date,
if STRS identifies a retiree who received a Golden Handshake
and who subsequently returned to the prohibited STRS-covered
employment:
a) STRS will contact the retiree by letter and request the
cessation of their teaching activities within 30 days, and
b) inform the affected retiree that they must, within 30
days after the receipt of such a letter from STRS, file a
notarized affidavit stating specified facts.
Further, this bill provides that, if such an affidavit is not
filed within 30 days, STRS is authorized to terminate the
additional monthly allowance provided to the affected retiree
by the Golden Handshake.
FISCAL IMPACT :
The committee is advised that this bill would have no fiscal
impact, because the school districts that provide Golden
Handshakes fully pay for the benefit as it is conferred on
those who retire within the specified time period.
Thus, under existing law , STRS is experiencing a small, but
unwarranted actuarial gain when the Golden Handshake benefits
are terminated and restitution is made upon the discovery
that an affected retiree has returned to STRS-covered
employment during the prohibited period.
COMMENTS :
1) What is the problem addressed by this bill ?
The committee is advised that STRS has identified less than
20 retirees who received a Golden Handshake when they retired
who subsequently returned to work during the period when this
reemployment was prohibited.
The author of this bill indicates that several constituents
have had their STRS monthly benefits reduced when this
David Felderstein
Date: 4/22/09 Page 5
problem was discovered by STRS. In addition, these STRS
retirees have been required to make specified restitution of,
in some cases, tens of thousands of dollars to STRS for what
has been considered overpayments.
These individuals indicate that, in most cases, their former
employer (such as their former principal) requested that they
return to work, often as a substitute teacher, during the
5-year period when they are prohibited to do so under
existing STRS law .
David Felderstein
Date: 4/22/09 Page 6
2) This bill is a work in progress
The committee is advised that this bill , in its current form,
represents an approach devised by the author and committee
staff to create a solution to a problem encountered by a
small number of STRS retirees that has significant financial
impact for those affected. These STRS retirees, who do not
receive Social Security benefits, not only have had their
monthly benefits reduced by the revocation of the Golden
Handshake enhancement, but have been required to make
restitution to STRS from their reduced monthly retirement
allowance.
This bill represents an attempt to find a solution to this
small but very significant problem. The assumptions behind
the drafting of this bill are that STRS retirees who received
a Golden Handshake and then returned to work during the
prohibited period:
a) did so without understanding that their actions would
result in a significant permanent reduction in their
monthly STRS allowance,
b) responded to a request to return from their former
employing school district or another school district, and
c) the STRS retiree is willing and able to obtain a
notarized affidavit stating the above facts and submits
this affidavit to STRS in the prescribed manner.
3) OPPOSITION :
None to date
David Felderstein
Date: 4/22/09 Page 7
#######
David Felderstein
Date: 4/22/09 Page 8