BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
280 (Calderon)
Hearing Date: 5/28/2009 Amended: 5/07/2009
Consultant: Maureen Ortiz Policy Vote: PE&R 5-2
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BILL SUMMARY: SB 280 authorizes teachers who have returned to
service during the 5 year prohibited period after receiving a
Defined Benefit Program Retirement Incentive (golden handshake),
to have previously forfeited benefits reinstated, upon
terminating their current employment.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Reinstating benefit --one time payment of
$107------ Special*
--unknown,
significant ongoing costs----- Special*
Employer costs
-----------minor--------- General
*Teachers' Retirement Fund
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STAFF COMMENTS: SUSPENSE FILE.
There will be a one time cost of $106,761 to pay benefits
retroactive to the time the member initially retired with the
retirement enhancement, and additional ongoing costs for each
member to retain that benefit (which would have otherwise been
forfeited without this bill) for the duration of his or her
lifetime. However, it should be noted that the funds would come
out of the Teachers' Retirement Fund which has already received
the full actuarial amount of the cost of the benefit from each
school employer when the member was initially provided with the
golden handshake. Therefore, there will be no new costs to
employers as a result of reinstating the forfeited benefit.
However, school employers may realize some costs if, after
January 1, 2010, members violate the provisions of the
retirement incentive, and the employer is required to pay
CalSTRS the costs of forfeited benefits, plus administrative
expenses. Those costs are unknown and will depend on the extent
to which the provisions of the retirement incentive program are
violated in the future.
SB 280 will allow a member who received benefits from the
retirement incentive program between January 1, 2004 and
December 31, 2009, and then returned to work during the
prohibited time period to have the benefit fully reinstated, and
shall have all money paid to the system as a result of losing
the service credit reimbursed, providing the following occur: 1)
the member has ceased employment with the employer that provided
the service credit within 30 days of becoming notified by
CalSTRS that the employment is in violation of receiving the
benefit, and 2) the member agrees in writing
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SB 280 (Calderon)
that he or she will not return to the employer that granted the
service credit until five years have elapsed since receiving the
credit.
Therefore, if the member does all of the above, he or she will
not forfeit any benefits arising from the additional service
credit, and CalSTRS will not be allowed to recover any payments
made in this connection. Additionally, SB 280 provides that any
member who has already been forced to forfeit any additional
benefit due to returning to service within the prohibited
timeframe as specified will be able to have his or her benefit
retroactively restored.
SB 280 further provides that beginning January 1, 2010, any
employer that grants a golden handshake shall provide to CalSTRS
a written statement indicating that the retiring member has read
and understands the terms of the retirement incentive program
and will not return to work with the same employer until five
years have elapsed. If the member subsequently returns to work
with the same employer, that member shall permanently forfeit
the service credit and benefit resulting from the retirement
enhancement, but will be allowed to keep any benefit already
received.
The bill further provides that on or after January 1, 2010, any
employer that grants a retirement incentive shall provide to
CalSTRS a written statement that the employer has read and
understands the terms of the incentive program. If the employer
does rehire a member during the prohibited period, that employer
shall reimburse CalSTRS all the costs associated with that
member's golden handshake, plus any associated administrative
expenses. Essentially, SB 280 will place the burden and
responsibility on the school employers when teachers return to
work in violation of the provisions of receiving a golden
handshake.
Current law authorizes school districts, community college
districts, or county offices of education to offer a retirement
incentive equal to two additional years of service credit to
eligible members providing that the retirement will result in a
net savings to the employer. The employer is required to
transfer to CalSTRS the actuarial equivalent of the benefit
enhancement and administrative costs, and is allowed to pay the
sum over an eight year period. The additional service credit
does not count toward eligibility for other STRS benefit
enhancements such as one-year final compensation, career factor
and longevity bonus. Known as the Golden Handshake Program, it
currently provides that the member will lose the benefit
increase if the members do any of the following:
1)Terminate their retirement benefit and reinstate to active
STRS-covered employment,
2)Within 5 years, return to STRS-covered employment with the
school district that granted the benefit,
3)Return within 1 year of retirement, to STRS-covered employed
with any other school district, or
4)File for unemployment with a year of retirement.
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SB 280 (Calderon)
Since the inception of the retirement incentive program,
approximately 1,900 members of CalSTRS have retired with the
benefit enhancement. However, it has become known that 19 of
those employees returned to work with the same district during
the five year prohibited period, and have subsequently had to
forfeit their Golden Handshake benefit. SB 280 will allow those
teachers to keep the benefit enhancement.
According to CalSTRS, districts and members are educated through
several publications regarding the retirement incentive program
and restrictions on post-retirement earnings, including Golden
Handshake programs, and further, members who retire with a
Golden Handshake are required to sign a form which includes
information on the post-retirement employment restrictions.