BILL ANALYSIS
Appropriations Committee Fiscal Summary
2554 (Pavley)
Hearing Date: 8/4/04 Amended: 7/27/04
Consultant: Maureen Ortiz Policy Vote: P. E. & R.
5-0
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BILL SUMMARY: AB 2554 modifies the existing CalSTRS
exemptions to the post-retirement earnings limitation for
certain teaching positions, and extends the sunset of the
program from July 1, 2005 to January 1, 2008.
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Fiscal Impact (in thousands)
Major Provisions 2004-05 2005-06
2006-07 Fund
Earnings limit extension -----approximately $100
annually-------- TRF
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STAFF COMMENTS: There were approximately 8,534 retired
members who worked under an exemption in the 2002-03 school
year. During that same year, 239 members who were working
without an exemption exceeded the earnings limit. When a
member exceeds the earnings limit, there is a corresponding
reduction in CalSTRS benefits which results in an
unanticipated gain to the system. AB 2554 will result in
loss of that gain of about $100,000 annually.
Existing law provides that members of the CalSTRS Defined
Benefit Program who retire and then accept reemployment are
subject to a postretirement earnings limitation, unless
otherwise exempted. For FY 2003/04, retired members can
earn up to $25,740 before realizing any reduction in their
retirement allowance. If their postretirement earnings
exceed that limit, their retirement benefit is reduced
dollar for dollar equal to the amount of earnings that
exceed the limit.
Members are exempt from the earning limit if:
1)the member returns to postretirement CalSTRS covered
employment after a period of at least 12 months,
2)he or she retired from service before January 1, 2000 and
returns to teach in grades K-12
3)the member retired before July 1, 2000 and returns to
provide direct remedial education in grades 2-12, or
4) returns to fill an administrative position for up to
one-half of the full-time equivalent that is vacant due to
an unanticipated situation.
AB 2554 extends the sunset date on the existing exemption
from the earnings limitation for retired members who return
to provide direct classroom instruction to pupils enrolled
in grades K-12. The bill also expands the list of the
types of services subject to the earnings limit exemption
to include instruction and services provided to pupils in
special education programs and English language learner
programs. It also extends the date a member must retire by
in order to qualify for an existing exemption from January
1, 2000 to January 1, 2004, and provides a two-year limit
on the earnings limit exemption for post-retirement
employment in a vacant administrative position.