BILL ANALYSIS �
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 178
Gloria Negrete McLeod, Chair HEARING DATE: June 25, 2012
AB 178 (Gorell) as amended 6/19/12 FISCAL: YES
STATE TEACHERS' RETIREMENT SYSTEM: WORKING AFTER RETIREMENT
HISTORY :
Sponsor: Author
Other legislation: AB 506 (Furutani),
Chapter 306, Statutes of 2009
AB 2390 (Karnette),
Chapter 494, Statutes of 2008
ASSEMBLY VOTES :
Not relevant - new bill with, May 31, 2012, amendments
SUMMARY :
1)AB 178 changes and clarifies rules for retired workers in
the California State Teachers' Retirement System (CalSTRS).
Specifically, AB 178:
a) increases the earnings limitation under which retired
members of CalSTRS may work for CalSTRS employers.
b) exempts certain appointees to financially endangered
school districts from the earnings limitation.
c) clarifies that certain employees of third parties are
not considered to be retired workers with regard to the
earnings limitation.
d) is an URGENCY bill.
BACKGROUND AND ANALYSIS :
1)Existing law :
a) establishes CalSTRS, which provides retirement and
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death benefits for California's teachers and school
administrators.
b) limits the amount of compensation that can be earned
as a retired member in employment with a CalSTRS-covered
employer to approximately $31,020 annually. The
earnings limit may increase each year based on the
percentage increase to the average compensation of
active members of the system.
c) requires that once a retired worker has earned up to
the earnings limitation amount, the retired worker will
have his or her retirement reduced, dollar for dollar,
by the amount of earnings in excess of the earnings
limitation that the retired worker earned in that fiscal
year.
d) defines the types of employment performed by a
retired worker that will be subject to the earnings
limitation, including work for a CalSTRS-covered
employer as an employee, a contractor, or an employee of
a third party.
e) has exempted, for approximately the past 12 years,
certain retired educators and administrators from the
earnings limitation until June 30, 2012, allowing them
to earn a full salary and a full retirement allowance
without limitation.
f) provides that the Superintendent of Public
Instruction, Board of Governors of the Community
Colleges, or a county superintendent of schools may
appoint a trustee, administrator, or fiscal advisor to
address academic or financial weaknesses in a school
district, pursuant to specified requirements.
g) requires that a retiree must wait 12 months before he
or she may reinstate to active employment with a
CalSTRS-covered employer.
1)This bill :
a) changes the basis of the earnings limitation to
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one-half of the median final compensation earnable in
the system, as determined annually. (That amount is
currently slightly over $40,000, according to CalSTRS.)
b) specifies that a trustee, administrator, or fiscal
advisor appointed to address academic or financial
weaknesses in a school district, pursuant to specified
requirements, shall be exempt from the earnings
limitation under the following conditions:
i. The appointing authority advertised the position
and attempted to fill the position with a non-retired
individual and was unable to do so;
ii. The appointing authority next tried to fill the
position with a retired worker who would reinstate
from retirement at the same salary as offered
originally and was unable to do so;
iii. The appointing authority, unable to fill the
position with a non-retired or reinstated worker, then
filled the job with the retired worker at a salary no
greater than the salary offered to current active
members for the appointed position;
iv. The appointment will end no later than June 30,
2013; and
v. The Superintendent of Public Instruction, Board
of Governors of the Community Colleges, or county
superintendent of schools certifies, prior to the
appointment, to CalSTRS that it is in compliance with
these requirements.
a) clarifies that a retired worker is not considered to
be an employee of a third party, for purposes of the
earnings limitation, if the following is true:
i. The worker does not fill a position that would
normally be filled by a school or district employee;
ii. The worker performs work of a limited duration;
and
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iii. The third-party employer does not participate in
a public retirement system.
a) allows a retiree to reinstate from retirement after
being retired for less than a full year, but specifies
that he or she may not select a different option
beneficiary upon re-retiring.
b) is an Urgency statute.
COMMENTS :
1)Compliance with the Conference Committee on Public Employee
Pensions
The Conference Committee on Public Employee Pensions,
consistent with the Governor's recommendations for pension
reform in his 12-point plan, has worked with the author to
ensure that provisions of the bill are consistent with
recommendations to limit post-retirement employment in public
jobs and to not conflict with the Conference Committee
report. This bill forms a bridge until the Conference Report
could become effective on January 1, 2013.
2)Expiration of Earnings Limitation Exemptions
For approximately 12 years, a number of exemptions from the
earnings limitation have allowed many retirees to work
fulltime without a reduction in benefits. AB 178, in
eliminating the exemptions, does not prohibit a retiree from
working after retirement. Instead, enforcement of the
earnings limitation removes one incentive for active workers
to retire early. It also brings the retired worker program
back to a part-time program, as it was originally intended to
be. This bill increases the earnings limitation to be a
closer approximation of a half-time salary, consistent with
the retired worker program in CalPERS, which limits the
amount of time a retiree can work to slightly less than 6
months.
3)Arguments in Support
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As stated by the author:
"Due to the urgency of the upcoming sunset date, AB 178 will
extend the sunset for one year with the expectation that the
Pension Conference Committee will address this issue in their
report and will go into effect next year. To be as
consistent as possible with the pending conference committee
report and the desires of the Governor, AB 178 will narrow
the scope of this exemption so that only school districts
that are either financially and/or academically distressed
will qualify."
According to the Riverside County Superintendents'
Association:
"Under specific and narrow conditions, AB 178 would extend
for an additional year the existing STRS post-retirement
earnings limit exemptions. The need for these exemptions has
increased due to the state's fiscal challenges and the fact
that many specialized providers are leaving the field.
Allowing retired employees to work for school districts
experiencing fiscal or academic distress without financial
penalty offers a larger pool of qualified educators who can
temporarily step in to fill critical needs while the school
searches for a long-time hire."
4)SUPPORT :
Association of California School Administrators (ACSA)
California Association of School Business Officials (CASBO)
California Charter Schools Association Advocates
California County Superintendents Educational Services
Association (CCSESA)
California Teachers Association (CTA)
Los Angeles County Superintendents of Schools
Riverside County School Superintendents' Association
(RCSSA)
Support for March 22, 2012 amended version:
Accrediting Commission for Community and Junior Colleges
(ACCJC)
California Speech-Language Hearing Association (CSHA)
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City College of San Francisco
Humboldt County Office of Education
Inyo County Office of Education
Lake County Office of Education
Orange County Department of Education
San Mateo County Board of Education
Small School District Association (SSDA)
Western Association of Schools and Colleges (WASC)
5)OPPOSITION :
None to date
#####
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