BILL ANALYSIS �
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THIRD READING
Bill No: AB 178
Author: Gorell (R) and Ma (D)
Amended: 6/19/12 in Senate
Vote: 27 - Urgency
SENATE PUBLIC EMPLOYMENT & RETIRE. COMM : 4-0, 06/25/12
AYES: Negrete McLeod, Walters, Padilla, Vargas
NO VOTE RECORDED: Gaines
ASSEMBLY FLOOR : Not relevant
SUBJECT : California State Teachers Retirement System
SOURCE : Author
DIGEST : This bill extends a post retirement earnings
limitation exemption for retired members of California
State Teachers Retirement System (CalSTRS) who return to
work under a limited-term appointment, changes how the
earnings limit is calculated, clarifies that the limit does
not apply to third-party employees, and allows retired
members to re-retire within a year of reinstating, as
specified.
ANALYSIS : Existing law establishes a postretirement
earnings limitation which is adjusted annually by the
Teachers' Retirement Board based on the percentage change
in the average compensation earnable of active members.
The current postretirement earnings limit is $31,020. The
limit is the amount under which a retired member of CalSTRS
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may return to work and earn in a fiscal year without having
to reinstate or without losing any of his or her retirement
allowance. A member who returns to work while retired
does not reinstate to active service, or pay additional
retirement contributions (nor does the employer), and that
member does not receive an increase in benefits due to the
increase in service. If a member exceeds the earning
limitation, his or her retirement allowance is reduced by
the amount of the excess compensation.
Current law also provides numerous exemptions to the
post-retirement earnings limit that were established to
assist the education community in meeting certain classroom
and teaching program requirements. These exemptions allow
a retired member to return to work without the salary
constraint of the post-retirement earnings limit. For
example, any member who has a 12-month break in all
creditable compensation is exempt from the limit.
Additionally, there are several exemptions to address
specific needs within the California public education
system as follows: a) to provide direct K-12 classroom
instruction, b) to support and assess new teachers in
certain programs, c) to support student teachers, the
pre-Internship Teaching Program, and alternative,
certification program, or the school paraprofessional
Teacher Training Program, and d) to provide instruction
and services to special education students, in English
language learner programs, or in direct remedial education
for grades 2-12.
All of these exemptions will expire on June 30, 2012.
Also set to expire on June 30, 2012 is an exemption for
limited-term appointments by the State Superintendent of
Public Instruction or a county superintendent of schools to
assist schools that are either in specific financial or
academic distress.
Retired members are currently allowed to terminate their
retirement benefit and reinstate to active membership at
any time after they retire, however, if they do so, those
members must wait one year to re-retire.
This bill contains the following provisions:
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Changes the calculation method of the post retirement
earnings limitation from what currently totals $31,020
annually, to one-half of the median final compensation of
all members who retired for service during the previous
fiscal year which would result in an increase in the
limit to just over $40,000.
Eliminates the provision in current law that requires a
member who reinstates to wait one year before
re-retiring, but requires those members to keep the same
option and beneficiary or beneficiaries that were in
effect before reinstatement, or to retain their
unmodified status.
Excludes an employee of a third party that does not
participate in a California public pension system from
the postretirement employment requirements.
Extends an exemption from the post retirement earnings
limitation for any member who has retired for service and
has returned to work as a trustee, administrator, or
fiscal adviser approved by the Superintendent of Public
Instruction, or a county superintendent of schools to
address academic or financial weaknesses in a school
district. The bill also includes members who are
appointed by the Board of Governors of the California
Community Colleges.
In order to use the limited-term appointment exemption, the
employer must submit documentation that includes
certification of all of the following: a) that the employer
advertised the position to active or inactive members and
was not able to find a qualified person, b) that the
employer made a good faith effort to hire a retired member
who reinstated, c) that the salary being paid does not
exceed what was advertised or is currently paid for that
position, and d) that the appointment terminates no later
than June 30, 2013.
Related Legislation
AB 758 (Wieckowski) would have extended the sunset dates
for the postretirement earnings limit exemptions to June
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30, 2014. That bill was held in the Assembly Public
Employees, Retirement and Social Security Committee in
2011.
According to the Senate Appropriations Committee, it is
anticipated that the Pension Reform Conference Committee
Report will include language similar to that in this bill.
However, since any pension reform provisions will not
become effective until January 1, 2013, AB 178 is intended
to provide a bridge in the post retirement earnings
limitation between the date of its enactment and January 1,
2013.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee analysis
there would be administrative expenses to CalSTRS are
unknown at this time, but will involve one-time costs for
information technology system changes, as well as updating
staff training and communications materials. Additional
ongoing costs will result from processing potential
increases in reinstatement and re-retirement applications,
and for the determination of third party activities.
Continuing the limited-term appointment exemption will have
no actuarial impact on the system because the valuation of
the Defined Benefit Program currently does not assume that
any member will work in excess of the limit.
SUPPORT : (Verified 6/25/12) (per Senate Public Employment
and Retirement Committee analysis)
Association of California School Administrators
California Association of School Business Officials
California Charter Schools Association Advocates
California County Superintendents Educational Services
Association
California Teachers Association
Los Angeles County Superintendents of Schools
Riverside County School Superintendents' Association
Support for March 22, 2012 amended version:
Accrediting Commission for Community and Junior College
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California Speech-Language Hearing Association
City College of San Francisco
Humboldt County Office of Education
Inyo County Office of Education
Orange County Department of Education
San Mateo County Board of Education
Small School District Association
Western Association of Schools and Colleges
OPPOSITION : (Verified 6/25/12) (per Senate Public
Employment and Retirement Committee analysis)
Lake County Office of Education, Oppose Unless Amended
ARGUMENTS IN SUPPORT : 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."
ASSEMBLY FLOOR : 75-0, 6/1/11
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AYES: Achadjian, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hern�ndez, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
Mendoza, Miller, Morrell, Nestande, Nielsen, Norby,
Olsen, Pan, Perea, Portantino, Silva, Skinner, Smyth,
Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski,
Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Alejo, Gorell, Mitchell, Monning, V.
Manuel P�rez
DLW:n 6/28/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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