BILL ANALYSIS
-----------------------------------------------------------
|SENATE PUBLIC EMPLOYMENT & RETIREMENT | BILL NO: SB 39 |
-----------------------------------------------------------
------------------------------------------------------------
|Deborah V. Ortiz, | Hearing date: April 12, 1999|
|Chair | |
------------------------------------------------------------
------------------------------------------------------------
|SB 39 (Baca) as amended3/9/99 | FISCAL: Yes|
------------------------------------------------------------
--------------------------------------------------------------
|David Felderstein | SB 39 |
|---------------------+----------------------------------------|
|Date: April 7, 1999 | Page 1|
| | |
--------------------------------------------------------------
STRS: "CAREER BONUS": INCREASE
HISTORY :
Sponsor: California Teacher's Association (CTA)
Prior legislation: AB 1102 (Knox)
Ch 1006/Stats 1998
SUMMARY :
Would increase the existing STRS "career bonus," providing
it to STRS members with 29 or more years of credited
service who retire after January 1, 2000, permitting STRS
members to retire with the maximum "age factor" of 2.4% at
age 60, instead of the current age 611/2.
BACKGROUND :
1) Chapter 1006 of 1998 provided an increase in the STRS
"age factor:"
- a "career bonus" of .2% per year of service for members
with 30 or more years of credited service who retire on
or after January 1, 1999.
Thus, if a teacher retired at age 60 with 30 years of
service, the "age factor" used to calculated his or her
retirement would be 2.2% per year of service (2.0% STRS
factor @ 60 + .2% "career bonus" = 2.2%). In other words,
the "career bonus," in this instance would enhance the STRS
benefit by 10% (2.0% x 30 = 60% without the "career bonus"
vs. 2.2% x 30 = 66% with the "career bonus").
ANALYSIS :
1) EXISTING STRS LAW: "AGE FACTOR"
--------------------------------------------------------------
|David Felderstein | SB 39 |
|---------------------+----------------------------------------|
|Date: April 7, 1999 | Page 2|
| | |
--------------------------------------------------------------
Existing STRS law provides that the "normal" retirement is
age 60.
The retirement allowance is based on the following formula:
years of credited service X age at retirement X final
compensation
As illustrated above, a STRS member retiring at age 60
receives an allowance equal to 2% of final compensation for
each year of credited service, which is reduced if the
member retires before age 60.
If a STRS member retired before January 1, 1999, the "age
factor" of 2% @ age 60 was the maximum STRS benefit;
retirement after age 60 did not increase the "age factor."
However, for a STRS member retiring after January 1, 1999,
Chapter 1102 of 1998 increases the "age factor" for
retirement after age 60, up to a maximum of 2.4% @ age 63 .
2) EXISTING STRS LAW: "CAREER BONUS"
Existing STRS law also provides an additional allowance of
.2%, (but still maintaining the existing maximum "age
factor" and "career bonus" limit of 2.4%) to members who
have 30 years or more of credited STRS service, and who
retire after January 1, 1999. The "career bonus" allows
teachers with 30 years of service to reach the maximum "age
factor" of 2.4% @ age 61 1/2 , instead of age 63.
3) THIS BILL :
--------------------------------------------------------------
|David Felderstein | SB 39 |
|---------------------+----------------------------------------|
|Date: April 7, 1999 | Page 3|
| | |
--------------------------------------------------------------
a) permits the earning of the maximum "age factor" of
2.4% @ age 60 , by expanding the "career bonus" programs
for STRS members retiring after January 1, 2000, applying
it to members with 31 years of credited STRS service, and
b) increases the bonus after 30 and 31 years of credited
service, per the following chart:
-----------------------------------------------------------------
| | | |
| Years of service | Current | SB 39 |
|credit |percentage |percentage |
|---------------------+---------------------+---------------------|
| 29 | 0 | .1% |
| | | |
| | | |
|---------------------+---------------------+---------------------|
| 30 | .2% | .3% |
|---------------------+---------------------+---------------------|
| 31 | .2% | .4% |
| | | |
-----------------------------------------------------------------
However, this bill maintains the existing limit on the sum
of the "age factor" and "career bonus" to a total of 2.4%
per year of STRS service.
FISCAL IMPACT :
The estimated cost of this bill would be .407% of statewide
teacher payroll for the first 30 years, and .177%
thereafter.
Using an estimated 1999 payroll of $17.021, the initial
--------------------------------------------------------------
|David Felderstein | SB 39 |
|---------------------+----------------------------------------|
|Date: April 7, 1999 | Page 4|
| | |
--------------------------------------------------------------
cost would be $69.3 million, increasing each of the next 30
years based on payroll.
STRS anticipates that it could absorb any administrative
cost.
COMMENTS :
1) STRS indicates that this bill needs technical
amendments to assure that the STRS benefit factor is
limited to 2.4% per year of service under all
circumstances.
2) The sponsor's goal is to create a retirement system
that calculates benefits based more on the length of the
career, rather than the age at retirement. Expanding the
"career bonus" with this bill would be a step toward that
goal by increasing the impact of career length on the
member's final benefit. It should also be noted that the
change would reduce the age at which a member could reach
the maximum allowance from the current 61 to age 60, if
the member had at least 31 years of service.
3) SUPPORT :
United Teachers of Los Angeles (UTLA)
Assn. of California School Administrators
Small School Districts Assn.
California Federation of Teachers (CFT)
4) OPPOSITION :
None to date
--------------------------------------------------------------
|David Felderstein | SB 39 |
|---------------------+----------------------------------------|
|Date: April 7, 1999 | Page 5|
| | |
--------------------------------------------------------------
# # # # #
--------------------------------------------------------------
|David Felderstein | SB 39 |
|---------------------+----------------------------------------|
|Date: April 7, 1999 | Page 6|
| | |
--------------------------------------------------------------