Retirement PlansIssues April 25 2014 Agenda Which Retirement

Retirement Plans/Issues April 25, 2014

Agenda Ø Which Retirement System Are You? Ø Defined Benefit vs Defined Contribution Ø STRS • Contributions • Qualifications üElection Process • Reporting to STRS • Compensation üCreditable/Non Creditable

Agenda • Penalties • Service Credit üFurlough Implications • Retirees Ø PERS • Contribution • Qualifications üExclusions

Agenda • Compensation üSpecial Compensation üNon-Reportable • Overtime • Service Credit üFurlough Implications • Election Process • Retirees üOASDI/Medicare Qualification Ø Questions

Agenda Ø Next “Concept” Classes • Beginning Fall of 2014 üSalary Computation üPayroll Deductions/Withholdings üPaying Employees üEmployee Leaves/Benefits üRetirement Systems • Open Labs after Each Concept Class

Which Retirement System? ØBased on Position not the Person • STRS: üRequires Credential, Permit or Certificate § Teachers, Administrators, Nurses, Psychologist • PERS: üNon-Credential, Meets PERS Qualification § Bus Drivers, Office Staff, Instructional Aides § Director of Human Resources, Chief Financial Officer üSee Circular in Concepts Docs for Examples

Which Retirement System? • Alternate Retirement/Social Security üDoes Not Meet STRS or PERS Requirements § Part Time Employees - Less Than 20 Hours • Dual Retirement üMember in One System, Non-member in the Other, or Member in both üWorking in both Classified and Certificate must have 2 Escape retirement tabs üSpecial Requirements

Defined Benefit vs Defined Contribution ØDefined Benefits Plans: • STRS/PERS • Promised Benefit Based on the Following Factors: – Age – Years of Service – Highest Final Compensation Pay

Defined Benefit vs Defined Contribution ØDefined Contribution Plans: • 457 B/403 B – Employee Contributions and Interest – Employer Can Participate

STRS - Contributions ØCalifornia State Teachers Retirement System (STRS) ØCommon name Cal. STRS or STRS • Employee Contributions Currently 8% üRequires Legislation to Change • Employer Contribution Currently 8. 25% • Reduced Workload Currently 10. 276% for Employer

STRS - Qualifications (See Retirement Qualification Rules) ØFull Time • Immediately with Full Time 100% Contract ØPart-time • 50% - 99% • Month following or • STRS Permissive Election (Form ES 350) from day one - Election can be made at anytime

STRS Retirement Qualification Rules

STRS - Qualifications ØSubstitute - Long Term/Daily/Hourly • 100 Days/600 Hours • With a Single District • 1 st of the Following Month • During Same FY • Escape Report Retire 01

STRS - Qualifications ØLess Than 50% of Contract/Daily/Hourly • After 60 Hours/10 Days • 1 st of Following Month, unless the following pay period is in the new FY • With a Single District • Escape Report Retire 02 ØFunds on Deposit From Previous STRS Employment • Compulsory Membership Regardless of the Type of Employment Less Than Half Time

STRS - Election ØCal. STRS Audits Election Procedures ØPermissive Election • Form ES 350 for Election • Form is Irrevocable § All Future Certificated Work is STRS • No Earlier than 1 st Day of Pay Period in which Form is Signed • Forward Form to County Office § New – Need Employee 99 (Used to be NOPA)

STRS - Election (See Join Cal. STRS? Join Cal. PERS? ) • Cal. STRS Member in PERS Qualifying Classified Position • 60 Days to Elect to Stay in STRS • New ES-372 Form for Election ØCal. PERS Member in STRS Qualifying Certificated Position • 60 Days to Elect to Stay in PERS • New ES-372 Form for Election

STRS - Election Ø Required to Ensure Employees have been Given the Election Form Ø Recommended that Districts Retain Written Acknowledgement (ES-373): • Employees Advised Concerning Form • Employees Given Form-372 Ø Forward Form-372 to County Office for Review (See Various Certificated Retirement Scenarios)

STRS - Reporting ØIssues: • Assignments Coding – Are They Reporting Correctly » Daily or Hourly • Special Compensation – Pension Spiking » Enhancing Member’s Benefits – Watch Contract Language – Requires Backup to County Offices

STRS - Reporting ØFor “New” Members ‾ Only Creditable Special Compensation is Longevity (See “T -chart”) ‾ Reported with Code “ 72” ØSEW • Secure Employer Web Site (SEW) • To Check Retirement Status: – https: //sew. calstrs. com/Cal. STRSSew. Web. UI/ Registration/Pages/Register. aspx

STRS – Compensation (See Cal. STRS Directive 2014 -01) Ø Creditable: Ed Code 22119. 5, 22119. 2 and 22119. 3 (PEPRA has been added) • Contributions on Service in Excess of One Year: ü ü Creditable to the Defined Benefit Supplemental (DBS) Program Not Used in the Calculation for Final Compensation Purposes

Cal. STRS Directive 2014 -01 p. 1 (See Handout)

STRS – Compensation (See Employers’ Creditable Compensation Guide for existing members) ØSTRS Creditable Compensation Guide • Lists What Types of Compensation üTo Creditable Service üTo Defined Benefit Program (DBS)

STRS – Compensation ØNon Creditable: • Position is Not Eligible for State Apportionment • Position Does Not Require Credential, Certificate or Permit • Position Does Not Meet Community College Standards üWalk On Coaches are an example § Walk On vs Contract (does not have a STRS position with the Disrtict)

STRS – Compensation Ø Compensation Cap for Cal. STRS 2% at 62 Employee Portion Only • Cap on Compensation is Equal to 120% of the 2013 Social Security Wage Base • Will be Adjusted Annually Based on Changes to the Consumer Price Index for All Urban Consumers • Beginning July 1, 2013, the Compensation Cap for Cal. STRS 2% at 62 is $136, 440

STRS – Service Credit STRS Service Credit Calculation: Pay Code Service Credit Formula 0 1 2 3 Examples: Earnings divided by Pay Rate divided by 12 Earnings divided by Pay Rate divided by 11 Earnings divided by Pay Rate divided by 10 Pay Rate Cd Earnings Service Credit 32, 445. 84 0 99. 68 0. 0030 *2, 187. 50 3 1, 093. 75 0. 0500 *1, 093. 75/2, 187. 50 =. 5 then divided by 10 =. 0500

STRS – Service Credit ØCertificated Mandatory Furlough • Preserve Pay Rate üReduces Service Credit • Preserve Service Credit üChange Calendars üChange Salary Schedules üDo Not Choose as Final Compensation Year • For K-12, Reduction Cannot Result in Less than: ü 175 Days for Teachers ü 190 Days for Program Managers, Principals, Administrators

STRS – Retirees ØCal. STRS Retirees can Work: • Earnings Limitations • FY 13/14 = $39, 903 • FY 14/15 = $40, 173 • After January 1, 2013, must wait 180 days before returning to work with a Cal. STRS employer üWill reduce their retirement benefit dollar for dollar by an amount equal to their earnings • Can Work as Classified Instructional Aide Only (Ed Code 45134) üWatch Payroll Reporting

STRS – Retirees ØUnused and Excess Sick Leave At Retirement • Basic Sick Leave üOne Day’s Paid Leave of Absence per Pay Period • Excess Sick Leave üNumber of Days in Excess of Basic Sick Leave üEmployer Pays Present Value for Excess Sick Leave • Service Credit: ü(Basic Days + Excess Days) /Contract Base Days • Employers Required to Report Basic & Excess Separately at Retirement (See Express Benefit Form SR 0554 E)

PERS - Contributions ØCalifornia Public Employees’ Retirement System (Cal. PERS) • Classic Member Currently 7% • New Members Currently 6% • Employers Contribution Currently 11. 442% üChanges every fiscal year base on Actuary Assessment üPERS rate is an employer pool rate

PERS – Qualifications ØMembership Qualifications: • Permanent Full-Time (40 hours per week) • Part-Time Averaging at Least 20 Hrs/Wk üfor at least one year • Full-Time Temp Assignment in Excess of 6 Months • Currently a Member

PERS – Qualifications ØMember Reciprocal Self-Certification Form (PERS-CASD-801) • Form is for employers to identify if new employees are classic members due to reciprocity • Employers need to properly identify status of members at the time of hire (See Circular Letter 200 -063 -12 in Concepts Docs)

PERS - Qualifications ØTemporary, Seasonal, On Call, Emergency, Substitute or Irregular Basis: • Qualifies When Worked 1000 Hrs or 125 Days in Fiscal Year • OT Hrs. ARE Included for Qualifying Purposes • Escape Report Retire 09

PERS - Exclusions Ø Membership Exclusions: (Notice of Exclusion - AESD-139) • Independent Contractors • Elected or Appointed Officers (effect July 1, 1994) • Students employed by a school district they attend in a position established for students only

PERS Retirement Verification

PERS–Enrollment/Change Form ØNew Procedure • Log into PERS • Verify the employees PERS status • Verify employees enrollment level • Classic or New • Print a snap shot of PERS record in PERS • Log into Escape Employee Management • Go to Retirement tab (based on PERS info) • Setup employee’s retirement status • Setup employee’s retirement level

PERS–Enrollment/Change Form Ø New Procedure • Forward to Maria in Business Services • Required Prior to First Payroll • PERS snap shot of employees PERS status/level • Form example in Concepts – Retirement documentation • Member Self - Certification Form • Form example in Concepts - Retirement documentation • PERS Enrollment/Change Form • Form example in Concepts - Retirement documentation

PERS - Compensation ØCompensation: • Pay Rate – Member’s Normal Rate of Pay or Base Pay • Report as Earned According to Job Classification • Must be Reflected in Pay Schedule or Bargaining Unit Agreement • PERS Members Can Be Paid on Monthly Basis, Hourly Basis or Daily Basis

PERS - Compensation Ø Cal. PERS Compensation Cap for New Members (Employee Portion Only) • Members Participating in Social Security • Compensation Capped at the Social Security Wage Base • For 2014 the Compensation Cap is $260, 000 • Members Not Participating in Social Security • Compensation Capped at 120% of the Social Security Wage Base • For 2014 the Compensation Cap is $138, 077

PERS - Compensation Ø Cal. PERS Compensation Cap for Classic Members (Employee Portion Only) • For 2014 the Compensation Cap is $126, 000 • Cal. PERS Circular Letter 200 -007 -14 • Copy provided in Concepts – Retirement Documentation

PERS - Reporting ØSpecial Comp/Additional Pay • Limited to Labor Policy • Reported in Addition to and Separately from Pay Rate

PERS - Reporting Special Compensation ØCommonly used Special Comp Pay • Educational Pay § Includes educational incentive pay • Incentive Pay § Includes bonus pay and longevity • Premium/Temporary Upgrade Pay § Includes working out of class • Holiday Pay § When employees are required to work during scheduled holidays and paid over and above normal salary • Additional Examples Available in Concepts Docs

PERS - Reporting Special Compensation • Uniform Allowances (Classic Members Only) üCompensation paid or reimbursed for monetary value of purchasing, renting and maintaining required clothing üClothing must be a substitute for personal attire clothing üExcludes items considered safety equipment: • Protective vests, pistols, bullets and steel-toed boots

PERS - Non-Reportable Compensation ØNon-Reportable Compensation: • Automobile/Mileage Allowance • OT Over 40 hrs in a Week • Cafeteria Plans • Cash in Lieu of Health Benefits • Health Benefits/Fringe Benefits • API Awards • Lump Sum Vacation to Clear Books • Severance Pay

PERS – Reporting Overtime Ø Circular Letter #200 -211 -05 • • Proper Reporting of OT Pay Rates Employees paid “overtime” rates for hours between “regular work week” and 40 hours/week – – Report “straight-time” rate Report “straight-time” earnings » May require two different addons

PERS – Service Credit ØService Credit: • Member in full-time employment will be credited one year service credit • 10 months of work • 215 days of work • 1, 720 hrs. of work in a fiscal year

PERS - Service Credit ØHow Service Credit is Earned: • Fiscal Year Basis: July 1 – June 30 • Earned by tenths: 10 Months = 1 Year • Pro-rated for part-time employees based on 1, 720 hrs = 1 Year • Service Credit = earnings divided by full time pay rate for each service period

PERS - Service Credit PERS SERVICE CREDIT Earnings Divided by Pay Rate Equals Service Credit: Example: 1. Member Earnings = $2, 400 = 1. 000 month of Monthly Pay Rate $2, 400 service credit 2. Member Earnings = $1, 200 =. 500 month of Monthly Pay Rate $2, 400 = service credit 3. Member Earnings = $1, 200 = 80 hours of Hourly Pay Rate $15. 00 service credit 4. Member Earnings = $1, 200 = 20 days of Daily Pay Rate $60. 00 service credit

PERS - Furlough Days ØFurlough Days: • Salary Roll Back or Docking Days • Should never change Pay Rate • Impact to Retirement

PERS - Election ØQualifying Elections: • Cal-PERS member hired for qualifying certificated STRS position • 60 days to elect to stay in Cal-PERS üMust meet other requirements • Use Form ES-372 ü Not required to return form unless electing into ü Should retain written acknowledgement of form (ES-373) • Forward Form to County Office for Review

PERS-Retiree ØCal-PERS Retiree (Circular Letter #200 -002 -14) • Make sure the retiring employee is aware of rules before they retire • After January 1, 2013, Retiree Must Wait 6 Months (180 days) before They Can Return to Work with a Cal. PERS Employer • Can Be Hired for Temp Assign during Emergency or Has Special Skills – Critically needed position • No Exception if a Golden Handshake/employer incentive has been given

PERS-Retiree Ø Cal-PERS Retiree • There Cannot be an Agreement to Return to Work between the Member and the Cal. PERS Employer Prior to Retirement Can Work Up to 960 Hours in a Fiscal Year. Compensation must be comparable to other employees doing similar duties Must be enrolled as retired annuitant • • Pay rate with hours worked reported

PERS-Retiree/Unemployment ØRetiree/Unemployment: • Cannot Hire Retired Annuitant that Received Unemployment Insurance Payments within the Previous 12 Months as Retired Annuitant • Annuitant Must Sign Affidavit as Such

PERS-Retiree/Disability ØDisability Retiree: • Temporary Position • 960 hours • No approval required • Permanent Position: • Employment must be in a different position • Cal. PERS approval required before accepting employment • Earnings limitation applies

Retiree OASDI/Medicare ØRetiree OASDI/Medicare Issues: • STRS Retiree-rehired in a PERS position üYes Medicare and Yes OASDI • PERS Retiree-rehired in a PERS position üYes Medicare and No OASDI • PERS Retiree-rehired in a STRS position üYes Medicare and Yes OASDI

Next Payroll Concept Class ØNext “Concept” Classes • Beginning Fall of 2014 üSalary Computation üPayroll Deductions/Withholdings üPaying Employees üEmployee Leaves/Benefits üRetirement Systems • Open Labs After Each Concepts Class