California Educator

February 2013

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TEACHER RETIREMENT < A bit longer for a bit less��� Pension reform impacts new, future teachers��� retirement BY DINA MARTIN Although the governor���s pension reforms that went into effect Jan. 1 spare current teachers for the most part, they have a major impact on new and future teachers who will find themselves working a bit longer for a bit less in retirement benefits. ���The die is cast, and we fear that introducing a two-tiered retirement system creates divisiveness in our schools,��� says Maggie Ellis, president of the Elk Grove Education Association and chair of CTA���s State Council Retirement Committee. ���Unfortunately, these changes also affect female teachers disproportionately as women comprise 70 percent of the teaching force.��� The California Public Employees��� Pension Reform Act of 2013, AB 340 by Assembly Member Warren Furutani (D-Long Beach), contains provisions proposed by Gov. Jerry Brown to rein in the costs of public employee pensions. Those changes include capping benefits, lowering benefit formulas for workers hired after Jan. 1, 2013, and requiring future employees to begin paying half the cost of their pension within five years. CalSTRS has a fact sheet, a summary and other items available on CTA���s website that outline and explain the changes. Despite the new changes, however, the most significant CalSTRS issue is closing a $64.5 billion funding gap. Along with the Pension Reform Act, the Legislature approved Senate Concurrent Resolution 105, which is intended to address long-term funding needs during the 2012-14 session. Meanwhile, CalSTRS officials are looking at various scenarios to close the gap. They say the total impact of new legislative changes may not be ���fully realized��� for decades to come, but they are hopeful funding issues will be addressed. ���We repeatedly informed the Legislature and the governor that THE NEW LAW FOLLOWS A YEAR OF POLITICAL AND LEGISLATIVE ACTIVITY IN WHICH CTA WORKED IN A STATEWIDE UNION COALITION TO PREVENT MORE ONEROUS PROPOSALS WHILE LESSENING THE IMPACT OF OTHERS. the pension reforms will not solve the long-term funding needs of CalSTRS,��� Ellis says. ���It appears some legislators thought that these issues would be taken care of by the reform act.��� The new law follows a year of political and legislative activity in which CTA worked in a statewide union coalition to prevent more onerous proposals while lessening the impact of others. In addition to its advocacy at the Capitol, CTA recruited retired members to participate in a number of ���Pension Truth Squads��� around the state to show how a secure retirement plan benefits employees and the state���s economy. ���I have no doubt that the stories current retirees told legislators brought to light the truth about the retirement benefits received by the majority of teachers. Their pensions are fair and reasonable but far from extravagant,��� Ellis says. The changes in AB 340 will primarily affect future CalSTRS members ��� It requires equal sharing of pension costs by asking new members to pay at least 50 percent of the normal ongoing costs of bene���ts or the current compensation rate. (Current members pay 8 percent in contributions, equal to 44 percent of normal costs. Fifty percent of the estimated normal cost of the new plan is less than 8 percent. Therefore, the new member contribution rate will likely be 8 percent, according to preliminary estimates.) ��� It places a cap on the compensation allowed to calculate pension contributions. This will signi���cantly affect members who earn above $136,440 (the Social Security wage base) in 2013. ��� It changes the normal retirement age from 60 to 62 and changes the maximum age factor from 2.4 percent at age 63 to 2.4 percent at age 65. ��� It extends the ���nal compensation period to three years for all new members. February 2013 41

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