Issue link: http://educator.cta.org/i/129419
> C A L S T R S U P D AT E Unintentional 'spiking' can hurt retirement benefits When it comes time to determine your career earnings for retirement, the saying "caveat emptor" (buyer beware) has never been more important. BY DINA MARTIN Although the California State Teachers' Retirement System (CalSTRS) is doing everything it can to encourage school districts to report earnings accurately, it is ultimately the employee's responsibility to make sure that earnings reports are correct when retirement nears. This bit of advice may come in handy for those planning ahead, especially since a number of retirees have had to return much-needed pension funds to CalSTRS due to errors made in reporting earnings. The issue isn't widespread, but it can be a shock when it happens. In one recent case, a retired teacher was forced to return $44,000 to CalSTRS because of errors that had been made in her earnings report. Generally, the problems came up in the reporting of "extra compensation" such as coaching stipends or extra duty assignments. Districts do not always understand the idea of "creditable compensation" and have put that money into a retiree's total compensation, causing a "spike" in earnings that erroneously increases retirement benefits. "Our active members have to know this is happening," warns Alen Ritchie, CTA/NEA Retired president. "Be aware: If you do extra duty or work an extra period, it must go into a Defined Benefits Supplement account. Otherwise, it's spiking." While the error may have been unintentional, it falls into the category of spiking, which is the practice of artificially and inappropriately increasing compensation to enhance retirement benefits. CalSTRS has been aggressive in taking steps to prevent pension spiking by creating a toll-free Pensions Abuse Reporting Hotline as well as a Compensation Review Unit to investigate suspected pension spiking incidents. The toll-free Pensions Abuse Reporting Hotline is (855) 844-2468. 34 California Educator May 2013 There have also been instances where it appeared districts intentionally spiked the earnings of employees to incentivize them to retire. CTA's Legal Department has gone after these districts to force them to change their practices. "We have retirees who have been caught in the crossfire," says CTA Chief Legal Counsel Emma Leheny. "It is devastating for someone on a fixed income to be told they have to return money they counted on for retirement." CalSTRS has been doing everything it can to prevent misreporting by conducting more reviews and fining and penalizing districts that engage in the practice. However, many problems are caused by increased turnover in district staff as well as downsizing at the district level. Still, employer reporting has improved, so it is likely there will be fewer problems as current CTA members head into retirement. "Remember, your retirement benefits are based entirely on what employers report," says Ed Derman, deputy chief executive officer of CalSTRS. "Don't assume if it's on the report, it's accurate." Involvement Committee. He was elected to the Teachers' Retirement Board in 2007. The 12-member Teachers' Retirement Board nominates and elects its chair and vice chair annually. The chair and vice chair provide board leadership, direction and policy development for the largest educator-only pension fund in the world. CalSTRS divests certain firearms holdings The CalSTRS Investment Committee approved the fund's divestment of holdings of firearms companies that manufacture weapons that are illegal in California. After the Sandy Hook Elementary School shooting in Connecticut, state Treasurer Bill Lockyer, a CalSTRS board member, issued a call for the fund to divest itself of companies that manufacture firearms and high-capacity magazines that are illegal for sale to, or possession by, the general public in California. CalSTRS has since begun the divestment process with the two publicly traded U.S. companies within the CalSTRS portfolio that manufacture these products, Sturm Ruger and Smith & Wesson. Dillon and Keiley re-elected "The tragic events that took place at as CalSTRS board leaders the Sandy Hook Elementary School that The trustees of the CalSTRS Teachers' December morning were truly eye-opening. Retirement Board re-elected CTA members I think our actions today are an appropriate Dana Dillon as chair and Harry Keiley as response, because this tragedy illustrates all vice chair of the board for the 2013-14 term. too well the hazards such firearms pose to Dillon, who also serves on the CTA Board human health and well-being," said Harry of Directors, is an intermediate grade school Keiley, CalSTRS Investment Committee teacher and librarian from Weed. She has Chairman and Santa Monica-Malibu Classserved on the CalSTRS board since her elec- room Teachers Association president. tion in 2003, including service as chair and CalSTRS followed a similar process leadvice chair. ing up to its 2009 decision to divest itself of Keiley, a high school teacher and Santa holdings in the tobacco industry. Monica-Malibu Classroom Teachers Association leader, chairs CTA's Political