Members of the California State Teachers Retirement System, and those who employ them, should be aware of new regulations regarding post-retirement earnings limits.
Based on new IRS provisions, Assembly Bill 506, Furutani, D-Long Beach, which has been signed by the governor, reduces the post-retirement earnings limitation to $0 for retirees under the age of 60 for the first six months after retirement as of July 1, 2010.
It also extends the sunset dates for the post-retirement earnings limit exemptions to June 30, 2012, and expands eligibility to members who retired on or before Jan. 1, 2009. ACSA had taken a support position on the bill based on the extension of the earnings limitations to 2012.
The signing of the bill is a timely reminder for CalSTRS members and employers of the rules and regulations surrounding earnings limitations. Aside from the new provisions outlined in AB 506, employers should be reminded that the post-retirement earnings limitation for the 2009-10 fiscal year is $30,580.
Upon retaining the services of a retired member, employers are required to 1) notify the retired member of the new earnings limit; 2) maintain accurate records of the retired member’s earnings; and 3) report those earnings to the retired member and to CalSTRS monthly, using member code 2 and assigned code 61, regardless of the method of payment or the fund from which the payments were made.
It should be noted that even independent consultants or contractors are subject to these limitations. If district resources are used, these employees fall under the regulations of the law.
Any activity considered to be creditable service is subject to the earnings limitation. Creditable service generally includes any position in pre-kindergarten through community college that requires a credential, certificate or permit, among others.
If a retired member earns more than is allowed, the member’s retirement allowance will be reduced by the amount of compensation that exceeds the earnings limitation. School districts report retiree earnings to CalSTRS. Upon receipt of a report of post-retirement earnings, CalSTRS will send retirees a letter explaining that these earnings will be counted toward the earnings limitation.
If a retiree’s post-retirement earnings reach half the limit, the retiree will be sent a second letter informing the retiree that the midpoint of the limit has been reached. If the retiree exceeds the earnings limit, a third and final letter will be sent informing the retiree that the earnings limit has been exceeded and that CalSTRS will begin to deduct excess earnings from the monthly retirement allowance.
The allowance must be reduced dollar-for-dollar by the amount of earnings in excess of the limit.
There are certain exemptions to the earnings limitations. Exemptions include those who have been retired at least 12 months without performing any service; those who provide direct classroom instruction in certain settings; those who return to administrative roles under certain emergency situations; and those who are appointed or assigned as an administrator. Employers must file exemptions prior to or as soon as the retired member begins working.
There are also several restrictions in place. For example, those who retired with a CalSTRS “Retirement Incentive” will lose the increased retirement allowance attributable to either incentive if they return to work within five years of retirement to the LEA that granted the incentive.
Another restriction prohibits CalSTRS retirees from returning to work in classified positions unless a K-12 school needs an aide in a high pupil-to-teacher ratio class or to provide one-on-one instruction in remedial classes or for underprivileged students.
More information on post-retirement earnings limitations can be found at www.calstrs.com. Questions can be directed to (800) 228-5453.