Gov. Jerry Brown has signed sweeping pension reform legislation that will reduce the retirement benefits of public school employees.
Assembly Bill 340, Furutani, D-Long Beach, caps final creditable compensation, increases the retirement age to 62 and requires employees to pay at least half of their pension costs, among other changes.
“This is the biggest rollback to public pension benefits in the history of California pensions,” said Brown. “We’re lowering benefits to what they were before I was governor the first time and in PERS and billions more in other local pension systems. Under the new rules, employers and employees alike are going to contribute their fair share of the costs, resulting in a more susreducing costs by up to $55 billion tainable system.”
The “Public Employee Pension Reform Act of 2012” caps creditable compensation at $110,100 for those covered by Social Security, and an estimated $136,440 for those not covered by Social Security. Members of the California State Teachers Retirement System are not covered by Social Security.
The bill also requires final compensation to be calculated using a three-year average, eliminating current provisions that allow a one-year final compensation to be used for those with more than 25 years of service. It allows only regular, recurring pay to be considered for purposes of calculating retirement benefits.
AB 340 requires current state employees and all new public employees to pay a 50/50 split on their pension contribution. Currently, members of CalSTRS pay 8 percent and employers pay 8.25 percent. Contribution rates for members of the California Public Employees Retirement System vary depending on individual collective bargaining agreements, but the new law requires a 50/50 employer/employee split by 2018.
AB 340 also limits post-retirement employment for all employees, prohibits felons from receiving benefits, prohibits retroactive pension increases, prohibits pension holidays for employees and employers and prohibits the purchase of service credit.
The law goes into effect Jan. 1, 2013. While the bulk of its provisions do not apply to current CalSTRS members, there is concern it will negatively impact the education profession as a whole. Research has repeatedly shown quality leaders are key to quality schools, and these sweeping changes will make it difficult to recruit educators to the profession.
For full text of the bill, visit: http://leginfo.ca.gov/bilinfo.html.
“While it is too soon to determine exactly what the full impact of the new law will be, there is a fear that it will make it much more difficult to recruit talented, skilled individuals to the field of education,” said ACSA Legislative Advocate Sal Villaseñor. “The new regulations will jeopardize the financial security of those who dedicate their lives to service in public schools.”
Both the California State Teachers and California Public Employees retirement systems have released preliminary summaries of the impact the new law will have on their members. Visit www.calstrs.com or www.calpers.ca.gov for more information.