Gov. Jerry Brown has signed sweeping pension reform legislation that will reduce the retirement benefits of public school employees, and ACSA has concerns over its effect on the profession as a whole.
“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.”
Assembly Bill 340, Furitani, 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.
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 be considered for purposes of calculating retirement benefits.
AB 340 requires current state employees and all new public employees to pay for at least 50/50 split of their 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, and while the bulk of its provisions do not apply to current CalSTRS members, there is concern that it will have a negative impact on the education profession as a whole. Research has repeatedly shown that quality leaders are key to quality schools, and these sweeping changes will make it difficult to recruit educators to the profession.
Both CalSTRS and CalPERS have released preliminary summaries of the impact the new law will have on their members. Click here for the CalSTRS summary or click here for the CalPERS summary.
Access the full text of the bill.