Challenges for the California Community Colleges Don Averill, Mary - PowerPoint PPT Presentation

Challenges for the California Community Colleges Don Averill, Mary Dowell, John Diddion 2013 - 2014 1

� Does the need for pension reform still exist? � Myths about pension reform � Legislative actions � Challenges for community college districts � Working for public agencies after retirement � Changes needed in pension reform law 2

� Baby boomer impact on the retirement system � Retirement systems not actuarially sound � Decrease in future working population � Perceived fraud in the system (spiking etc.) � Retirees life expectancy increasing � Who pays what toward retirement systems � Management of retirement systems 3

� Retirees receive excessive retirements � The system cannot be changed (vesting) � Hybrid pensions are not the answer � All public retirement systems are the same � Everyone who retires double dips � The retirement system never changes � All public retirement system are the same 4

� Brown proposal and Republican support � Conference Committee Report on Pension Reform � AB 178 STRS Earning limits and exemptions (Sunsets on June 30, 2013) � AB 1028 and SB 1021 PERS retiree restrictions � SB 459 Independent Contractor status � AB 340 Public Employees Pension Reform Act of 2012 (Elements of AB 178 were folded into Ab 340 and extended to June 30, 2014) 5

� State Teachers Retirement System (CalSTRS) � Public Employment Retirement System (CalPERS) o State employees o Public safety employees o Education employees o Judicial employees o Legislators Retirement System(ended with term limits) � County Employees Retirement Law of 1937 � Charter cities not covered under AB340 – 86 cities 6

Public Employee Pension Reform Act of 2012 Current Employees New Employees Issue (hire date before December 31, 2012) (as of January 1, 2013) $110,100 for Social Security participants 120% of above cap for non-Social Cap on salary used for defined benefit None Security participants ($132,120) Caps would be increased with inflation No change - encouragement that 50% of Employee must pay at least 50% of total Sharing of contributions contribution be bargained employer/employee contribution Local miscellaneous: Remains at 2.5% at Changes to 2% at 62 with a maximum of Retirement formula (PERS) (non safety) 55 2.5% at 67 Changes to 2% at 62, with a maximum of Retirement formula (STRS) Remains at 2% at 55, up to 2.5% at 62 2.4% at 65 Highest twelve months within the three Final compensation No change years preceding retirement Creditable Compensation Only regular, recurring pay - no sick leave, vacation, bonuses, overtime Service credit purchase Prohibits the purchase of service credit after December 31, 2012 If felony was committed within scope of employment, pension benefits will be Felony conviction forfeited. Maintains existing CalPERS limit of 960 hours employment; Maintains AB 178 Post-retirement employment CalSTRS earnings cap at median salary of all CalSTRS employees for the previous year.($40,011) Exemptions extended until 2014) 7

� No specific language to create a hybrid pension system including both defined benefit and defined contribution � No action was taken to contain health care costs � Some members (judicial members) excluded � Charter Cities excluded from the legislation � Inequities exist in many areas particularly related to retirement earnings in public service after retirement � Many issues are relegated to be resolved through negotiations 8

� Creditable compensation will be on base pay � Will have to negotiate in some cases to get to 50% contribution � Employer cannot pay employees share of contribution � Service credits cannot be purchased retroactively � Employment related felonies will lead to a loss of pension benefits � Audit corrections between systems could affect payment of employee benefits. 9

� CalSTRS earning limit is set at $40,011 for current year � AB 178 defines limited exemptions o “Special Trustees” for academic and financial trouble when appointed by State Superintendent, Chancellor of CC System, or County Superintendent o Must have prior approval of CalSTRS before starting work o State must try to find qualified current member first 10

� Retiree can re-instate in CalSTRS and retire again without waiting out a year � A retiree can work as a consultant, independent contractor, or for a third party without earning limits provided they are not performing creditable service � Retirees after January 1, 2013 cannot work for their former employer for 180 days if they are under age 62. This restriction was prior to age 60 before AB 340 was signed into law � These restrictions are necessary to meet federal code requirements to qualify for tax status. 11

� Retirees are allowed to work 960 hours without reducing retirement earnings under some conditions Appointments can only be made on an interim basis into a vacant � position and during recruitment for a permanent employee (AB 1028). � There is an exception to the previous bullet if specialized skills are required. � The compensation for the interim appointment cannot exceed the maximum of the published pay schedule for the position (AB 1028), divided by 173.333 to cacculate as an hourly rate (SB 1021). Further, a retiree appointed to a vacant position shall not receive � any additional compensation or benefits beyond the hourly rate (SB 1021). The ability for an employer to request an extension of the � appointment beyond the 960-hour per-year limit has been eliminated (SB 1021). 12

� Cap on defined benefit earnings on recruitment � Health and welfare costs not specifically addressed � Meeting emergency employment needs � Interim employee needs o Faculty early retirement agreements and 180 break in service from home district o Dealing with academic and financial mitigation without state intervention (prior to FCMAT) � Negotiating with unions to resolve AB 340 requirements. 13

403(b) 401(a) 457 $50,000 $50,000 $17,000 Employee may also utilize $5,500 “catch-up” provision for the 403(b) and 457(b) plans if over age 50.

� ACCCA is continuing its oversight of pension reform � ACCCA will be open to collaborating with other associaitons representing management employes to amend the law � ACCCA will continue to look to equity and parity in use of interim employees among the retirees � Information on district and retiree impact will be available on both the ACCCA and PPL webpage � QUESTIONS? 15