Q.  What would happen to my CalSTRS retirement if there were to be furlough days negotiated?

A.  This question comes up frequently during this talk of furloughs. The reporting to CalSTRS and CalPERS is based on the number of days in the work year and the earned versus earnable salary of the employee. There are two possible consequences to the CalSTRS or CalPERS retirement reporting when the school year is reduced.  Keep in mind that all reporting takes place in the fiscal year, July 1 to June 30.  

The first scenario is a slightly reduced service credit report for the year.  If the work year was reduced from 185 days of required service to 183 days of required service and the salary schedule was not adjusted proportionately, the example would be 183/185 = .989 years of service credit rather than one year of service credit.  The actual calculation is based on earned compensation (183) divided by earnable compensation (185).  For the purposes of retirement, the final compensation doesn’t change because the salary schedule stayed in tact.

The second scenario would be that the District and Association negotiate to shorten the work year, thus having a 183 day year rather than 185 days. In addition to shortening the year, the salary schedule is reduced by a proportionate amount.  The service credit calculation would be calculated in the same manner.   Since the earned and earnable compensation would be the same amount, one year of service credit would be earned by the member.  In this case the member’s final compensation, if retiring this year, would be slightly reduced as reflected on the salary schedule.  The prior year or prior three year period may be used to calculate final compensation.  A temporary reduction of the salary schedule could be accomplished through negotiations and the use of a Memorandum of Understanding (MOU) with a time certain sunset date.  Consult with your CTA staff member on how to draft this agreement. 

Q.  How can I be certain that the District is reporting the negotiated change accurately to CalSTRS?

A.  Each district has a CalSTRS technician assigned through the County Office of Education.  The chapter can insist that CalSTRS reviews any negotiated settlement for possible reporting problems.  CalSTRS is a third party but is responsible to educate and provide assistance to the County Office for accurate reporting of employee earnings to CalSTRS.   

NOTE:  There will be a CalSTRS Circular in late February or early March 2009 addressing the issue.  It will be available on the www.calstrs.com site.