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Pension Reform Approved - Aug. 31, 2012

 

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Both houses of the Legislature today adopted significant changes to public employee pensions. For the vast majority of existing community college employees, there are no effects of the changes.

For the most common question I have had in the last 48 hours, the new limits on sick leave will not affect the frequent community college practice of honoring accrued sick leave as service credit upon retirement. The new limits are meant to curb the "cash out" practice more common in some municipal employers that increase final compensation.

Further, the limits on service credit purchase are targeted at the purchase of "air time"--time in which the employee was not serving in public service. It appears that purchase of time for public service liquidated under another system (i.e. PERS->STRS) will still be allowed.

This is a very complicated area of law and I encourage you to consult with your system after the new law is implemented. We try to provide as much information as possible, but must acknowledge that individual situations may vary based on the adopted language.

Public Employee Pension Reform Act of 2012

IssueCurrent Employees
(hire date before December 31, 2012)
New Employees
(as of January 1, 2013)
Cap on salary used for defined benefit None

$110,100 for Social Security participants

120% of above cap for non-Social Security participants ($132,120)

Caps would be increased with inflation

Sharing of contributions No change - encouragement that 50% of contribution be bargained Employee must pay at least 50% of total employer/employee contribution
Retirement formula (PERS) (non safety) No change (varies) Changes to 2% at 62 with a maximum of 2.5% at 67
Retirement formula (STRS) No change
2% at 60 to 2.4% at 62
Changes to 2% at 62, with a maximum of 2.4% at 65
Final compensation No change Highest twelve months within the three years preceding retirement
Creditable Compensation Only regular, recurring pay - no sick leave, vacation, bonuses, overtime (unclear if sick leave will still be allowable for service credit)
Service credit purchase Prohibits the purchase of service credit for non-accrued service after December 31, 2012
Felony conviction If felony was committed within scope of employment, pension benefits will be forfeited.
Post-retirement employment Maintains existing CalPERS limit of 960 hours employment; Maintains AB 178 CalSTRS earnings cap at median salary of all CalSTRS employees for the previous year.
Post-retirement employment waiting period No employee could return for post-retirement employment without sitting out 180 days, unless the governing board identifies that the appointment is "necessary to fill a critically needed position" in an open session, not on a consent calendar.

 Please do not hesitate to contact me at scottlay@ccleague.org if you have any questions.

Sincerely,

Scott Lay
President and Chief Executive Officer
Orange Coast College '94

 


Community College League of California
2017 O Street, Sacramento, California 95811
916.444.8641 . www.ccleague.org



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Last Updated: 9/4/12