Extra Service Now Counts

CALIFORNIA STATE TEACHERS’ RETIREMENT SYSTEM

SEMIANNUAL PUBLICATION FOR ACTIVE AND INACTIVE CALSTRS MEMBERS ■ SPRING 2002

Extra Service Now Counts VIP to Go Online he Voluntary Investment TProgram, CalSTRS’ 403(b) n the old days, teachers taught perform extra service after that program, is getting better. In for nine months with most off date. That help will come either addition to the existing toll-free I during the summer. Working from an increased monthly customer service center, by mid- outside the traditional school year retirement allowance or more summer VIP will go online. VIP was not all that common, and extra funds in the Defined Benefit participants will be able to access service did not count toward Supplement, or DBS, accounts. the CalSTRS Web site to view retirement. No one has to tell you Those of you earning less than account information and receive that those times have changed. one year of service credit in a financial advice and counseling Nowadays, educators commonly school year will see more duties services. CalSTRS will also be work in year-round schools, teach counting as service credit. This adding more investment choices during summer school and increased service credit will mean a this year, including funds geared intersession and perform even higher monthly retirement allow- toward targeted retirement dates. more extra duties beyond working ance. Here are the changes coming in the classroom. Those of you earning more your way: In recognition of the changing than one year of service credit in a scene, a state law will take effect July school year will see contributions Online Account Information • View account balances 1, 2002, that helps educators who from pay for extra service depos- • View fund and plan ited in your DBS accounts. These information funds will grow throughout the • Access video, audio and years as they earn interest, supple- written information on menting your retirement allowance saving for retirement or providing funds if you leave • View loan balances and request new loans CalSTRS-covered employment. • Change allocations of For more about DBS, see page 13. current balances and future Additionally, in some cases the contributions changes to the compensation that • View explanations of various is counted or credited to your payout options CalSTRS account could further • Access self-managed accounts boost your retirement allowance.

• continued on page 3 • continued on page 5

Spring 2002 1 CEO Notes By Jack Ehnes, Chief Executive Officer

billion. CalSTRS has a worldwide an obligation to deter wrongful reputation as a stable, dependable corporate conduct when it under- and trustworthy pension plan. Part mines the integrity of financial ’m pleased to be writing my of the success is the CalSTRS markets. That’s why CalSTRS first column in the Bulletin. investment strategy, which is to recently petitioned to be lead I Settling in to my new position follow a disciplined approach in plaintiff in a class action lawsuit as Chief Executive Officer for order to provide the best possible against Homestore.com, Inc. CalSTRS has been a busy and often long-term returns. This ensures that hectic experience, but, most of all, a CalSTRS can weather the inevitable Customer Service Is very welcoming one. I’m looking ups and downs of financial markets. Important forward to the work ahead, which Of course it’s important to I also want to say a word about will be building on an already solid remember that one of the best customer service here at CalSTRS. foundation. The California State features of a defined benefit plan As educators, you are busy profes- Teachers’ Retirement System is a such as CalSTRS’ is that your benefit sionals and you need to receive secure, well-respected pension fund, is guaranteed for life. No matter information about your retirement thanks largely to the hard work of what turn the financial markets take, benefits that is clear, comprehensive my predecessor Jim Mosman, the you can be assured your retirement and timely. CalSTRS will continue dedicated CalSTRS staff and the benefits will not be affected. our efforts to improve service to you leadership of the Teachers’ Retire- That said, in order for CalSTRS so that you can get the information ment Board. to achieve the best returns possible, you need when you need it. As far as my top priorities as we must factor some risk in our A large part of good service is CEO of CalSTRS, they will be investment plan. If we didn’t take spending time with customers so focused on ensuring that our risk, we wouldn’t make a good that I can be aware of your concerns. benefits are sound and our service, return. However, to minimize risk, I invite you to contact me directly to topnotch. When the day is done, it we combine our assets so that the tell me what is working and not comes down to making sure we portfolio is well-diversified. No working for you. I would also be provide an excellent pension plan to individual investment is going to happy to speak to groups about our members and do so with make or break our portfolio. The retirement issues that affect excellent service. recent Enron collapse is a good California’s educators. You can example of the value of diversifica- contact me at CalSTRS; P.O. Box Portfolio is Strong tion. In the period of CalSTRS’ 15275; Sacramento, California You should be pleased to be a decline in Enron stock value, those 95851-0275. member of a retirement system with losses were more than offset by Thank you, the third largest investment portfolio substantial gains in other areas. in the nation, valued at over $100 As the third largest pension fund in the U.S., however, we have

2 Bulletin About Jack For part-time educators • Became Chief Executive Officer of CalSTRS on February 4. • You will have more service • Came to CalSTRS from Great-West Life & Annuity Insurance Company. credit when you retire, which Was the vice president for corporate affairs at where he administered the company’s defined benefit and defined contribution plans. will mean a larger monthly retirement allowance. • Was the insurance commissioner for the state of Colorado. • Served as board trustee of the Colorado Public Employees’ Retirement • Your final compensation could Association for 11 years, including six years as chair and vice chair. change because the pay for • Is a native of Rochester, New York. extra service will now count in • Holds a B.S. from Cornell University and a M.A. from Vanderbilt University. determining the final compensation. A higher final compen- • Received awards as 1992 “State of Colorado Manager of the Year” and the 1999 Career Service Award from the Colorado Group Insurance sation will increase your Association as well as recognition from the Colorado chapter of AARP for retirement allowance. outstanding public service. Examples of extra service • Lives in Sacramento with his wife Cindy and daughters, Amy ◆ Extra periods and extra days, and Lacey. such as summer school and • Enjoys outdoor activities (he’s an avid skier, hiker and camper) and intersession reading good fiction. ◆ Extracurricular assignments such as: Creditable continued from page 1 CalSTRS retirement account. •Coach Therefore, those of you who have That’s because, besides increas- • Band director already been performing extra ing the amount of service credit, service may see a small change in • Yearbook editor the changes could affect another your take-home pay. Although • Club advisor element in the retirement calcula- service will not count toward Social • Staff development days tion formula, your highest average Security benefits, it will still be • Peer assessment/Review salary, called final compensation.1 credited to Medicare. consulting teaching The highest average salary could be increased if you are paid for extra Creditable Compensation For More Information service at a rate higher than your at a Glance regular salary. Earnings from service The CalSTRS Web site deposited in your DBS account will For full-time educators (www.calstrs.ca.gov) has more not affect your final compensation. • Your DBS account will be information about creditable Previously, pay for extra service larger because it will be compensation. Go to was sometimes covered by Social supplemented with additional www.calstrs.ca.gov/benefit/defined/ Security or an alternative to Social contributions from service in mbrinfo/ab2700faqs.htm. Security. Extra service will now be excess of one year. covered by CalSTRS, so, starting in • You will be able to “fill-in” any July, you will contribute 8 percent of unpaid leave in the year that your salary and your employer will you earn less than one year of contribute 8.25 percent toward your service credit.

1 There are three elements to the retirement calculation formula. They are age at retirement, years of service (service credit) and highest salary.

Spring 2002 3 New Retirement Benefit Allows Partial Lump-Sum Payment Monthly Benefit Permanently Reduced

f you could, would you want to member and depends on the age of Joseph is 62, earning $4,750 per receive part of your retirement the member, the member’s earnings month with 32 years of service I benefit in a lump-sum pay- and the years of credited service at credit. With his longevity bonus of ment? Even if that meant a perma- retirement. $400 included, his unmodified nent reduction to your monthly retirement allowance is $4,048 per benefit? You now have that choice. Important Considerations month when he retires. Here’s how A new CalSTRS benefit allows If you are thinking about PLS, PLS would affect his monthly members who retire on or after you should carefully consider the allowance: April 1, 2002, to receive a portion implications. There can be signifi- PLS Permanent of their service retirement benefit cant income tax consequences if Amount Monthly Decrease you receive a lump-sum payment. as a lump sum in exchange for a $10,000 ...... $66 It is extremely important to lower monthly allowance at retire- $25,000 ...... $164 thoroughly evaluate your financial ment. A Partial Lump Sum or $50,000 ...... $328 needs since the ongoing monthly “PLS,” is allowable for members $75,000 ...... $493 benefit is permanently reduced. who are at least age 60 and 3 $92,460 (maximum) ...... $607 months within the month their Each situation is different. retirement is effective. Members Examples Before your retirement effective with 30 or more years of service For a typical career teacher date, you can obtain an estimate credit can participate in the pro- with less than thirty years of using the online calculator available gram at age 60. credited service, the maximum in May on the CalSTRS Web site You can choose to have your partial lump sum could range from (www.calstra.ca.gov). Or you can PLS paid to you or rolled over $23,000 to $60,000, reducing the receive an estimate within 4-6 through a trustee-to-trustee unmodified allowance by between weeks by writing CalSTRS. Please transfer to a qualified plan. You are $150 and $450 dollars a month. provide your name, address, Social not permitted to do both. If you For a typical career teacher Security number, phone number choose a direct transfer to a quali- with thirty or more years of and projected retirement date. fied trust plan, the PLS amount credited service, the maximum Priority will be given to those with must be at least twice the amount partial lump sum could range from imminent retirement dates. Mail of your reduced monthly retire- $78,000 to $90,000. The unmodi- your request to Service Retirement ment benefit. fied allowance would be reduced by MS-64; Attn: PLS Estimator The lump-sum payment can be between $500 and $625 dollars a Request; PO Box 15275; up to 15 percent of the present month. Sacramento, CA 95851. value of the retirement allowance. The amount can differ with each

4 Bulletin VIP continued from page 1 Long-Term Care Online Financial Advice Application To help participants make more informed decisions about their invest- Opens in Spring ments, VIP will provide access to the Financial Engines Investment Advisor, Part-time and Substitute which recommends how to allocate your VIP funds based on all your invest- Teachers Are Also ments (including those outside your VIP), your risk tolerance and when you Eligible need your funds. For an additional fee, participants will be able to request an asset allocation that reflects all tax-deferred accounts or a recommendation o one likes to think based on all investment accounts and reflecting multiple goals. Nabout needing long-term care. But if you ever do, you Counseling Services want to be able to afford it. VIP will provide licensed investment advisers through the toll-free Catastrophic accidents, number to provide counseling services. The advisers will work with partici- disabilities and age-related pants to determine their timelines and objectives and help them in using the illnesses can happen, and Financial Engines asset allocation modeling tool. They can also counsel on conventional health plans and available payouts and help those who are having trouble navigating on the Medicare typically do not Internet. provide coverage. The CalPERS Long-Term Care For More Information Program can help with the For more information about VIP, call the toll-free number at 800-699- costs. 403b (800-699-4032). And don’t forget to check the Web site for online Eligibility isn’t limited to services in mid-summer—www.calstrs.ca.gov. Click on the 403(b) link under CalPERS members. Those Benefits and Services. eligible for CalPERS long-term

care coverage include all ○○○○○○○○○○○○○○○○○○○○○○○○ California public employees, What Is VIP? school teachers, school employees, retired teachers, their VIP is a tax-deferred savings plan for active members of the Defined spouses, parents and parents- Benefit Program and participants in the Cash Balance Benefit Pro- in-law. New this year, siblings gram. VIP has low administrative fees and lets you choose to invest of all active employees and your contributions among several funds. retirees, age 18 years and older, are eligible to apply.

○○○○○○○○○○○○○○○○○○○○○○○○ Substitute teachers, part-time and seasonal employees are also eligible. The 2002 application period starts April 1, 2002, and ends June 30, 2002. For more information and to request an Check out www.flexyourpower.ca.gov application kit, phone 800- 338-2244 or use the CalPERS for great ideas on how to save money Web site at www.calpers.ca.gov/ on your energy bills. longtermcare.

Spring 2002 5 Home Buying Now Easier

New CalSTRS/CaHLIF 80/17 Home Loan Program Borrow 80 Percent and Finance 17 Percent With “Silent Second”

irst-time homebuyers and those living in high- CalSTRS and CaHLIF. In some cases, districts have paid cost housing areas can have a tough time afford- the remainder for teacher-recruitment purposes. F ing a home. A new program developed between Closing costs and prepays can be paid from: CalSTRS and the California Housing Finance Agency’s ■ California Housing Loan Insurance Fund can help. The Borrower’s own funds CalSTRS/CaHLIF 80/17 Home Loan Program was ■ Seller contributions up to 3 percent implemented statewide in November 2001. It allows ■ Gift from relative CalSTRS members to borrow 80 percent of the loan ■ value with an additional 17 percent financed through a Unsecured grant from a government agency or an employer-assisted housing program approved by “silent second.” CalSTRS and CaHLIF CalSTRS members and other employees of Califor- nia public schools are eligible for 80/17. Loans are not After closing, the borrower must have cash reserves secured against the borrower’s retirement account. You equaling two monthly mortgage payments. Funds from only have to qualify for the 80 percent portion of the loan individual retirements accounts (IRA/Keogh accounts) and do not have to make payments on the second, which and tax-favored retirement accounts [401(k) accounts accrues simple interest. The second is repaid at the end of and 403(b) accounts] may be considered as cash reserves. the 30-year loan period or when the loan is terminated. At this time, North American Mortgage and First You can borrow up to $450,000. Those living in high- Mortgage Corporation are the only lenders authorized to cost counties can borrow up to $550,000 (see list on next offer the 80/17 Home Loan program, although CalSTRS page). A 3 percent down payment is required with a is in the process of authorizing more lenders. You can find minimum of 1 percent that must come from the more information on the Web at www.calstrs.ca.gov/ borrower’s own funds. The remainder may be a gift from benefit/homeloan or by calling North American a relative or a grant from a government agency or an Mortgage at 800-700-6262 or First Mortgage employer-assisted housing program approved by Corporation at 877-959-1998.

6 Bulletin CalSTRS Home Loan Program Approved Lenders

Bank of America High-Cost Counties Northern California 650-358-6004 Bay Area Southern California 818-704-4076 Alameda Contra Costa Countrywide Home Loans Marin Napa 800-877-5626 San Francisco San Mateo Solano Sonoma CUNA Mutual Mortgage Corporation* 800-576-3577 Central Coast Monterey San Benito First Mortgage Corporation*▲ San Luis Obispo Santa Barbara 877-595-1998 Santa Clara Santa Cruz Ventura North American Mortgage*▲ 800-700-6262 Southern Coast Los Angeles (except Palmdale Lancaster area) Wells Fargo Home Mortgage Orange 909-680-3685 San Diego

* Zero Home Loan Lender ▲ 80/17 Home Loan Lender

Increased Limits on CalSTRS Home Loans Because California housing prices seem to have no limits, CalSTRS has raised its home loan limits. In January 2002, new state legislation increased the CalSTRS Home Loan Program limits to 200 percent of the Fannie Mae and Freddie Mac limits. At the same time, Fannie Mae and Freddie Mac increased their loan limits to $300,700. This means that the limit on CalSTRS conventional home loans is now $601,400. For the Zero Down Program, the limit on CalSTRS home loans is now $350,000 and, in high-cost counties, $450,000 (see list above).

Spring 2002 7 Second Year of 2001–2002 Legislative Session Begins

The second year of the 2001-2002 legislative session is underway. The following bills that affect CalSTRS active members have been introduced. Unless otherwise noted, the legislation would become effective on January 1, 2003.

AB 1710 (Negrete McLeod) AB 2767 (Pavley) Requires community college districts to Permits granting of up to 10 years offer an alternative retirement plan and of service credit for new employees Additionally, this year’s legislation Social Security to all their part-time who teach five years in teacher- includes several Senate and Assem- employees. shortage discipline. bly bills that seek to conform AB 2137 (Lowenthal) SB 461 (Torlakson) California law to the retirement plan Provides an additional two years of DB Requires CalSTRS to provide high provisions of the Federal Economic Program service credit to educators deductible prescription drug coverage Growth and Tax Relief Reconcilia- who perform three years of credited to eligible retired members. The bill, tion Act of 2001. These bills include: service in low-performing schools from which would be effective January 1, AB 1122 (Corbett), AB 1743 January 1, 2003, to January 1, 2008. 2004, requires CalSTRS to specify (Campbell), SB 657 (Scott) and AB 2451 (Salinas) deductibles, co-payments, maximum SB 1256 (Brulte). Permits part-time credentialed com- benefit levels and eligibility criteria AB 1744 (Corbett) munity college employees to have the based on the number of years of In addition to conforming California value of unused sick leave at the time of credited service, requiring at least 10 state law with some of the retirement retirement credited to the CalSTRS but not more than 25 years of provisions of the recently enacted Defined Benefit Supplement account, credited service. federal tax relief bill (EGTRRA), Cash Balance Benefit Program account SB 1318 (Karnette) permits members retiring between or alternative retirement plan account. Authorizes employers to pay member January 1, 2002, and up to 120 days AB 2506 (Steinberg) DB contributions. after the enactment of state conformity Requires the Teachers’ Retirement SB 1580 (Burton) legislation to purchase service credit Board to establish a registration Requires the four members of the using rollover funds allowed under process for vendors seeking to offer Teachers’ Retirement Board currently EGTRRA if the purchase is completed retirement investment products to appointed by the Governor to be in 2002. The legislation becomes employees of all state and local public elected by the members of the group effective the day the Governor signs agencies, except employees of the to which they represent. the bill. University of California and California State University. Statutory changes are made from time to time that affect CalSTRS benefits and that may affect AB 2646 (Liu) any decisions you make in relation to those benefits. These changes are made by the California Eliminates the 25-year credited service Legislature and the Governor. Although CalSTRS makes every effort to keep its members in- requirement to have final compensa- formed about changes in its benefit structure, it cannot safely predict what the Legislature and Governor may do that might be of interest to you. For this reason, you should keep yourself tion based on highest 12 consecutive informed about possible benefit changes by consulting the CalSTRS Web site (www.calstrs.ca.gov), months rather than highest 36 months. the CalSTRS Public Service Office (1-800-228-5453), CalSTRS retirement counselors, your union representative (if applicable), your legislative representative and any other source that you believe may be helpful to you before you make any final decision. You are ultimately respon- sible for any decision you make in regard to your CalSTRS benefits.

8 Bulletin PART- TIMER MATTERS

Reducing Employers Makes a Difference

re you a part-time educator working for several To increase her retirement calculation, Eloise could school districts and nearing retirement? If so, terminate her employment with the lowest actual pay A you should know that you could possibly earn rate and her retirement calculations would be higher: a larger retirement allowance if you reduce the number Employer Earnings Service Credit of employers you work for during your final three years A $ 3,360 0.100 of employment. B 30,250 0.500 The reason for this is that one part of the retirement Totals 33,610 0.600 allowance calculation is the highest salary earnable over Her annual earnable for final compensation is 36 consecutive months or, for some part-time employ- $33,610 ÷ 0.600 = $56,017 ees, 12 consecutive months. When someone works part However, if Eloise also terminates the position with the time, the highest salary earned or “final compensation” next lowest annual pay rate, her final compensation is is calculated by dividing the salary the person would even higher. have earned if they had worked full time by their service credit. Employer Earnings Service Credit B $30,250 0.500 However, when a person has more than one em- Totals 30,250 0.500 ployer, the calculation is more complicated. In this case, the final compensation is the sum of all their actual Her annual earnable for final compensation is salaries divided by the sum of all their service credit. $30,250 ÷ 0.500 = $60,500 When the salaries and service credit vary, the calcula- Here’s the impact of the three alternatives on Eloise’s tions can result in a lower final compensation, which retirement calculation reduces the retirement allowance. Works all three jobs The following example shows how the calculation 11.5 x 2.4 x $3.938 = $1,087 per month can affect the retirement allowance of a part-time Terminates job with lowest annual pay rate educator.1 10.75 x 2.4 x $4,668 = $1,204 per month Eloise works part time at two high schools and a Terminates all jobs except one with highest annual pay rate community college. She has 8.95 years of service credit. 10.45 x 2.4 x $5,042 = $1,265 per month If she continues to work for all three employers during her last three years before retirement at age 63, here is Eloise decided that the increase of $178 per month how her final compensation would be calculated: in her retirement benefit was significant enough to Employer Earnings Service Credit terminate employment at two of her part-time jobs. A $ 3,360 0.100 Over the lifetime of her retirement, the difference in B 30,250 0.500 income would likely be about $53,000, not including C 6,563 0.250 the 2 percent annual COLA and any ad hoc increases or Totals $40,173 0.850 purchasing power increases. ÷ Eloise’s annual earnable salary is $40,173 0.850 = $47,262 However, Eloise could not afford to work at only one part-time job during her final three years before 1 Note that this examples assumes the person has already retirement. To make up for the loss in salary, she found earned 5.0 years of service credit and is eligible for a service retirement. employment as a part-time teacher in a private school. • continued on page 10 Spring 2002 9 Part-Timer Matters continued from page 9 Planning Milestones Each individual situation is As you proceed through your career, you may want to perform these different. CalSTRS strongly tasks for a secure, comfortable retirement. recommends that you meet with a regional counselor before your IF YOU HAVE… THEN YOU … retirement and carefully weigh your less than one year of service credit • begin tax-deferred savings, such as to a options before making decisions 403(b) plan that affect your retirement benefits. • submit a Beneficiary Designation Information form to CalSTRS

one year of service credit (You are eligible for • check your CalSTRS annual statement of the CalSTRS lump-sum death benefit and monthly account each year for accuracy of service For Part-timers, survivor benefit if you die while an active member.) credit noted Final Compensation five years of service credit (You are vested, • use the online retirement calculator to project Is Often 36 Months and, therefore, will receive a retirement allowance your retirement allowance • attend a CalSTRS Financial Education For part-time educators, retire- when you retire. You can now retire if you are 55 or older.) Program workshop ment is calculated using the • develop a financial plan “highest average annual compensation earnable,” or the salary ten years of service credit (You are planning • use the online retirement calculator to project your retirement allowance you would have earned if you the financial details of your career and retirement.) • update your financial plan were working full time. • review the beneficiary designation on your annual statement of account For CalSTRS members with less • increase tax-deferred savings, if possible than 25 years of service credit, • select a pre-retirement option if you wish to this is based on any period of 36 at least 30 years of service credit and are between ages 50 and 55 (You are eligible to provide a lifetime allowance to your survivor consecutive months. retire.) after you retire • meet with a CalSTRS regional counselor to get For members with 25 or more information about selecting a pre-retirement years of service credit, it is based option and an estimate of your retirement allowance on any period of 12 consecutive • update your CalSTRS beneficiary designation, months. Most members retire with if necessary at least 25 years of service credit. However, since most part- at least five years of service credit and at • select a pre-retirement option if you wish to provide a lifetime allowance to your survivor time educators do not accumu- least age 55 (You are eligible to retire.) after you retire late 25 or more of service credit, • meet with a CalSTRS regional counselor to get the 36-month period is most information about selecting a pre-retirement commonly used. option and an estimate of your retirement allowance • update your CalSTRS beneficiary designation, if necessary

10 Bulletin nonqualified service credit after Service Credit Purchase earning five years of CalSTRS service credit. Calculators Are Online To calculate nonqualified service on the Web, select “Service Credit Est.” on the CalSTRS Quick Navigator, which is on the home page. You will need to provide your ondering how much it and your highest earnable salary in birthday, current amount of service would cost to buy the last three years of CalSTRS- credit, current annual salary, service credit? The covered employment. W estimated purchase date, amount of CalSTRS Web site now lets you service to be purchased and amount calculate the cost online. If you Nonqualified Service of lump-sum deposit (if any). decide to purchase additional Credit Estimator service credit, you can also order The CalSTRS Web site also lets the forms on the Web that you need you estimate the cost of purchasing For More Information to make the purchase. nonqualified service credit. Consult the CalSTRS Web site, Sometimes called “air time,” your Member Handbook or listen to Permissive Service Credit nonqualified service credit is Teletalk message 250. You can also Calculator service credit not connected to any order the Purchase Additional The permissive service credit specific prior employment. It does Service Credit brochure by calling calculator helps you estimate the not count toward eligibility for the 800-228-5453. Use the automated cost of buying this type of service career factor, longevity bonus or forms ordering option. You can credit. Permissive service credit can one-year compensation. You can view the brochure online at be purchased for performing non- purchase up to five years of www.calstrs.ca.gov. CalSTRS work activities or for service credit you would have earned while on an employer- Other Online Calculators approved leave. Retirement Benefits Calculator Here’s a partial list of permis- Did you know that currently you can estimate your CalSTRS sive service credit you can calculate retirement benefit by using the online calculator? It doesn’t matter the cost for: what your age is or how long you’ve been a member of CalSTRS. Just • Certain military service plug in your birthday, retirement date, service credit, salary and beneficiary’s birth date and the calculator will do the rest. Try different • Out-of-state service scenarios to help decide the best retirement for you! • Other types of teaching CalSTRS is also working on other online calculators. In the experience, including part time near future, you will be able to access the Web site to find: • Maternity or paternity leave •A Redeposit Calculator that will calculate the cost to redeposit To use the calculator, select previously withdrawn CalSTRS retirement funds Defined Benefits from the home •A Monthly Payment Calculator that will let you know what your page (www.calstrs.ca.gov). Use the monthly payments may be relative to payroll deductions or Quick Navigator to select “Purchas- personal payments ing Additional Service Credit.” You •A Benefit and Cost Recovery Calculator to determine how long will need to provide the amount of it will take to recover the costs of purchasing service credit service credit you would like to buy

Spring 2002 11 Born in the 1940’s? This Message is for You

f you are in your 50’s, you are either eligible or close to eligible to retire. You can retire at age 55 with at least five years of service credit or at age 50 with at least 30 years1940 of service credit. If you are sure you will want to provide a Ilifetime monthly allowance to another person or persons when you die, you may want to consider making a pre- retirement election of an option as soon as you are eligible to retire. This will ensure a monthly allowance for that person even if you die before you retire. That person is called your “option beneficiary.” You can choose more than one option beneficiary. When1941 you provide a lifetime allowance to another person, your allowance is reduced, or modified, due to actuarial assumptions based on your age and the age of the person you select. Since this allowance modification is based on both your ages, generally, the younger you are when the selection is made, the less your allowance is reduced.* The following example illustrates this advantage. 1942 EXAMPLE Disadvantage to Selecting Member Chooses Pre-Retirement Election of an Option a “Pre” 1943• Member retires at age 60 While many members find selecting a pre-retirement election • Option 2 beneficiary is also age 60 of an option to their advantage, • Both member and option beneficiary were age 55 when pre-retirement there is a disadvantage. If you option was chosen cancel or change your pre-retire- Unmodified Allowance ...... $1,963.891944ment election of an option or your option beneficiary dies before you x Percentage Payable* ...... x.936 retire, your retirement allowance = Member’s Modified Allowance ...... $1,779.28 will be permanently reduced. Member Chooses an Option at Retirement 1945 For More Information • Member retires at age 60 You can figure your approxi- • Option 2 beneficiary is also age 60 mate retirement allowance under Unmodified allowance ...... $1,963.891946the various options by using the online retirement calculator at x Percentage Payable* ...... 879 www.calstrs.ca.gov, or read about = Member’s Modified Allowance ...... $1,726.26 options and a pre-retirement election of an option in the * The percentage payable will be the higher in effect on either your effective date of 1947retirement or your pre-retirement election of an option. Member Handbook. Note: If a member takes a disability retirement, their pre-retirement election 1948of an option is voided and the member makes a new election. The election can be the same option and beneficiary as before.

121949 Bulletin In the News What Is the DBS There have been two recent Program? significant news stories that have concerned CalSTRS Defined Benefit As you read on page 1, members. The first is the collapse of Enron. starting July 1, 2002, The second is the Governor’s budget, which had proposed contributions from any extra service you perform in deferment of the state’s General Fund contributions to CalSTRS. excess of one year will go Two stories, the same question. Members called CalSTRS to ask into your Defined Benefit Supplement account. In whether their Defined Benefit allowance would be affected. In addition, one-fourth of your both cases the answer is no. Defined Benefit contribution, or 2 percent of your Your retirement allowance is based on a formula set by law, not CalSTRS-covered on the overall value of the CalSTRS investment portfolio. So in employment, is allocated to the case of Enron or any other CalSTRS investment, fluctuations this account from January 1, 2001, through 2010. in the investment portfolio will never affect your allowance amount. The same is true for any changes to the state’s There will be no change in contributions to the DB Program. the 8 percent contribution currently withheld from your Here are the facts on CalSTRS’ investments in Enron: CalSTRS paycheck. Also, your owned 2.02 million shares in Enron on June 30, 2001. Since CalSTRS DB retirement allowance will not be then, all Enron shares have been sold. While the Enron stock affected by your DBS has lost value since June, the overall CalSTRS investment account. portfolio gained $2.2 billion in the month of November. (This

You will receive your DBS month includes the net of the Enron decline.) Overall CalSTRS funds when you become losses in Enron were $47.5 million, which represents a small disabled, retire or leave fraction of the $102 billion portfolio. CalSTRS-covered employment. The amount in the In the case of the Governor’s proposal, with the state facing a accounts will vary, projected $12 billion shortfall, the Governor is seeking ways to depending on each member’s salary or save General Fund dollars. In his initial budget announced in compensation for extra January 2002, Governor Davis proposed deferment of the service and the interest the state’s general fund contribution to CalSTRS for 27 months, account earns. which was to save the state approximately $948 million over Your beneficiary is eligible two years. The funds were to be repaid over a 30-year period. to receive your DBS funds The budget would also have included an additional benefit for upon your death. Your DBS CalSTRS members. This proposal has been withdrawn, and, at beneficiary is the same person or persons you have press time, the Governor had adopted a proposal by the State designated for your DB Treasurer for the sale of bond funds as a means to decrease the account. state’s General Fund costs.

Spring 2002 13 TELETALK MENU Contacting CalSTRS— The CalSTRS Teletalk system has more than 100 Making Headway recorded messages that can provide general Here’s Some Other Ways to Get Information information on CalSTRS benefits and services. You n the last issue you heard that callers were getting busy signals and experiencing can call the Teletalk line anytime. Just dial 800- long waiting times when using the CalSTRS toll-free phone system. You also heard 228-5453 and press 2. I that CalSTRS was working hard to improve phone service. So how is CalSTRS doing? Making headway—although at times, callers still Here is a list of Teletalk experience delays. CalSTRS members still hear the dreaded, “We’re sorry, but all our categories. lines are busy,” but less often, and waiting time has been reduced. Recent improvements such as the hiring of new employees, redesigning the phone 90 What’s New? system to allow for specialization of staff and adding self-service features to the phone 100 General Information system have helped improve customer service. 150 Membership, Service Credit and Contributions Be assured that CalSTRS employees and the Teachers’ Retirement Board are 200 Regional Counseling working diligently to ensure the top-quality service that members deserve. Plans are Services underway to recruit, hire and train additional staff and to provide other avenues for 250 Purchase of Additional members to obtain CalSTRS information. Service Credit and Here are some ways to get the information you need without hearing a busy signal Redeposits or spending time on hold: 300 Pre-Retirement Election of an Option Call after hours to use the automated telephone system to hear Teletalk messages, 350 Service Retirement order forms and get information about your account. The number is 800-228-5453. 400 Disability Benefits Automated services are offered 24 hours a day, seven days a week. 420 Coverage A, Disability ☛ For information about your account, press 1. You will need to provide your Social Allowance and Rehabili- Security number and date of birth. The information you will hear includes your tation Program contributions, interest, service credit, date retirement application was received and 450 Coverage B, Disability date refund application was received. Retirement and Rehabili- tation Program ☛ For Teletalk, which has more than 100 recorded messages that can provide general 500 Death Benefits information on CalSTRS benefits and services, press 2. You can even have a Teletalk 520 Coverage A, Family message faxed to you for reference. Allowance Program ☛ Order forms or booklets by pressing 3. 550 Coverage B, Survivor Use the CalSTRS Web site. You can obtain information about benefits and Benefits services, view publications and order forms on the Web site at www.calstrs.ca.gov. If you 600 Increases In Benefits do not have a computer at home, visit your local library. Nearly all of them provide 650 Tax Liability 700 Refund of Contributions Internet access and staff to help you. 750 Deferred Savings E-mail your questions. E-mails may be sent through the CalSTRS Web site by Program choosing “Contact CalSTRS” on the home page menu. Inquiries will be answered 800 Teachers’ Retirement within 10 working days. Fund Investment Of course if you need to speak to someone directly, please call the Public Service 900 Cash Balance Benefit Office. Representatives are available from 8:00 a.m. to 5:00 p.m., Monday through Program Friday. As the improvements to customer service continue, soon you’ll hear, “Operators are standing by.”

14 Bulletin Goal is First Retirement Check Within 30 days

After you retire, how long will it take for your first retirement check to arrive? CalSTRS’ goal is to provide you with your first check within 30 days of your effective date of retirement or within 30 days of the date your completed application is received by CalSTRS, whichever is later.

An Acknowledgement, Then an Award Letter CalSTRS will send an acknowledgement letter confirming that your application has been received. Next you will receive an award letter, which will detail your estimated retirement allowance.

How long it takes to receive your award letter depends on when you submitted your application. Your award letter will be sent about 30 days before your retirement date. If you submit your application close to but not later than the month in which you retire, your award letter will be sent after your completed application is received.

Allowance May Be Adjusted Your first check will likely be an estimated amount because CalSTRS may not have the final information about your account by the time the check is issued. Although your first check may be adjusted, the initial amount is typically very close to what you will receive on an ongoing basis. Because information about your account undergoes change as information is received from the employer and processed by CalSTRS, you may receive more than one allowance adjustment letter.

Adjustments As additional information is received from your employer, your allowance is adjusted retroactively to the date of your retirement. At that time, you will receive the adjustment letter listing the amount paid to date, the correct allowance payable and the reconciliation of any differences. It’s a good idea to save the adjustment letter for your income tax records. Any retroactive payments due you will be sent shortly thereafter, and any overpayments will be deducted from your retirement payments.

Spring 2002 15 PRSRT STD U.S. POSTAGE PAID PERMIT NO. 25 P.O. Box 15275 SACRAMENTO, CA Sacramento, CA 95851-0275

How to Reach Us Write CalSTRS at: California State Teachers’ Retirement System P.O. Box 15275 Sacramento CA, 95851-0275 Call CalSTRS Public Service Office: 800-228-5453 916-229-3870 916-229-3541 for TTY for hearing impaired person. Browse CalSTRS Web site at: www.calstrs.ca.gov When contacting CalSTRS, be sure to include your Social Security number.

CalSTRS Vision Statement Jack Ehnes, Chief Executive Officer CalSTRS is committed to lifetime security and service that meets Christopher J. Ailman, Chief Investment Officer the changing needs of California’s educators. Sherry Reser, Managing Editor State of California Linda Riley, Editor Gray Davis, Governor Aileen Adams, Secretary, State and Consumer Statements in this publication are general and the Teachers’ Services Agency Retirement Law is complex and specific. If a conflict arises between information contained in this publication and the law, Teachers’ Retirement Board any decisions will be based on the law and not on this Gary Lynes, Chair publication. George W. Fenimore, Vice Chair Paul G. Krasnow The Bulletin is published twice a year for active and inactive Marty Mathiesen members of the Defined Benefit Program and participants in Karen Russell the Cash Balance Benefit Program of the California State Jay Schenirer Teachers’ Retirement System. Comments or suggestions may be Carolyn A. Widener directed to: Editor, Public Affairs, MS #34, P.O. Box 15275, Phil Angelides, State Treasurer Sacramento CA 95851 Kathleen Connell, State Controller Delaine Eastin, Superintendent of Public Instruction Printed on recycled paper B. Timothy Gage, Director, Department of Finance

16 Bulletin