The postretirement earnings limitation exemptions are set by the Teachers’ Retirement Law and contain a sunset date. That date is June 30, 2012. When a law contains a sunset date, it will expire or sunset on the determined date unless an extension in the law or the enactment of a new law occurs.

In the case of the postretirement earnings limit exemptions, legislation to extend the exemptions has not been enacted.

A lot of hyperbole has been written about what "ought" to be done with regards to reforming, or lowering the cost of, public pensions. However, that’s very different from what "can" be done, legally.

California case law and the California and U.S. constitutions have enshrined the concept of legally binding contracts. Under that concept, once a public entity enters into a contract with employees, it cannot rewrite that contract without the agreement of the employee. Therefore, according to current law, CalSTRS core pension benefits (retirement, disability and survivor benefits) are guaranteed by both the U.S. and California constitutions.

The year 2013 is the earliest any of the provisions within the Governor’s 12-point pension reform proposal could go into effect, including elimination of purchasing non-qualified service credit; that’s if the measures are adopted as written.

It’s important to keep in mind that while the Governor has introduced specific pension reform measures, all measures must first go through the legislative process before anything is certain.

Under current CalSTRS-offered benefits, the normal retirement age is age 60, and the minimum retirement age is generally attainable at age 55 with at least five years of service credit. If an educator has 30 years of service credit, he or she is able to retire even earlier at age 50.

CalSTRS takes pension spiking very seriously, which is why we have, and continue to aggressively pursue instances of suspected spiking. Our internal controls and processes to identify and resolve instances of spiking include regularly conducting school district audits and analyzing employer compensation reports to identify excessive increases that could affect the member’s final compensation factor.

No one can predict the outcome or precise timing of any potential pension reform measures. As meaningful discussions on pension reform take shape, it’s important to remember that the Governor’s 12-Point proposal must work its way though the legislative process before anything is official.

On October 13, 2011, CalSTRS along with a number of our stakeholders participated in GASB’s public hearing and formally recommended the Board to suspend adoption of the Exposure Drafts as they are currently written until more appropriate accounting standards can be implemented.

GASB‘s intent behind the new accounting rules is to implement improved financial reporting, which CalSTRS supports. However, in their current state, the proposed GASB amendments do not accurately address the cost-sharing accountability structure of the CalSTRS pension system.

CalSTRS has been very transparent in providing the Legislature and Administration with financial data that illustrates the need to address a $56 billion funding shortfall, the gap between projected future assets and obligations to retired educators. CalSTRS assisted the State Auditor in developing the information for the report which further underscores that, absent any thoughtful action, the fund is projected to be depleted in the early 2040s.