US - Members of the California State Teachers' Retirement System (CalSTRS) could pay higher contributions under a Budget proposal released this week by governor Arnold Schwarzenegger.
The proposal would eliminate the state’s annual contribution to the fund’s defined benefit plan and shift the burden of payment to employers, saving the state US$469m.
Currently, members contribute 8% and employers 8.25% of payroll while the state contributes 2.017% of the total teacher’s payroll of two fiscal years ago.
If passed, the 2% state contribution would shift to the employers, increasing their contribution to a total 10.25%. Employers would then have the option of passing on the increased contribution to members through collective bargaining agreements.
In the Budget document, the office of the governor said: “Recognising that this shift could ultimately result in less take-home pay for teachers, this proposal is coupled with a proposal to permit teachers to opt-out of the newly created defined benefit supplement program.
“Those teachers who choose to opt-out of the DB supplement program will realise an immediate increase in compensation equal to a 2% raise.”
Commenting on the proposal, CalSTRS said: “The budget proposal raises a number of potential concerns which CalSTRS will actively address to determine the legality of the provisions of the proposal and to ensure the members’ benefits remain secure. While sensitive to the state’s funding constraints, the Teachers’ Retirement Board must keep as paramount its fiduciary responsibility to the members.”
CalSTRS’ DB program pays monthly retirement, disability and survivor benefits to about 193,000 retirees and will provide future benefits to about 500,000 members currently in the system. The supplement program was established in 2001 to provide additional retirement income to members.
In addition, the Budget proposes to bargain with employee unions to equalise the employee and employer share of the annual contributions made to the California Public Employees Retirement System (CalPERS), as labor contracts expire. The measure would save US$206m in 2005 and 2006, according to the governor’s office.
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