Dear Scotty, "My CalSTRS report is confusing me!" (updated 2018!)
(The following was originally published in October 2016. October 2018 updates are available at the bottom of this page.)
I logged into calstrs.com to check my annual information, just like you said at the retirement workshop, but there were some weird things on my Retirement Progress Report. Why was there money in the DBS account under “member” that wasn’t matched by the district. And what is this special message about extra money? Will I actually get that back? I don't like people taking my money because I want to invest it and increase my earnings!
Dear Mr. Gekko,
Great question. The retirement progress reports for CalSTRS came out in September so now is a good time to check it! For those who had some DBS earnings in certain years, CalSTRS has committed to making sure the money will go to the employees who earned it when things are good. So those extra dollars are from the fund over-performing in the years mentioned. This money comes and goes and shouldn’t be counted on, but for some faculty, there was a nice extra bump of over $1,000 into the DBS account. Enjoy it now – CalSTRS reported earnings of 1.4% in July of 2016, far below the assumed rate of 7.5%. The prior year was 4.8%, but 2013-14 had 18.66% return, and some of that did trickle over the following year.
As to the extra money description (located in the special message under the Defined Benefit Supplement box on page 2 or 3 of most reports), that refers to the amount CalSTRS took off the salary right away. This amount is known as “excessive contributions” because the contribution to the account is 8% from both employee and employer, and any excess must be returned. As your main contribution rate was 9.2%* last year (1.2% above the 8%), any overtime work performed had a larger contribution rate than is allowed. At the end of the year, CalSTRS returns the money to the districts, and they in turn pass it back to the individual employees. The first year this happened was 2014-15, but at that time the contribution rate was 8.15%, so the difference of 0.15% was hardly noticeable. Next year, expect even more as the rate this year has jumped to 10.25%*! This is the final increase set forth by AB 1469, which took effect on July 1, 2014.
*All numbers assume 2% at 60. If you are under 2% at 62, then this year will move the rate to 9.205% instead of 10.25%, and last year was 8.56% instead of 9.2%.
So don’t worry, Gordo, that money was yours and you’ll get it back. Happy investing!
September 2018 UPDATE
Hey Mr. Gekko,
I thought you’d want an update on the 2018 CalSTRS changes since the annual statements were released recently. For those interested, it was September 11, 2018 at midnight and yes, I opened mine as soon as it was released! Here are the major updates to be aware of:
While there were “Additional Earnings Credits” for the years 2013-14 and 2014-15 in the annual summary for 2016, there were none in 2017 or 2018. Based on some of the recent great returns for CalSTRS, these “Additional Earnings Credits” might return next year, but there are no guarantees. Unfunded liabilities for CalSTRS increased again in general, and there were no additional earnings.
There was an expected increase for CalSTRS 2% at 62 faculty up to 10.205%. https://www.calstrs.com/information-circular/eic18-2-volume-34-issue-2 and https://www.calstrs.com/calstrs-funding-plan. This brings all full-time faculty to virtually the same contribution rate for their base salary with "2% at 60" members paying 10.25%.
Because the Defined Benefit Supplement (DBS) account contributions rate is only 8% while around 10.25% is sent to CalSTRS for all pay including contractual and overload, there is around 2.25% in excess contributions. See the “special messages” box under your DBS account information in the annual report. This amount is credited back to you on an upcoming paystub; for reference, the amount was credited on the paystub at the end of November, 2017.
Sure, Gordon, the amount you get back is based on your overload and some could see over $1,000 back in a future check. Hope you spend it quickly on the newest cryptocurrency!
See you soon,