| Adjunct Junction by Phyllis Eckler |
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Phyllis Eckler,
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There have been many changes
made to part-time faculty retirement programs in the last year and a
half, and many legislative initiatives that will hopefully go further
toward making retirement savings pay future dividends. To begin with,
Glendale Community College part-timers must elect one of the two plans
offered by the California State Teacher's Retirement System (CalSTRS). The CalSTRS
Cash Balance (STRS CB) plan allows immediate vesting (that means that
BOTH the employee's contribution of 4 percent and the employer's 4
percent contribution will always be available to the enrolled member).
As noted above, 4 percent of all employee earnings and 4 percent of
district funds are used to fund this retirement program. These
contributions accrue a set percentage of interest yearly
which is based on the 30-year Treasury rate. It usually hovers around 6
percent. The Cash Balance plan is a retirement savings vehicle much like
a 401K. The total amount of money that collects over time plus any
interest that accrues is available to the faculty member upon retirement
or at age 59 1/2. If an instructor leaves the teaching institution, the
money may be left in the CalSTRS program until retirement, or one may
elect to roll it over to another retirement program such as an IRA
without incurring a penalty. The other
plan which part-timers may elect is called the CalSTRS Defined Benefit (STRS
DB) Program. This is more of an old-fashioned pension plan. Employees
contribute 8 percent of their pay to the plan while their employer
contributes 8 1/4 percent. It takes the equivalent of five years of full-time teaching to vest in this program (i.e.
to take advantage of both the employee's and
the employer's contributions). If a part-timer does not vest in the
program before deciding to retire, he or she would receive only his or
her own 8 percent contribution back plus interest. Also, once election
has been made to join the STRS DB, a part-timer may not choose to go
back to the Cash Balance plan. Although
there are obvious risks involved in choosing the STRS DB program (such
as the uncertainty of vesting), recent changes have made this option
somewhat more attractive. A pension (STRS DB), unlike a retirement
savings plan (STRS CB), never runs out of money. It pays the member a
defined amount monthly until death. This amount
is determined by three factors that are multiplied together. The formula
is as follows: Service Credit X Final Compensation X Age Factor =
Monthly Pension Service Credit This is
determined by how many years the teacher has taught. In the past this
service credit computation was very much skewed against part-timers
because it was figured in hours taught by a full-timer in one year. A
full-time year of teaching for the average lecturer was considered to be
15 hours in the classroom and 15 hours of preparation and grading per
week times 35 weeks per year. This amounted to 1050 hours per year.
Part-timers who were in the STRS DB program received service credit only
for the teaching time and none for preparation and grading. This meant
that a part-timer teaching half as much as a full-timer (7.5 hours per
week) received only 25 percent service credit, not 50 percent. This was
because the part-timer was not given credit for the other 7.5 hours of
grading and preparation, since he or she wasn't actually receiving pay
for that. As this inequity was brought to light legislation was
passed to change the calculation of a full-time year to include only the
15 hours per week that a full-time lecturer teaches, not the preparation
and grading; thus the calculation for a full-time year of service credit
became 525 hours per year (15 hours of teaching X 35 weeks/yr.). This
change has finally been instituted at Glendale College for all
part-timers as of this spring. The other change, as of July 2001, allows
all
hourly work done by a part-timer including office hours, release time,
substitute teaching and intersession teaching to be counted toward the
full year's service credit. In this way it is now possible for a
part-timer to actually get a full year's service credit even though by
law he or she is allowed to teach only up to 60 percent of a
full-timer's load. Another law that was recently passed allows
part-timers to use funds from their Cash Balance savings plan to
"buy back" service credit time so that it would not really
take five future years to vest in the Defined Benefit program if one
decided to "buy back" years of part-time teaching. Final Compensation The other
factor that is used in the calculation of a part-timer's monthly pension
upon retirement is one's "final compensation," sometimes
called the "annual earnable." This is the annual salary that a
part-timer would earn if The
part-timer could work one hour a week for that last year and the
"final comp" amount would still be his hourly pay times 525. Obviously
a part-timer's "final comp" amount was higher under the old
1050 hour system because the hourly pay was being multiplied by 1050 to
give the part-timer an "annual earnable" that was twice as
high. A part-time member must use the average "annual
earnable" of any three consecutive years of teaching to come up
with the "final comp" amount for the above formula. Part-timers
may still use that 1050 multiple, but only to multiply the hourly pay
that they were paid in the year that that 1050 multiple was used
(i.e.2002 and earlier). In other words, a part-timer retiring in 2004
cannot use her 2004 hourly pay (which because of annual raises is
usually higher each year) and multiply it times 1050. She can only Age Factor This is
probably the most straightforward part of the formula. If a part-timer
retires at age 50 the multiple that would go into the formula would be
.011. If he retires at age 63 the multiple would be .024. This was
done to provide an incentive to teachers to retire later rather earlier
from the teaching profession. Of course there is a range between those
two multiples and a complete table for each age is available from
CalSTRS. What Does All This Mean? The basic
difference between the STRS Cash Balance plan and Defined Benefit plan
is that the former has a limited payout based on contributions plus
interest. The latter has an unlimited monthly benefit until death. The
total benefit amount for the STRS DB program usually far outstrips that
of the total contributions made by the worker during his or her career
and is only There are
many other factors that part-timers should be aware of before electing
STRS DB coverage. Issues that concern part-timers about STRS DB and
examples are given in the Issues section of the Guild website at |
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