Retirement Incentive Program Guidance

July 26, 2007

Dear County Superintendent of Schools and County Chief Business Officials:

RETIREMENT INCENTIVE PROGRAM GUIDANCE

Assembly Bill (AB) 1207 (Chapter 313, Statutes of 2003) made permanent a retirement incentive “golden handshake” program. This retirement incentive program allows school employers to offer an additional two years of service credit to members in the California State Teachers’ Retirement System (CalSTRS) Defined Benefit Program. To offer the program, the school district or county office of education must demonstrate net savings to the County Superintendent of Schools (County Superintendent) or State Superintendent of Public Instruction (SSPI), respectively.

This letter provides clarification and guidance in addition to the information already available from CalSTRS directives, information circulars, and a spreadsheet program from the California County Superintendents Educational Association (CCSESA).

Background

CalSTRS issued a December 30, 2003, Employer Directive 2003-06 (ED 03-06), which informs employers of two retirement incentive programs provided by AB 1207, a 2+2 Retirement Incentive Program which has since sunset, and a 2-Year Retirement Incentive Program. The 2-Year Retirement Incentive Program is still in effect and is the subject of this letter.

The ED 03-06 provided general guidance to school employers wishing to offer the retirement incentive programs. It clarified that CalSTRS is not the approving authority for determining cost savings; rather, it is the employer's responsibility to demonstrate a cost savings, without specifying the period over which the cost savings must be realized. The condition, however, is that the cost-savings period and methodology must be agreed to by the County Superintendent or SSPI as appropriate, prior to finalizing the memorandum of understanding (MOU) or formal agreement.

Attachment A [http://staging.cde.ca.gov/fg/ac/co/ghfieldltr2007a.asp] provides highlights of the CalSTRS directive.

CDE Guidance

Attachment B [http://staging.cde.ca.gov/fg/ac/co/ghfieldltr2007b.asp] provides guidelines that the California Department of Education (CDE) will use to evaluate cost savings for golden handshake requests for county offices of education. Because SSPI approval should be provided prior to finalizing the MOU or formal agreement, we ask that you allow the CDE a minimum of 30 calendar days to review the request prior to local approval of the incentive.

If you have any questions or would like additional information on this subject, please contact the Office of Financial Accountability and Information Services, at 916-322-1770 or by e-mail at sacsinfo@cde.ca.gov.

Sincerely,



Scott Hannan, Director
School Fiscal Services Division