Defined Benefit Supplement Program - Frequently Asked Questions

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	Defined Benefit Supplement Program - Frequently Asked Questions

	General Information What is the Defined Benefit Supplement Program? Assembly Bill 1509 (Chapter 74, Statutes of 2000) established the Defined Benefit Supplement Program. This is an additional benefit for active CalSTRS Defined Benefit Program members. It is designed to provide you with a lump-sum cash or monthly annuity benefit in addition to your benefits from the DB program at no extra cost to you. AB 1509 required that 1/4 of your 8 percent CalSTRS contribution be allocated to your new account from January 1, 2001 to December 31, 2010. At retirement, disability, death or six months following termination of CalSTRS-covered employment, the funds in your account will be available to you or your beneficiary, whichever is applicable. What is my contribution rate? If you were a member between January 1, 2001 and December 31, 2010, you have contributed 8 percent of creditable compensation earned to the CalSTRS DB Program. Six percent of creditable compensation earned went to the CalSTRS DB Program and 2 percent to the DBS Program account. For example, if your monthly compensation for CalSTRS-covered service is $3,000, you contribute $240 per month to CalSTRS; $60 was allocated to your DBS Program account. AB 2700 was also enacted and reforms the definition of creditable compensation to include money paid for overtime, overload, summer school, intersession, stipends paid to department chairs when release time is not granted by the employer and other specified service. It also requires that member and employer contributions on compensation earned for creditable service in excess of one year of service in a school year, beginning July 1, 2002, be credited to the DBS Program. (This provision has no sunset date.) How long will these contributions be allocated to my DBS account? Your DBS account was established January 1, 2001 or when you were employed in CalSTRS-covered employment, whichever was later. The 2 percent of contributions under AB 1509 to your DBS Program account terminated January 1, 2011 and are no longer allocated to your DBS account. The contributions from AB 2700 compensation will continue to be paid into your DBS account. What happens to my money in the DBS Program? Your money earns interest at a guaranteed rate that is set annually by the Teachers' Retirement Board. Will my paycheck stub reflect my contributions to this new program? No. Your regular CalSTRS monthly contribution amount will not change or be reduced as a result of the new DBS Program and your checkstub will look the same. Where can I get more information about the DBS Program? Check the Defined Benefit Supplement Program webpage or call the CalSTRS 800-228-5453. Do I need to take any action at this time, such as completing enrollment forms for the DBS Program? No. As an active member, you are automatically enrolled in the DBS program. Can I make voluntary contributions to my DBS account? No. Can I make a partial withdrawl of my funds from my DBS account? No. You must withdraw all of the funds from your DBS Program account when you terminate CalSTRS-covered employment or receive a retirement or disability lump-sum benefit from your DB Program account. Can I borrow against the balance in my DBS account? No. Does my employer make any contributions on my behalf to the DBS account as a result of AB 1509? No. Can I name different beneficiaries for my DB and DBS accounts? No. Your DBS beneficiary will be the same as your DB Program designated beneficiary. Will my DBS contributions affect any voluntary contributions I make to other savings programs, such as contributions to a 403(b) account? No. How would a divorce affect my DB Program and DBS account? Your DB Program and DBS funds are separate and distinct accounts. However, both are subject to California community property laws and distribution by court order. Can I request an estimate of my DBS account? Yes, when the funds in your DBS account equal or exceed $3,500. More information on annuity estimates is available here. You can find your DBS account balance on your benefit estimate letters and statements of account, which are available on myCalSTRS. Must my benefit effective date be the same for both my DB Program and DBS account? Yes. Service Retirement As a result of AB 1509, will my monthly retirement benefits under the DB Program change? No. Your monthly DB retirement allowance is based on a formula that includes your final compensation, years of service credit and a factor based on your age at retirement. It is not based on the funds in either your DB Program or DBS account. What happens to my DBS account when I retire? At retirement you will elect how to receive your DBS funds. If you retire with a balance in your DBS account of less than $3,500, you must take a lump-sum distribution. If the balance in your DBS account is $3,500 or more, you must choose one of the following: a lump-sum distribution an annuity combination of lump-sum distribution and annuity Must my benefit effective date be the same for both my DB and DBS account? Yes. Disability Benefits As a result of my new DBS account, will my monthly disability benefits under the DB Program change? No. Your monthly DB Program disability allowance is based on a formula that is not affected by the funds in either your DB Program or DBS accounts. Must my benefit effective date be the same for both my DB Program and DBS account? Yes. What happens to my DBS funds if I become disabled before I retire? Provided that the amount in your DBS account is at least $3,500 you can elect to receive either a lump-sum distribution or a monthly annuity. If the amount in your DBS account is less than $3,500, you must take a lump-sum distribution. Annuity Choices What are my annuity choices? You have the following five annuities to choose from: single life annuity without cash refund feature single life annuity with cash refund feature 100 percent joint and survivor annuity 50 percent joint and survivor annuity period certain annuity Additional information about these choices will be available in the future on the CalSTRS Web site and publications. What is a single life annuity without cash? A lifetime monthly payment with no cash refund payable upon your death. Single Life Annuity choices are only available to Defined Benefit members who retire without selecting an option beneficiary. What is a single life annuity with cash? A lifetime monthly payment. Any balance remaining upon your death will be paid to your one-time death benefit recipient(s). Single Life Annuity choices are only available to Defined Benefit members who retire without selecting an option beneficiary. What is a 100% joint and survivor annuity? This choice provides a monthly annuity for your lifetime and the lifetime of your annuity beneficiary. One hundred percent of your monthly annuity would be paid to your annuity beneficiary upon your death. Joint and Survivor Annuity choices are available to members who elect an option before or at retirement. The beneficiary of a Joint and Survivor Annuity must be the same person you named as your Defined Benefit option beneficiary. What is a 50% joint and survivor annuity? This choice provides a monthly annuity for your lifetime and the lifetime of your annuity beneficiary. Fifty percent of your monthly annuity would be paid to your annuity beneficiary upon your death. Joint and Survivor Annuity choices are available to members who elect an option before or at retirement. The beneficiary of a Joint and Survivor Annuity must be the same person you named as your Defined Benefit option beneficiary. What is a period certain annuity? A monthly payment made for any number of years from three to 10. The amount you receive is based on the number of years over which the annuity is paid. If you die before the annuity period ends, the remaining payments are paid to your one-time death benefit recipient(s). Can I request an estimate of my DBS annuity? Yes, when your DBS account balance is equal to or exceeds $3,500. More information will be available in the future on the CalSTRS Web site and publications. When can I make my annuity choice? At the time you file a DB Program retirement or disability benefit application, you will also make your DBS distribution choice. You must either choose a lump-sum distribution or select an annuity or a combination of both. Is this money taxed when I take it out? Yes. These funds may be subject to state and federal taxes unless you roll the account balance over to another qualified plan. You may wish to consult your tax advisor. If I Terminate Am I required to take the DBS termination benefit if I leave CalSTRS-covered employment? If you leave CalSTRS-covered employment and: Withdraw the funds from your DB Program account, you are required to take the DBS termination benefit which will close out your DBS account, or Do not withdraw funds from your DB Program account, you may leave your DBS Program funds on account. Your funds will continue to accrue interest as long as they remain on deposit. If I terminate employment, when can I get my DBS money? If after termination of employment you have not performed creditable service for six months and you have received a refund of your Defined Benefit account, CalSTRS is required to refund your Defined Benefit Supplement account. If I terminate and take my DBS termination benefit and later return to membership, can I redeposit these funds? No. Although you can redeposit previously refunded funds into your DB account, funds from your DBS account cannot be redeposited. If I terminate employment and take my DBS termination benefit and return to CalSTRS membership before six months have elapsed, will the termination benefit be issued? No. If you return to membership and DBS contributions are received within the six-month period, your application for a DBS termination benefit will be canceled. In the Event of Death Must my benefit effective date be the same for both my DB and DBS account? Yes. What happens to my DBS funds if I die before I retire? Provided that the amount in your DBS account is at least $3,500, named beneficiary(ies) can elect to receive either a lump-sum distribution or a monthly annuity. If the amount in your DBS account is less than $3,500, named beneficiary(ies) must take a lump-sum distribution. What happens to my DBS funds if I die after I retire? If you elected a lump-sum distribution from your DBS account at the time of your retirement or disability, no further DBS benefit is payable. If you elected a monthly annuity, any further distribution of funds is based on the type of annuity selected. As a result of AB 1509, will my survivors' monthly family allowance under the DB Program change? No. Your survivors' monthly family allowance or surviving spouse allowance is based on a formula that is not affected by the funds in either your DB Program or DBS accounts. In the event of my death, what happens if I elected a single life annuity without a cash refund feature? There is no cash refund payable upon your death. In the event of my death, what happens if I elected a single life annuity with a cash refund feature? Any balance remaining upon your death will be paid to your one-time death benefit recipient(s). In the event of my death, what happens if I elected a 100 percent joint and survivor annuity? One hundred percent of your monthly annuity would be paid to your annuity beneficiary upon your death. In the event of my death, what happens if I elected a 50 percent joint and survivor annuity? Fifty percent of your monthly annuity would be paid to your annuity beneficiary upon your death. In the event of my death, what happens if I elected a period certain annuity? If you die before the annuity period ends, the remaining payments are paid to your one-time death benefit recipient(s). Tax Considerations Are my contributions to my DBS account tax deferred? Yes, as long as your employer does not tax your retirement contributions when your salary is paid. Is the interest on my DBS account tax deferred? Yes. Yes. These funds may be subject to state and federal taxes unless you roll the account balance over to another qualified plan. You may wish to consult your tax advisor.

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