The Cash Balance Benefit Program (CB Benefit Program) is an optional program designed specifically for part-time, substitute, adjunct or temporary educators. More detailed information on this program can be found in the Cash Balance publications for part-time teachers and community college instructors.

Description of Program

The Cash Balance Benefit Program is a defined benefit plan that meets the requirements of the Internal Revenue Code. It is optional to school districts, community college districts or county offices of education as an alternative retirement plan.

The CB Benefit Program is a primary retirement program for employees of California public schools who are hired to perform creditable service by:

• School district or county office of education, on an hourly or daily basis, and/or employed or contracted for less than 50% for each full-time position.
• Community college district, on a part-time or temporary basis (semester to semester), or for not more than 60% of the hours per week considered a regular full-time assignment.
• Governing body of an employer, as a trustee member.

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Plan Eligibility Requirements

Employers must elect to offer the program through formal school board action. The CB Benefit Program may be offered exclusively or along with other alternative plans, including Social Security.

At the time the CB Benefit Program is elected, part-time employees performing less than 50% creditable service of a full-time equivalent position participate in the program either:

• On the first day creditable service is performed
• Effective dates of the action to provide the program

If a member chooses coverage under the CalSTRS Defined Benefit Program or an alternative plan offered by their employer than the effective dates are not applicable.

Election of Coverage

If the governing board elects to provide coverage under Social Security or an alternative plan a member can choose not to participate in the CB Benefit Program.

A member can participate in the CB Benefit Program at a later date, if they initially chose alternative coverage. However, the program must be provided by the employer and the member is eligible to participate.

Discontinued Eligibility

Eligibility in the CB Benefit Program ends when:

• Accepting a position with a specific employer on the basis of 50% or more of a full-time equivalent
  • The position can be under a written contract or employment agreement
• Election into the Defined Benefit Program with the employer
• Working full-time performing creditable service with any employer

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Contributions

Each employer contributes a minimum of 4% of salary on behalf of each participating employee. Through the collective bargaining process, employers are permitted to pay different levels of employee and employer contributions, as long as the following conditions are met:

• The sum of the employee and employer contributions equals or exceeds 8% of employee salary, but in no event shall the employer contribution rate be less than 4%.
• The employee and employer contribution rates are the same for each participant employed by the employer.
• The contribution rates as determined under the collective bargaining agreement become effective on the first day of the plan year and remain in effect for at least one plan year.
• The employee and employer contribution rate shall be in one-quarter percent increments.

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Immediate Vesting

A participant is immediately eligible for a benefit equal to the sum of the balance of contributions, including compound interest earned on their employee and employer accounts.

Guaranteed Interest Rate

The guaranteed interest rate is set by the Teachers' Retirement Board for each plan year based on the 30-year Treasury rate.

Secure Investments

The CB Benefit Program is a separate benefit structure within CalSTRS. Contributions to the program are invested at the direction of the Teachers’ Retirement Board. For more information on the CB Benefit Program investments see page 11 in either the Cash Balance publication for part-time teachers or community college instructors.

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Gain and Loss Reserve

When the rate of return on investments is less than the guaranteed interest rate, funds accumulated in the Gain and Loss Reserve (Reserve) are used to credit interest to participant’s employee and employer accounts.

Additions to the Reserve are determined by the board, on an annual basis. Additions are based on earnings exceeding the need to credit the guaranteed interest rate and pay administrative costs.

The Reserve also ensures adequate funds are available in the Annuitant Reserve for monthly annuity payments.

Retirement Eligibility

Normal retirement age is 60, but no earlier than age 55 years. A participant must terminate all creditable service and apply for a retirement benefit. Distribution of a retirement benefit must begin by age 70 ½, unless still working.

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Early Withdrawals

Both federal and California state tax codes provide for tax penalties for certain early withdrawals. A 10% federal and 2.5% state tax penalty may be assessed for early withdrawals.

Rollover

Participants may be permitted to transfer funds from eligible retirement plans into the CB Benefit Program, as long as the transfers are allowable under applicable federal and state laws.

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Flexibility at Retirement

Normal retirement benefit is a lump-sum equal to the balance of credits in a participant's employee and employer accounts.

The entire lump-sum payment may be eligible to rollover into:

• An IRA
• A defined contribution plan
• Other eligible retirement plan(s) that accepts such a rollover

With a balance is $3,500 or more there are 5 annuities to choose from:

• Participant-Only Annuity
• 100% Beneficiary Annuity
• 75% Beneficiary Annuity
• 50% Beneficiary Annuity
• Period-Certain Annuity 3-10 years

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Reemployment After Retirement

If a participant becomes reemployed to perform creditable service while receiving a monthly retirement annuity:

• Prior to 60 years of age, their annuity shall be terminated. The employee/employer account of the participant shall be credited with the actuarial equivalent balances as of the date of reemployment.
• On or after 60 years of age but within one year of the annuity commencement date, their annuity shall be terminated. The employee/employer account of the participant shall be credited with the actuarial equivalent balances as of the date of reemployment.

However, if a participant becomes reemployed, to perform creditable service under the plan, on or after age 60 and more than one year after the annuity commences, the retirement annuity shall continue and if the employment is covered by Cash Balance participation the new employee/employer contributions shall be credited to a new CB account established on behalf of the participant.

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Disability Eligibility

A participant may apply for disability at any time. All creditable service subject to coverage by the CB Benefit Program must be terminated prior to the disability date. A disability benefit will become payable only upon determination by the board that the participant has a total and permanent disability.

Disability Benefit

Normal distribution is a lump-sum benefit. The benefit amount is equal to the balance of contributions, interest and additional credits in the participant's employee and employer accounts. Effective January 1, 2007, the participant may choose one of the following five annuities if the participant has a balance of $3,500 or more:

• Participant-Only Annuity
• 100% Beneficiary Annuity
• 75% Beneficiary Annuity
• 50% Beneficiary Annuity
• Period-Certain Annuity 3-10 years

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Death Benefit

Death of Participant Prior to Retirement

Normal distribution is a lump-sum benefit. The sum of the balance of credits of the participant's employee and employer accounts is payable to the named beneficiary. If no valid beneficiary is designated, the lump-sum payment will be paid to the participant's estate.

Beneficiary

A participant's beneficiary to whom a death benefit is payable, may elect to receive the benefit in the form of an annuity, provided the sum of the balance of credits to the participant's employee and employer accounts equals or exceeds $3,500. The beneficiary may choose a period certain annuity.

Death of Participant Receiving Annuity

Benefit payable in accordance with form of annuity elected by the participant.

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Termination Benefit (Refunds)

Upon termination of all creditable service subject to coverage by the plan, for any reason other than death, disability, or retirement, a participant may apply for a lump-sum termination benefit. The benefit amount is equal to the sum of the employee and employer accounts, plus compounded interest as of the date the benefit is paid.

Five-Year Rule

A participant may not apply for a termination benefit, if less than 5 years has elapsed following the date that the most recent termination benefit was distributed to the participant.

Waiting Period

The termination benefit is payable after 6 months has elapsed following the date of termination of employment. The application for the termination benefit will be automatically canceled if the participant performs creditable service within 6 months following the date of termination of employment.

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CB Benefit Program Definitions

• Additional Earnings Credit

  A percentage determined by the Board for a plan year by means of a plan amendment and credited to employee and employer accounts on a specified date.

• Annuitant Reserve

  Reserve account established by the board within the State Teachers' Retirement Fund for the payment of monthly annuities with respect to the CB Benefit Program.

• Disability Date

  Date the benefit becomes payable to a participant who has been approved for a disability benefit from the CB Benefit Program.

• Employee Account

  The nominal account of the participant to which employee contributions and interest and any additional earnings credits are credited under the plan.

• Employee Contribution Rate

  Percentage of the participant's salary withheld by the employer as an employee contribution.

• Employee Contribution

  Amount withheld from the participant's salary by the employer.

• Employer Account

  Nominal account of the participant in which employer contributions on behalf of the participant and interest and any additional earnings credits are credited.

• Employer

  School district, community college district, or county office of education that has elected to provide the benefits of the CB Benefit Program to persons employed to perform creditable service. Employer does not include the state.

• Employer Contribution Rate

  Percentage of salary the employer contributes to the CB Benefit Program with respect to each employee who is a participant of the program.

• Employer Contribution

  Amount contributed by the employer to the program for each employee who is a participant.

• Full Time Equivalent

  The time that a person who is employed on a part-time basis would be required to serve in a school year if he or she were employed full time, as defined by Education Code Section 22138.5, in that position.

• Participant

  Person who has performed creditable service subject to coverage under the CB Benefit Program, and who has contributions credited under the CB Benefit Program or is receiving an annuity under the CB Benefit Program by reason of creditable service.

• Plan Year

  Period commencing on July 1 and ending on June 30 in the following year.

• Reinstatement

  Reemployment with an employer in which creditable service subject to coverage by the CB Benefit Program had previously been terminated and a lump-sum distribution or annuity had been paid.

• Retirement Benefit

  Retirement benefit payable is an amount equal to the sum of the participant's employee and employer accounts as of the retirement date.

• Retirement Date

  Date the benefit becomes payable to a participant who has applied for a retirement benefit from the CB Benefit Program.

• Salary

  Remuneration in cash for creditable service by an employer to a participant. Salary does not include fringe benefits, job-related expenses, money paid for unused accumulated leave, compensatory damages, or severance pay. Annuity contracts, tax-deferred retirement programs, or other insurance programs are not salary when the cost is covered by an employer and not deducted from the participant's salary.

• Termination Benefit

  Benefit that is an amount equal to the sum of the participant's employee and employer accounts payable under the provisions of the CB Benefit Program upon termination of all creditable service.

• Total and Permanent Disability

  Any medically determinable physical or mental incapacity that is expected to prevent the participant from performing creditable service for the employer for a continuous period of at least one year.

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