CalSTRS administers a hybrid system as part of a comprehensive financial security package for members that includes the Defined Benefit Supplement Program, a cash balance plan.
Defined Benefit Supplement accounts were established for each active member of the Defined Benefit Program in January 2001.
The account is available to members when they begin receiving their monthly Defined Benefit, or six months after leaving CalSTRS-covered employment and receiving a refund of Defined Benefit contributions.
CalSTRS automatically establishes an account under the DBS Program for all DB Program members who
performed creditable service and made contributions to CalSTRS on creditable compensation earned for
that service.
Creditable compensation for the following is credited to the DBS Program:
- Overtime
- Overload
- Summer school
- Intersession
- Stipends paid to department chairs when release time is not granted by the employer
- Member and employer contributions on compensation earned for creditable service in excess of one year of service in a single
school year.
From January 1, 2001 through December 31, 2010, each member of the DB Program contributed 8 percent of their CalSTRS-covered
salary toward retirement. Of this contribution:
- 25 percent (2 percent of salary) went to the member's DBS account.
- 75 percent (6 percent of salary) went to the member's DB account.
Beginning January 1, 2011, the full 8 percent of CalSTRS-covered salary will go to the Defined Benefit Program. Any contributions
in excess of one year of service credit are credited to the member's DBS account.
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An amount equal to the member’s DBS account balance is vested at the time contributions are initially
credited to the member's account.
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Funds earn interest at a rate set at the beginning of each plan year, July 1 through June 30, by the
Teachers’ Retirement Board, based on the 30-year U.S. Treasury rate. The rate through June 2011,
compounded daily, is 4.50 percent.
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The DBS Program:
- Is a separate benefit structure within the Teachers' Retirement Plan
- Invests contributions in internally pooled portfolios
- Portfolios reflect market fluctuations on a daily basis
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Years when the rate of return is less than the guaranteed interest rate funds accumulate in a Gain and
Loss Reserve (Reserve) account to credit interest to members' accounts. The Gain and Loss Reserve ensures
adequate funds are available in the Annuitant Reserve for monthly annuity payments.
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The TRB may apply an additional earnings credit to DBS accounts for a plan year. The board shall consider
whether the DBS investment earnings for the plan year exceed the amount required to meet the liabilities
identified below:
- The amount required for the plan year to credit interest on members’ nominal accounts at the
minimum interest rate.
- The amount of the Defined Benefit Supplement Program administrative expenses with respect to the
for the plan year.
- Any additions needed for the Gain and Loss Reserve.
For any plan year that the board declares an additional earnings credit, the board shall specify the amount
to be added to members’ accounts as a percentage increase.
The additional earnings credit shall:
- Be applied on the date specified by the board and to the balance of credits in each member’s nominal
account as of the last day of the plan year.
- Not be added to the balance of credits transferred from a member’s Defined Benefit Supplement account
to the Annuitant Reserve.
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When the board declares an additional earnings credit for a plan year, the board also may declare by plan
amendment an additional annuity credit, for members and annuity beneficiaries who are receiving an annuity,
based on the remaining balance of credits in the member's Defined Benefit Supplement account. The additional
annuity credit, if declared by the board, will be paid in a lump-sum.
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Both federal and California state tax codes provide for tax penalties for certain early withdrawals. A 10 percent
federal and 2.5 percent state tax penalty that is subject to change may be assessed for early withdrawals.
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A member will receive a retirement benefit under the Defined Benefit Supplement Program if the member has:
- Terminated all employment to perform creditable service subject to coverage by the plan
- Retired for service under the Defined Benefit Program
- Submitted a completed application for a retirement benefit on a form prescribed by the system
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A member’s retirement benefit under the Defined Benefit Supplement Program will be an amount equal to the
balance of credits in the member’s Defined Benefit Supplement account on the date the retirement benefit
becomes payable.
The member may elect any of the following as a retirement benefit:
- A lump-sum payment
- An annuity payable in monthly installments
- A combination of both a lump-sum payment and an annuity
Upon distribution of the entire retirement benefit in a lump-sum payment, no other benefit will be payable
to the member or the member's beneficiary under the Defined Benefit Supplement Program.
A member may elect to receive the retirement benefit as an annuity provided the balance of credits in the
member’s DBS account on the date the benefit becomes payable equals at least $3,500 after any lump-sum
payments have been made from the account.
A member who is retiring may choose one of the following five annuities:
- Member-Only Annuity
- 100% Beneficiary Annuity
- 75% Beneficiary Annuity
- 50% Beneficiary Annuity
- Period-Certain Annuity
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If a member reinstates from service retirement, payment of a retirement annuity will terminate. The member’s
Defined Benefit Supplement account will be credited with the actuarial equivalent of the member’s annuity as
of the date the annuity is terminated.
If the member subsequently retires again, an annuity based on the remaining balance of credits in the member’s
Defined Benefit Supplement account at the time of the subsequent retirement will become payable.
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A member will receive a disability benefit under the Defined Benefit Supplement Program beginning on the
effective date of the member's disability retirement or disability allowance benefit.
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The member's disability benefit under the Defined Benefit Supplement Program shall be an amount equal to the
balance of credits in the member’s Defined Benefit Supplement account on the date the disability benefit becomes
payable.
The member may elect any of the following as a retirement benefit:
- A lump-sum payment
- An annuity payable in monthly installments
- A combination of both a lump-sum payment and an annuity
Upon distribution of the entire disability benefit in a lump-sum payment, no other benefit will be payable
to the member or the member's beneficiary under the Defined Benefit Supplement Program.
A member may elect to receive the disability benefit as an annuity provided the balance of credits in the
member's DBS account on the date the benefit becomes payable equals at least $3,500 after any lump-sum payments
have been made from the account.
A member may choose one of the following annuities:
- Member-Only Annuity
- 100% Beneficiary Annuity
- 75% Beneficiary Annuity
- 50% Beneficiary Annuity
- Period-Certain Annuity
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If a member’s disability allowance or disability retirement allowance is terminated, payment of a disability
annuity will terminate. The member’s Defined Benefit Supplement account shall be credited with the actuarial
equivalent of the member’s annuity as of the date the annuity is terminated.
If a disability allowance or a service or disability retirement allowance subsequently becomes payable again,
an annuity based on the remaining balance of credits in the member’s Defined Benefit Supplement account at the
time of the subsequent disability or service or disability retirement becomes payable.
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A survivor benefit under the Defined Benefit Supplement Program will become payable when the system receives
proof of the member’s death.
If the member’s death occurs before an annuity under the Defined Benefit Supplement Program becomes payable,
the survivor benefit will be an amount equal to the balance of credits in the member’s Defined Benefit
Supplement account on the date of the member’s death.
A beneficiary, other than an entity, may elect to receive the survivor benefit as an annuity provided the
balance of credits in the member’s Defined Benefit Supplement account equals at least $3,500. The beneficiary
who elects to receive an annuity will elect one of the following forms of payment:
- A period certain annuity payable over a specified number of years from a minimum of three years to a
maximum of 10 years, but not to exceed the life expectancy of the beneficiary.
The beneficiary may designate a payee to receive the remaining balance of payments if the beneficiary’s death
occurs prior to the end of the period certain.
If the death of a member occurs while the member is receiving an annuity under the Defined Benefit Supplement
Program, the survivor benefit will be payable in accordance with the terms of the annuity elected by the member.
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The termination benefit is a lump-sum payment that is equal to the balance of credits in the member's Defined
Benefit Supplement account. A member will be eligible for a termination benefit upon termination of all
employment to perform creditable service subject to coverage under the plan for a reason other than:
- Retirement
- Disability
- Death
To qualify for a termination benefit, a member must not have been paid a termination benefit in the last five years.
Upon distribution of the termination benefit, no further benefit will be payable to the member or the member’s
beneficiary under the Defined Benefit Supplement Program.
If a member submits an application for a refund of contributions under the Defined Benefit Program, CalSTRS
will refund your Defined Benefit Supplement account after you respond to correspondence regarding the payout.
A termination benefit is payable after six months have elapsed following the date the member terminated
employment. If the member performs creditable service within the 6 months following termination of employment,
the termination benefit will not be payable and the application will be cancelled.
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Additional Earnings Credit
A percentage determined by the TRB for a plan year by means of a plan amendment and credited to
members' DBS accounts on a specified date.
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Annuitant Reserve
Reserve account established by the TRB within the CalSTRS' Cash Balance Fund for the payment of
monthly annuities.
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Disability Benefit
Benefit paid to a member who meets the definition of disability or disabled that is an amount equal
to the balance of credits in the member's account as of the disability date.
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Disability Date
Date the benefit becomes payable to a member who has been approved for a disability benefit from the
DBS Program.
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Employee Account
The nominal account to which two percent of the member's eight percent are diverted along with accrued
interest and any additional earnings credits credited under the plan.
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Employee Contribution Rate
Percentage of the member's salary withheld by the employer as an employee contribution.
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Employer
School district, community college district, or county office of education that has elected to provide
the benefits of the DBS Program to persons employed to perform creditable service. Employer does not
include the state.
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Full Time Equivalent (FTE)
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.
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Plan
The State Teachers' Retirement Plan.
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Reinstatement
Reemployment with an employer in which creditable service subject to coverage by the DBS Program had
previously been terminated and a lump-sum distribution or annuity had been paid.
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Retirement Benefit
Retirement benefit payable is an amount equal to the balance of credits in the member's account as of
the retirement date.
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Retirement Date
Date the benefit becomes payable to a participant who has applied for a retirement benefit from the
DBS Program.
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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,
severance pay, annuity contracts, tax-deferred retirement programs, or other insurance programs.
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Disability or Disabled
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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