Steve "Job" Buser helps Molly (and the rest of us) understand SB 190

From: Molly Janczyk
Sent: Tuesday, January 24, 2006
Subject: RE: 85% rule

Steve, The problem is we are at the what does Bb say: K level on this. C-A-T say cat.

I know you are speaking as simplistically as you think is necessary but for us, there are loopholes. I then try to ask the next ques based on your repsonse until we get down to the A,B,C's of it.

I do appreciate your efforts!!!!!!!!! We're just beyond basics in lack of understanding them. Or I am anyway.

Ok.

SB190 raised every retiree out there to 2.1% and then included in the SB190 nearly $1Billion dollars for enhancements for those retirees, more dollars were set aside to bring them up to 85% of their origninal purchasing power at retirement.

QUESTION: IS THAT A PERMANENT AMOUNT? Does that mean that some of those older retirees are above 2.1% then?

Your retiree example below earned $1000 at retirement. They were taken to 2.1% by SB190 and still needed $200 to make it = 85% of their original buying power when they retired coompared to today. That additional $200 was factored in to SB190 funds and so that retiree is now above the 2.1%.

Was that a permanent change for always? That amount of $1700 is permanent for your example, CORRECT______.

SB190 did this type of scenario for every retiree out there, CORRECT________?

Please respond yes or no and if no , why with the most elemental language.

Thank you for having the patience of JOB with me.

If the above is true, then every retiree out there should knkow they rec'd a substantial bump in '99 or 2000 and if they don't recall, verify it with STRS or compare your stubs.

From: Steve Buser

To: Molly Janczyk

Subject: 85% rule

Date: Tue, 24 Jan 2006

You might already have this example from an earlier email. If not, consider the case of a member who retired many years ago with initial retirement benefit of $1000 per month. Assume that in the years since the member retired, prices have doubled for most goods. That retiree would need twice as much money today, or $2000 per month, just to be in a position equivalent to when he or she retired. Unfortunately, STRS COLAs are relatively new and even when they have been granted, they have not always kept pace with inflation. So let's assume that the current benefit for the retired member is only $1500 per month. $1500 is only 75% of $2000. The retiree would need 85% of $2000, or $1700 per month, to get back to 85% of the original purchasing power of the benefit. Hence, under the 85% rule SB 190 would have increased the benefit by $200 in order to get the benefit from $1500 per month to $1700 per month.

Hope that helps.

At 10:41 AM 01/24/2006, you wrote: I know it was addressed, I don't understand it. Could you give an ex. using an older retiree calculation getting them back to 85% and if it didn't gave them what extra amount?

From: Steve Buser, Tues., Jan. 24, 2006

The 85% rule is addressed in prior emails. As for the question of 2.1% versus 2.2%, it is my understanding is that ALL members who retired before SB 190 took effect (not sure of the precise date) had their benefit recalculated using the 2.1% rule. Only those who retired after SB 190 took effect got the additional increase up to 2.2%. However, if the new rule of 2.1% for existing retirees did not get a retiree back to at least 85% of the amount he or she needed based on price increases since retirement, then SB 190 provided an additional increase, as discussed in earlier emails.

Given that SB 190 reduced some benefit gaps but did not provide full parity, it my hope that the board will be able to reconsider the issue of equity, along with differences in contribution rates that members have paid over time, to see if the over all pattern of changes to benefits that STRS have provided over time, including but not limited to SB 190, has been equitable across groups. However, to head off potential speculation, I do not know anyone who is thinking in terms of taking back benefits for anyone. I think the hope is that if we identify a group of members that are not get their fair share we can make some type of favorable adjustment - if and when we get the broader financial picture for STRS under better control.

Steve

At 11:08 PM 01/23/2006, Molly wrote:

1.What does the provision for older retirees increasing their benefit to at least 85% of original purchasing power mean?

2. How specifically did it help all retirees who retired '98 and earlier back to 70's, 80's and 90's ? Did it raise all to 2.1% and '99 and beyond to 2.2%?

[A HUGE round of applause for MOLLY AND STEVE!!! KBB]