Damon re: Boards paying additional retirement money for some

Damon Asbury to Molly Janczyk, January 9, 2007

Subject: RE: Damon: Boards paying additional retirement money for some

Just to confirm my original reply to Robert Hudson Jones on this matter, I asked Bob Slater, our Chief Financial Officer for his opinion. It is as follows:

It is as "cost neutral" as a salary increase. If employer pick-up is adopted for a group such as teachers or administrators, presumably not all are close to retirement. Whether an employer gives a 4% employer pick-up or a 4% salary increase, the effect on STRS is exactly the same.

Employer pick-up is subject to the same FAS limits as any salary increase, additional supplemental contract, etc.

Therefore, it has no impact on the unfunded liabilities, nor does it impact retirees.

Damon

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From Molly Janczyk, January 08, 2007

Subject: Damon: Boards paying additional retirement money for some

Impressions thus far: Please confirm or correct the statement below comprised of some impressions gathered. Sources did not wish to be named in case their info was incorrect but this is their take based on info over time.
Issue of Board pick-up of employee STRS contributions as described by RH Jones. Rather than pump up your Final Average Salary for retirement computation purposes, I always heard that the reverse was true -- that such a pick-up would put more cash in your paycheck but would not be counted as income at STRS when FAS was calculated.

Thus, from the standpoint of STRS, it's pretty much a neutral thing except for the fact that STRS wasn't receiving any contribution for this extra fringe benefit. Of course, STRS wouldn't be paying out a higher benefit either. It should be a "wash." That's been my understanding from various Labor Relations Consultants over the years. It's never been a favored strategy by many as far as I know.