File No. 585

House of Representatives, April 20, 2006

The Committee on Appropriations reported through REP. MERRILL of the 54th Dist., Chairperson of the Committee on the part of the House, that the substitute bill ought to pass.

AN ACT AUTHORIZING TEACHERS WHO ARE MEMBERS OF THE TEACHERS' RETIREMENT SYSTEM TO CONTRIBUTE UP TO ONE-HALF THE COST OF RETIREMENT INCENTIVE PLANS ESTABLISHED BY BOARDS OF EDUCATION.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 10-183jj of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2006):

(a) A local or regional board of education may establish a retirement incentive plan for teachers, as defined in subdivision (1) of subsection (26) of section 10-183b, as amended, in its employ who are members of the teachers' retirement system. The plan shall provide for purchase of additional credited service by [the] a board of education and a member of the system who chooses to participate in the plan, of additional credited service for such [members who choose to participate in the plan] member and for payment by the board of education of not less than fifty per cent of the entire cost of such additional credited service and payment by the member of the remaining percentage of such total cost. Payment shall be made in one lump sum, prior to retirement. Any such plan shall specify a maximum number of years, not exceeding five years, of additional credited service which may be purchased under the plan. Any such plan shall have a two-month application period.

(b) Any such member who has attained age fifty and (1) who would become eligible to receive a retirement benefit under subsection (a), (b) or (c) of section 10-183f if such member received additional credited service pursuant to subsection (e) of this section, or (2) who is not retired and is eligible to receive a retirement benefit under subsection (a), (b) or (c) of [said] section 10-183f shall be eligible to apply. Any member who applies shall agree in writing, as part of such application, to submit a complete formal application for retirement to the Teachers' Retirement Board on a date which shall be established by the board of education which employs the member, provided such date shall be on or before the last day of the school year in which additional credited service is purchased for such member pursuant to this section.

(c) All such eligible members may participate in the plan except that a local or regional board of education may limit the number of such members for whom it purchases such additional credited service in any calendar year to a specified percentage of such members in its employ on the first day of January of such year. If participation is limited, members with a greater length of service with the board of education, if they choose to participate, shall have additional credited service purchased before members with a lesser length of service with the board of education.

(d) The amount of additional credited service purchased for any member pursuant to such retirement incentive plan shall be uniformly determined but shall not exceed the lesser of the following: (1) Five years of additional credited service, or (2) an amount of service credit equal to one-fifth of the member's total credited service, including additional credited service purchased by the member [,] pursuant to the provisions of section 10-183e.

(e) For each year of additional credited service purchased pursuant to this section, the local or regional board of education and the member shall pay, in accordance with subsection (a) of this section, an amount specified by the Teachers' Retirement Board equal to the actuarial present value, determined according to actuarial tables adopted by the Teachers' Retirement Board, of the difference between the retirement benefit which the member is entitled to receive based upon the member's service apart from such purchased service and the benefit which the member is entitled to receive including such service. Payment for such service may be made in equal annual installment payments, including interest, not exceeding three times the number of years being purchased. Payments shall be made in accordance with subsection (b) of section 10-183n, as amended, and rules adopted by the Teachers' Retirement Board. Any late payments or outstanding obligations from a prior year's purchase or from late payment of monthly mandatory deductions shall be included as part of the cost of purchasing such service. [When a board of education purchases additional credited service for a member pursuant to this section, the Teachers' Retirement Board shall notify the member in writing.] Any additional credited service purchased for any such member shall be in addition to any credited service purchased pursuant to section 10-183e.

Sec. 2. Subsection (b) of section 10-183 of the general statutes is repealed and the following is substituted in lieu thereof (Effective July 1, 2006):

(b) Any member may purchase, as provided in subsection (c) of this section, additional credited service, but not to exceed an aggregate of one year in the case of service described in subdivision (2) of this subsection for each two years of active full-time service as a Connecticut teacher; and not to exceed an aggregate of one year in the case of absence described in subdivision (8) of this subsection for each five years of active full-time service as a Connecticut teacher, provided if any such absence exceeds thirty consecutive school months, such additional credited service shall be limited to thirty school months; and not to exceed an aggregate of ten years for all service described in this subsection. In no event, however, may any service described in this subsection be purchased if the member is receiving or is, or will become, entitled to receive a retirement benefit based upon such service from any governmental system other than the teachers' retirement system or the federal Social Security System. Additional credited service includes:

(1) Service as a teacher in a school for military dependents established by the United States Department of Defense;

(2) Service as a teacher in another state of the United States, its territories or possessions;

(3) Service in the armed forces of the United States in time of war, as defined in section 27-103, or service in said armed forces during the period beginning October 27, 1953, and ending January 31, 1955;

(4) Service in a permanent full-time position for the state;

(5) Service as a teacher at The University of Connecticut prior to July 1, 1965;

(6) Service as a teacher at the Wheeler School and Library, North Stonington, prior to September 1, 1949;

(7) Service as a teacher at the Gilbert Home, Winsted, prior to September 1, 1948;

(8) Any formal leave of absence as provided in regulations adopted by the board, if the member subsequently returns to service for at least one school year;

(9) Service as a teacher at the American School at Hartford for the Deaf, the Connecticut Institute for the Blind or the Newington Children's Hospital;

(10) Forty or more days of service as a substitute teacher, or the equivalent service rendered at less than half-time, in a single public school system within the state of Connecticut in any school year, provided eighteen days of such service shall equal one month of credited service under subsection (a) of this section;

(11) Service in the armed forces of the United States, other than service described in subdivision (3) of this subsection, not to exceed thirty months;

(12) Service as a full-time, salaried, elected official of the state or any political subdivision of the state during the 1978 calendar year or thereafter, if such member subsequently returns to service for at least one school year;

(13) Service in the public schools of Connecticut as a member of the federal Teacher Corps, not to exceed two years; [and]

(14) Service in the United States Peace Corps; and

(15) Service in the United States VISTA (Volunteers in Service to America) program.

The following fiscal impact statement and bill analysis are prepared for the benefit of members of the General Assembly, solely for the purpose of information, summarization, and explanation, and do not represent the intent of the General Assembly or either House thereof for any purpose:

OFA Fiscal Note

State Impact:

Municipal Impact:

Explanation

Currently, a local Board of Education may establish a retirement incentive plan for teachers and the municipality is required to pay to the Teachers' Retirement Board (TRB) 100% of the cost of the purchase of additional credited service. Under the bill, the cost of a retirement incentive plan may be shared equally between the municipality and the teachers. To the extent that municipalities use this cost sharing provision to implement a retirement incentive plan, it would result in a municipal savings that cannot be determined until a retirement incentive plan is established. On average, the full actuarial cost of one additional year of credited service is approximately $14,000.

The bill also adds service in VISTA (Volunteers in Service to America) to the fourteen existing purchase of service provisions under the Teachers' Retirement System (TRS). As is the case with the existing purchase provisions, the teacher must pay one-half of the actuarial value of the additional credited service and the state bears the cost of the remaining half. On average, the unfunded liability of the TRS will increase $7,000 for each year of additional service credit. TRB does not currently collect data on the number of teachers with VISTA service. Therefore, the fiscal impact to TRS and the state's contribution to TRS cannot be determined by the TRS actuary at this time.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.



OFA Bill Analysis

sHB 5723

AN ACT AUTHORIZING TEACHERS WHO ARE MEMBERS OF THE TEACHERS' RETIREMENT SYSTEM TO CONTRIBUTE UP TO ONE-HALF THE COST OF RETIREMENT INCENTIVE PLANS ESTABLISHED BY BOARDS OF EDUCATION.

SUMMARY:

The bill amends the teachers' retirement system statutes governing the retirement incentive plan for teachers that may be established by a local Board of Education (BOE). Under the bill, a teacher who chooses to participate in a retirement incentive plan may contribute up to fifty percent of the cost of the additional credited service. The bill also adds service in VISTA to the existing purchase of service provisions under the teachers' retirement system.

EFFECTIVE DATE: July 1, 2006

Local Retirement Incentive Plan

The bill allows teachers who choose to participate to contribute up to one-half the cost of a retirement incentive plan established by a local BOE. The establishment of such a plan is strictly voluntary on the part of the local BOE. Under current law, a municipality must pay to the Teachers' Retirement Board (TRB) the full cost of the additional credited service provided by the retirement incentive plan. Any plan can specify a maximum number of years, not to exceed five, of additional credited service which may be purchased under the plan. The bill requires that the payment by the teacher be made in one lump sum, prior to retirement.

Purchase of Additional Credited Service

The bill adds an additional credited service purchase provision for service in the United States VISTA (Volunteers in Service to America) program. There are currently fourteen additional credited service purchase provisions that allow members to purchase additional credit in the teachers' retirement system. Any purchase of service requires the member to pay the TRB an amount determined on an actuarial basis to reflect the present value one-half the full actuarial cost of the benefit increase that will be derived by the purchase of such service.

COMMITTEE ACTION

Appropriations Committee

Joint Favorable Substitute