The pension reform bill signed by President Bush last week is a far-reaching measure that
includes several provisions relating to CalSTRS members.
The Pension Protection Act of 2006, which the president called the most sweeping overhaul
of the nation's pension laws in more than 30 years, is intended largely to strengthen
defined benefit plans offered by private employers.
Supporters say the bill will help preserve traditional pensions and reduce the likelihood
of a costly taxpayer bailout of the federal agency that insures them. The 907-page bill has a
wide range of technical components, a few of which were backed by CalSTRS as beneficial to educators.
Among other things, the new law:
- Clarifies rules on purchasing service credit. The bill expressly allows purchases of up to five years of "air time." This removes ambiguity in the law but will not change CalSTRS' current practice of allowing purchases of up to five years of "nonqualified service."
- Allows service credit for teaching outside of the United States under specific circumstances.
- Eases transfers from 403(b) and 457 plans to purchase service credit.
- Permits non-spouse beneficiaries as well as surviving spouses to roll over benefits under a plan to an IRA - currently, only spouses can do this.
- Broadens the category of eligible rollover recipient plans for post-tax contributions to include any tax-qualified retirement plan - defined benefit or defined contribution plan.
Some provisions may require state legislative action for CalSTRS to implement.
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