Cash Balance Benefit Program

Cash Balance Benefit Program

Overview

The Cash Balance Benefit Program, an Internal Revenue Code 401(a) defined benefit plan, is an optional program designed specifically for part-time educators and adjunct faculty.

Additional Annuity and Earnings Credits

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Program Description

The Cash Balance Benefit Program is a hybrid retirement program that can be an alternative to the CalSTRS Defined Benefit Program, Social Security and other retirement plans. It accumulates funds based on dollars contributed by the employee and the employer plus interest, similar to a defined contribution program.

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Eligibility for Benefits

Eligibility is determined on the basis of employment, part-time or temporary, not on the actual hours worked. Generally, employees and employers each contribute 4 percent of the employee’s gross salary.

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Contributions

With the Cash Balance Benefit Program, your employer generally matches your contribution dollar for dollar. Typically, you contribute 4 percent of your salary and so does your district. This combined contribution usually will total 8 percent.

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Early Withdrawals

CalSTRS is required to withhold 20 percent federal income tax on all rollover-eligible payments distributed directly to you. If you choose to have state income tax withheld, CalSTRS will withhold at 10 percent of your federal withholding, or 2 percent.

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Annuities

Your normal retirement benefit is a lump-sum equal to the balance of credits in your employee and employer accounts.

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Benefit Payment

Normal distribution is a lump-sum benefit. The benefit amount is equal to the balance of your contributions and your employers’ contributions plus any compounded interest and additional credits.

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Disability Benefit

You may apply for disability at any time. All creditable service subject to coverage by the Cash Balance Benefit Program and Defined Benefit Program must be terminated before receiving a disability benefit. A disability benefit will become payable only if you meet all disability benefit requirements and upon determination by CalSTRS that you have a total and permanent disability.

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Death Benefit

If you die before retirement, the balance of your contributions and your employers’ contributions plus any compounded interest and additional credits will be paid to your designated recipient. Normal distribution is a lump-sum benefit, or your beneficiary can choose an annuity if the balance is $3,500 or more. If you did not designate a recipient, a lump-sum payment will be paid to your estate.

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Termination Benefit (Refunds)

If you end all CalSTRS creditable service subject to coverage by the Cash Balance Benefit Program and the Defined Benefit Program for any reason other than death, disability or retirement, you may apply for a lump-sum termination benefit.