ERIC Number: ED319422
Record Type: RIE
Publication Date: 1990-Mar-28
Reference Count: N/A
Projected Future Costs of AB123.
A projection is provided of the Rancho Santiago Community College District's estimated future marginal costs of classroom teachers who, pursuant to California Assembly Bill 123, may retire using their highest 12 consecutive months' salary rather than the average of the 3 highest consecutive years as their final compensation. The projection was derived based on the following procedures: a review of AB123; a review of the current retirement benefits of the State Teachers Retirement System (STRS); the computation of STRS retirement benefits using both the 3-year average and the highest 12 consecutive months as final compensation; the computation of the marginal costs; and the computation of the present value of the marginal costs. The present values were computed only for a 26-year life expectancy after retirement, in keeping with the mortality data used by STRS. Neither the 2% compound cost of living allowance, the administrative costs, nor the quarterly supplemental benefits were included in the findings. The projections assumed that only one faculty member would retire in each year. Findings of the study indicated that the marginal cost--the difference between the 3-year average and the highest year salary--was the variable which had the most significant impact on future costs. The estimated total costs per year, valued at the rate of 6%, ranged from $25,369 in 1990 to $42,017 in 2010. It was recommended that the projected amount for each year should be deposited at the beginning of that year in a trust fund that earned interest at the rate of 6% for a period of 26 years. Appendixes provide study findings in tabular form and the text of Assembly Bill 123. (JMC)
Publication Type: Reports - Descriptive
Education Level: N/A
Authoring Institution: Rancho Santiago Community Coll., Santa Ana, CA.