Legislation will provide additional increases to supplemental benefits for certain retirees beginning in 2023

Pension Sense blog | October 6, 2022

Soaring prices for food, gas and other goods have almost everyone worried, especially those with fixed incomes.

At CalSTRS, we offer two programs intended to ease the impact of inflation on our members.

First is the simple benefit adjustment, which provides a 2% increase to your monthly pension every September. This increase is based on your initial benefit and is not compounded as benefits increase.

Next are supplemental benefits. The Supplemental Benefit Maintenance Account (SBMA) is one of the strongest anti-inflation programs operated by any public pension system in the nation. Its goal is to provide supplemental payments to maintain 85% of the purchasing power of your initial benefit.

What is purchasing power? It’s a measure of how your retirement benefit keeps pace with inflation. For example, if your benefit amount stays the same, but the cost of items doubles, your purchasing power is only 50% of what it was originally.

Using California’s rate of inflation from the previous fiscal year, we assess the level of purchasing power for retirees after application of the 2% annual increase. The change in the All-Urban California Consumer Price Index, calculated by the Division of Labor Statistics and Research in the California Department of Industrial Relations, is used for this annual assessment, and the rate of inflation was 8.3% for the 2021–22 fiscal year.

Due to the high level of inflation, members who retired in 2005 or earlier will receive SBMA payments. As a result, about 50,000 retired members and beneficiaries will receive SBMA payments for the first time in October 2022, bringing the total recipients to almost 112,000.

SBMA payments are made quarterly on the first of October, January, April and July. If you are eligible, you will receive a letter from us confirming your eligibility. Your SBMA benefit will be paid separately from your regular monthly benefit, but it will be issued in the same manner as your monthly benefit (i.e., direct deposit or paper warrant).

The annual adjustment in benefits is reflected in the October 1, 2022, payment. This is an automated process, and you do not need to contact CalSTRS to enroll.

Additionally, Governor Newsom signed Senate Bill 868 (Cortese, Chapter 818) on September 29, 2022. This bill—supported by the Teachers’ Retirement Board—provides additional SBMA benefits to members and beneficiaries of members who began receiving a benefit before 1999 and, therefore, did not qualify for various increases occurring that year and in the early 2000s. This will help CalSTRS members most in need of assistance without compromising the financial integrity of the SBMA and its long-term ability to protect against inflation. The increases will become effective for the 2023–24 fiscal year.

The increases will be a percentage of the total benefit as follows:

• 15% for members who retired prior to January 1, 1980.
• 10% for members who retired between January 1,1980–December 31, 1989.
• 5% for members who retired between January 1, 1990–December 31, 1998.
• 0% for members who retired after December 31, 1998.

To learn more about supplemental payments, please read the CalSTRS Supplemental Payments publication. Also see “Protecting against inflation during retirement” in the CalSTRS Member Handbook.

For information on how to reach CalSTRS, visit the contact us web page.