Lump Sum Death Benefit receives small increase
August 9, 2021
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This article was written by retired ACSA Member Dave Davini.
A one-time lump sum death payment to the beneficiary upon death of an active or retired CalSTRS member is provided for under Education Code Section 23880. The CalSTRS Board has the authority to adjust the death payment amount following each annual actuarial valuation based on changes in the All Urban California Consumer Price Index (CPI). For most CalSTRS members, the death benefit in 2020 was $6,372.
On June 9, 2021, the board voted unanimously to approve a 1.7 percent increase which reflects the change in the California CPI from December 2019 to December 2020. The new Lump Sum Death Benefit is now $6,480, which will increase the actuarial obligation by $15 million.
The board has adjusted the Lump Sum Death Benefit nine times since 1992. The board last voted to increase the benefit in 2018 and 2002.
During its June meeting, the board discussed its desire to increase the Lump Sum Death Benefit and how the costs of doing so may compare to other costs approved by the board. The board discussed that other costs are intended to benefit the fund and members, whereas an increase of this type may be a state contribution increase, and how this type of increase needs to be balanced. The board heard a motion to approve a 5 percent increase in death benefit payments (made by Board Member Karen Yamamoto and seconded by Board Member Joy Higa). The board considered whether 5 percent may be an arbitrary increase if it’s not tied to another measure such as inflation, and whether the 1.7 percent increased linked to COLA may be a more incremental and appropriate increase.
The ACSA Retirement Committee has consistently advocated for increasing the Lump Sum Death Benefit and will continue to do so in the future because the purchasing power of this benefit has been eroded due to inflation and failure of the CalSTRS Board to adjust the benefit annually as provided in Education Code.
This vested benefit helps all members and should be adjusted annually to help members with ever-increasing end-of-life costs. The Lump Sum Death Benefit is modest at best and would not cover the cost of a traditional funeral. Advocating for members’ benefits is the right thing to do and an important reason for joining ACSA and staying active, even in retirement.
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