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CalSTRS employer audits find noncreditable pay and misclassified extra‑duty earnings; 65 audits completed in six‑month plan
Summary
CalSTRS completed 65 employer audits from Jan. 1 through June 30, 2024, covering about 40,000 members and identifying 97 new findings. Staff said the most common issues were noncreditable compensation and misclassification of extra duty earnings, and described resolution and member‑notification processes under AB 1667.
CalSTRS audit staff reported completing 65 employer audits covering roughly 40,000 members during the six‑month audit plan that ran Jan. 1–June 30, 2024, and identified 97 new audit findings, officials told the Audits & Risk Management Committee on Sept. 25.
"We completed a total of 65 audits, which is definitely on the upper end of that audit plan," Chris Wall said during his presentation, adding that the audits identified 97 new findings and that the employer audits team focuses heavily on special pay audits (44 in this period).
Wall said the two most common finding types were noncreditable compensation (29 findings) and extra duty earnings that should have been reported as additional assignments rather than special pay. CalSTRS staff explained that those classification differences change how pay is reported for pension credit.
Audit staff described the resolution process: employer audits hand findings to program areas and an audit resolution team, and program areas work with employers to correct issues; the employer audits team validates closures. Wall said 102 audit findings were resolved during the period, and staff flagged that 141 findings remain over a year old because new regulatory requirements now require employers to identify every impacted member before a finding is closed.
Jeff Zimmer, director of Employer Services, described post‑audit outreach. "Audit services hands it over to the audit resolution team in Employer Services. And every audit gets a special consultation with that employer," Zimmer said. He said AB 1667 requires that members systemically affected by an audit receive notification; staff sent approximately 13,000 member letters and handled 350–400 direct member inquiries related to audit findings.
Staff also described a shift toward data‑driven, focused audits rather than broad full‑scope field audits. Focused audits rely on analytics to target likely issues; staff said focused audits often prompt travel and in‑person field work when data indicate a higher risk or when education is needed. The committee asked about whether the program would return to more full‑scope audits; staff said they will perform full or multi‑area audits when data or tips justify them.
Internal Audit reported completing its assigned items in the six‑month plan and identified 16 internal audit findings, of which several involved third‑party risk and contract compliance; most internal audit findings have been or are being resolved. Staff said a Pension Solution pre‑implementation audit is planned for 2024‑25.
