CalSTRS
What are the CalSTRS changes?
On
February 13, 2014, Jack Ehnes (CEO of CalSTRS) released a report indicating that the unfunded
liability was more than $60 billon, with actuarial projections showing that the
fund would be unable to pay all constitutionally guaranteed benefits starting
sometime in 2046.
http://www.calstrs.com/sites/main/files/file-attachments/scr_105_final_reportltr_v2.pdf
At
that point in time, the incoming contributions from current working members
would be paying out as much of the benefits as possible, making the pension
payments about 50% of the actual amounts. This report and other previous
reports caused Governor Jerry Brown to draft a bill calling for extreme changes
to the funding amounts. This happened extremely quickly over the past few
months and the bill was sent to the Senate, where only minor changes occurred.
AB 1469 was passed by the legislature to the happiness of CalSTRS,
but the concern of many others.
http://www.calstrs.com/statement/calstrs-commends-legislature-passage-ab-1469
AB
1469 makes significant changes to CalSTRS with
respect to the funding formula for the Defined Benefit (Pension). Historically,
the employee rates have not changed since 1972, employer rates have not changed
since 1990, and the state rate is lower now than it was in 1997.
Here
are the future contribution rates for those hired prior to 2013 (known as 2% at
60).
Fiscal Year |
Employee Contribution |
Employer Contribution |
State Contribution |
Total Contribution |
2012 – 2013 |
8.000% |
8.250% |
2.017% |
18.267% |
2013 – 2014 |
8.000% |
8.250% |
3.041% |
19.291% |
2014 – 2015 |
8.150% |
8.880% |
3.454% |
20.484% |
2015 – 2016 |
9.200% |
10.730% |
4.891% |
24.821% |
2016 – 2017 |
10.250% |
12.580% |
6.328% |
29.158% |
2017 – 2018 |
10.250% |
14.430% |
6.328%* |
31.008% |
2018 – 2019 |
10.250% |
16.280% |
6.328%* |
32.858% |
2019 – 2020 |
10.250% |
18.130% |
6.328%* |
34.708% |
2020 – 2021 |
10.250% |
19.100% |
6.328%* |
35.678% |
Beyond 2021 |
10.250% |
19.100%** |
6.328%* |
35.678% |
*
State contribution increases are capped at 0.50% per year from 2017-18 and
beyond, based on actuarial assumptions at that time.
**
Employer contributions are allowed to change by no more than 1% per year (up or
down) after 2021, and shall not exceed 20.25% of the salary at any time.
[The
contribution rates for the Defined Benefit Supplement (DBS) account remain
capped at 8% for employees and 8% for employers. There is no change to this
account/fund as it does not have a defined benefit (pension). This separate
account is only funded with salary amounts over the contract amount, so your
overtime puts payments into this DBS account.]
For those
hired in 2013 or later (called 2% at 62), the maximum future contributions are
slightly lower to employees because total benefits are capped and could be
slightly less over time:
Fiscal Year |
Employee Contribution |
Employer Contribution |
State Contribution |
Total Contribution |
2013 – 2014 |
8.000% |
8.250% |
3.041% |
19.291% |
2014 – 2015 |
8.150% |
8.880% |
3.454% |
20.484% |
2015 – 2016 |
8.710% |
10.730% |
4.891% |
24.331% |
2016 – 2017 |
9.205% |
12.580% |
6.328% |
28.113% |
2017 – 2018 |
9.205% |
14.430% |
6.328%* |
29.963% |
2018 – 2019 |
9.205% |
16.280% |
6.328%* |
31.813% |
2019 – 2020 |
9.205% |
18.130% |
6.328%* |
33.663% |
2020 – 2021 |
9.205% |
19.100% |
6.328%* |
34.633% |
Beyond 2021 |
9.205% |
19.100%** |
6.328%* |
34.633% |
Based on AB
1469, CalSTRS is required to report the fiscal health
of the Defined Benefit Program (Pension) every five years beginning on or
before July 1, 2019. The report given should identify adjustments required to
all portions that will completely eliminate the unfunded liability by June 30,
2046.