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CalSTRS Funding March 20, 2013

CalSTRS Funding March 20, 2013

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Published by CalWonk
The CA Legislative Analyst Office released a report ont he unfunded liabilities associated with the California Teachers Retirement System.
The CA Legislative Analyst Office released a report ont he unfunded liabilities associated with the California Teachers Retirement System.

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Published by: CalWonk on Mar 20, 2013
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03/20/2013

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Presented to:Assembly Public Employees, Retirement, andSocial Security CommitteeHon. Rob Bonta, ChairSenate Public Employment and Retirement CommitteeHon. Jim Beall, Chair
 Addressing CalSTRS’Long-Term FundingNeeds
L E G I S L A T I V E A N A L Y S T S O F F I C E
 
March 20, 2013
LAO
70 YEARS OF SERVICE
 
1LEGISLATIVE ANALYST’S OFFICE
March 20, 2013
LAO
70 YEARS OF SERVICE
 
State’s Second Largest Pension System.
Established100 years ago, the California State Teachers’ RetirementSystem (CalSTRS) now serves about 862,000 members—about2 percent of California’s population. CalSTRS members includecurrent, former, and retired teachers and administrators, as wellas their beneficiaries.
Constitutional Duties.
Under Proposition 162 (1992), CalSTRS’duties to its members take precedence over any other duties ofthe system, including minimizing employer contributions.In addition, CalSTRS is required “to administer the system ina manner that will assure prompt delivery of benefits and relatedservices to the participants and their beneficiaries.
What Is CalSTRS’ Defined Benefit (DB) Program? 
For manydecades, CalSTRS has administered its main pension program,which (1) receives contributions from members, school andcommunity college districts, and the state; (2) invests thosecontributions; and (3) uses its assets to provide a specificmonthly pension benefit to retirees and their beneficiaries.Retirement programs of this kind are known as DB programs.
Overview of CalSTRS
 
2LEGISLATIVE ANALYST’S OFFICE
March 20, 2013
LAO
70 YEARS OF SERVICE
 
Contribution Rates Set in Statute.
 
Unlike the California PublicEmployees’ Retirement System (CalPERS)—which has theauthority to set employer contribution rates—contribution levelsto CalSTRS from members, districts, and the state are set instatutes adopted by the Legislature.
Estimated $5.7 
 
Billion of Contributions in 2012-13.
In 2012-13,school and community college district employees, districts, andthe state are expected to contribute a total amount of $5.7 billionto CalSTRS. Contribution rates set in current law are as follows:
 
Employees ($2.1
 
Billion).
Employees contribute 8 percentof their pay to CalSTRS’ DB Program.
 
Districts ($2.2 
 
Billion).
Districts contribute 8.25 percent ofpayroll to the DB Program.
 
State ($1.4 
 
Billion).
The state currently pays about 5 percentof teacher payroll (measured on a two-year lag) to the DBProgram and a companion program—the SupplementalBenefit Maintenance Account—combined. (This percentagewill grow slightly in future years, but not enough to address asubstantial part of CalSTRS’ funding problem.)
Overview of CalSTRS’ Current Funding

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