WEST SACRAMENTO, Calif. – The California State Teachers’ Retirement System’s (CalSTRS) Corporate Governance 2014 Annual Report shows its engagement with small-cap companies yielded remarkable progress in the adoption of majority voting standards for the election of corporate directors.
The Corporate Governance 2014 Annual Report reflects four years of work with small-cap companies—those with a capitalization of $2 billion or less—to adopt the majority-vote standard. The standard requires directors to receive a majority of shareholder support to be elected to the board.
The Governmental Accounting Standards Board issued two new accounting standards that significantly change the way pensions are reported. Statement 67, Financial Reporting for Pension Plans, becomes effective for CalSTRS in fiscal year 2013-14. Statement 68, Accounting and Reporting for Pensions, becomes effective for plan employers in fiscal year 2014-15.
Among the specific issues identified for cost-sharing, multiple-employer plans, such as CalSTRS, is use of a blended discount rate. The new blended rate considers a long-term rate of return on plan assets, which reflects a pension fund’s long-term investment strategy, and a high-quality, non-taxable municipal bond index rate, to account for the potential need to borrow funds to pay pension benefits after net assets have been fully depleted.
Using this new blended discount rate may cause plans that are projected to run out of assets, like CalSTRS, to appear to have an increased unfunded liability. However, although the liability may be reported on a financial balance sheet as a new, significantly higher amount, the actual current shortfall of approximately $74 billion projected by CalSTRS will not change as a result of the new standards.
Electronic privacy is crucial for the ongoing success of the Internet as a convenient means to provide customer service. Your personal information will be used only to conduct CalSTRS-related business.