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Actuarial assumption review ensures fund remains strong

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Every four years, the Teachers' Retirement Board reviews the actuarial assumptions used by CalSTRS to ensure they remain reasonable, reflect the experience of the system, and are appropriate for assessing funding levels and determining the contribution levels from the state and employers needed to achieve full funding.

The board approved the actuarial assumptions in a unanimous vote at its January 2024 meeting after CalSTRS actuaries and consultants presented the 2024 Experience Analysis report.

There are two main types of actuarial assumptions: economic and demographic. Economic assumptions are based on expert forecasts of macroeconomic outcomes. Demographic assumptions are based on CalSTRS experience and are used to predict member behavior, such as when members retire and how long they are expected to receive benefits.

The following are the most significant recommendations from the report:

  • Reducing the assumed payroll growth to reflect expected downward K–12 enrollment trends.
  • Changing the assumed life expectancy of CalSTRS retirees to more closely reflect recent trends.

Adopting these assumptions is a key step before the May 2024 meeting, when the board will review the results of the actuarial valuation of the Defined Benefit Program and set the contribution rates for the state and employers for the next fiscal year. Based on the current assumptions and valuation, state and employer contribution rates are not expected to increase in the 2024–25 fiscal year, and full funding is still anticipated by 2046.