Ask Jack: Should I be worried about the funding of our pension plan?

Ask Jack Jack Ehnes

Q: Has the health of our pension plan recovered? Is our pension secure?

In June 2014, the Legislature passed and Governor Edmund G. Brown Jr., signed into law Chapter 47, Statutes of 2014 (Assembly Bill 1469–Bonta), which establishes a statutory solution to fully fund the CalSTRS Defined Benefit Program through gradual contribution increases from members, employers and the State of California. This tremendous accomplishment concludes a nearly decade-long effort to bridge the $72.7 billion unfunded actuarial liability as of June 30, 2014, and sets the program on a sustainable course.

Furthermore, for the first time in nearly 10 years, projections indicate contributions are sufficient to meet future needs based on the current investment assumption of 7.5 percent. Due to the new funding structure enacted in AB 1469, CalSTRS no longer projects a depletion date. Instead, the Defined Benefit Program is expected to be fully funded by 2046.

CalSTRS is on target to meet the promise of a secure financial future due to California’s educators. The dynamic leadership of our Governor, the Legislature and our stakeholders has been remarkable in reaching this historic accomplishment. More than 100 years ago, the Legislature established the teachers’ retirement fund as a means to provide a secure retirement to the devoted educators of this state. With a solid financial plan in place and prudent investment strategy, CalSTRS can confidently carry out its mission, which is to secure the financial future and sustain the trust of our membership.