Ask Jack Jack Ehnes

What institution guarantees CalSTRS pensions? Is it an insurance agency operated by the federal government?

The State of California is the plan sponsor of the CalSTRS Defined Benefit Program. According to current law, CalSTRS core pension benefits (retirement, disability and survivor benefits) are guaranteed by the U.S. and California constitutions. If the CalSTRS fund were to become depleted, the State, as plan sponsor, would be obligated to step in and pay the difference between the benefits paid and the contributions received by CalSTRS.

The question raised here is an important one, especially when you take into consideration the funding needs of CalSTRS. Right now, CalSTRS faces a projected $64 billion funding shortfall that can be managed with thoughtful and timely action by the Legislature and the Governor. The projections show that the CalSTRS fund has enough money to pay promised benefits to current members and retirees for about 30 or more years. However, absent any changes in contribution rates or liabilities, they also show that the program will deplete its assets by as early as 2046.

CalSTRS has been working for some time to raise awareness of our funding shortfall, the cost of waiting to address it and the ultimate risk failing to do so presents to the General Fund. A responsible funding strategy is needed that will uphold the state’s promise to teachers and protect the state General Fund.

Senate Concurrent Resolution 105 may be the vehicle that drives a long-term funding strategy for CalSTRS. The resolution urges CalSTRS to collaborate with affected stakeholders, including organizations representing CalSTRS members and employers, to develop at least three funding strategy options and submit them to the Legislature by February 15, 2013. We are hopeful that with the submission of our report pursuant to SCR 105, legislation will be enacted in the 2013-14 legislative session as intended in the resolution.

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