What is the purpose of the actuarial valuation?

Ask Jack Jack Ehnes

Valuations operate akin to a measuring stick. They guide appropriate changes and decisions necessary to sustain the long-term viability of the fund. More specifically, the primary purpose is to analyze the sufficiency of future contributions from members, employers and the state to meet current and future obligations of the Defined Benefit Program.

The actuarial valuation is a snapshot of the CalSTRS fund’s assets and liabilities in a given year. The most recently adopted valuation, as of June 30, 2013, shows an increase in the unfunded actuarial obligation or unfunded liability from $71 billion to close to $74 billion. The fund is now 66.9 percent, or approximately 67 percent, funded.  In other words, CalSTRS has slightly less than 67 cents on hand for every dollar it owes its members.

A key takeaway from the valuation is that a plan of action to address the unfunded liability is needed.  Current projections show the fund will deplete its assets by as early as 2046. CalSTRS is working with the Legislature to develop a plan that can be written into legislation to address CalSTRS’ funding gap over the long term. The latest valuation is just one data source used in developing such a plan.

Another data source was the February 2013 CalSTRS report, “Sustaining Retirement Security for Future Generations: Funding the California State Teachers’ Retirement System,” prepared in response to Senate Concurrent Resolution 105. The report, developed with input from affected stakeholders, provides the Legislature with a range of sustainable funding strategies necessary to secure the long-term needs of the Defined Benefit Program.

On March 19, CalSTRS presented its latest report, “History of CalSTRS Funding and Presentation of Additional Scenarios,” to a joint informational hearing of the Assembly Committee on Public Employees, Retirement and Social Security and the Senate Committee on Public Employment and Retirement. The report gives legislators key information required to structure a plan that spans a range from 20 to 60 years to fully fund CalSTRS.

For accessible versions of files on this page, contact ADACoordinator@CalSTRS.com.