Ask Jack
Ask Jack
Ask Jack is an online communication channel offered by CalSTRS CEO, Jack Ehnes. This Web forum solicits questions about the sustainability and administration of the CalSTRS Defined Benefit Program. Not all will be posted directly, but Jack’s responses will be inclusive of views and perspectives.
Can you explain the impact of different retirement ages presented under the Governor’s pension reform proposal?
Under current CalSTRS-offered benefits, the normal retirement age is age 60, and the minimum retirement age is generally attainable at age 55 with at least five years of service credit. If an educator has 30 years of service credit, he or she is able to retire even earlier at age 50.
If the Governor’s proposal is passed, would an instructor with more than 35 years have to forfeit the 2.4% benefit formula?
Under the current benefit formula, members are entitled to a benefit based on age, final compensation and years of service credit at retirement. This benefit can be as much as 2.4 percent of final compensation per year of service credit.
Can you explain what CalSTRS is doing about reports of pension spiking?
CalSTRS takes pension spiking very seriously, which is why we have, and continue to aggressively pursue instances of suspected spiking. Our internal controls and processes to identify and resolve instances of spiking include regularly conducting school district audits and analyzing employer compensation reports to identify excessive increases that could affect the member’s final compensation factor.
Could the Governor’s 12-Point proposal reduce benefits for current retirees or reduce anticipated benefits for members?
There are two provisions that may impact current retirees or reduce anticipated benefits for members and one that deals with contributions paid by members.
What is the earliest Governor Brown’s 12-point pension reform proposal could be implemented and where can I find the proposal?
No one can predict the outcome or precise timing of any potential pension reform measures. As meaningful discussions on pension reform take shape, it’s important to remember that the Governor’s 12-Point proposal must work its way though the legislative process before anything is official.
Are reports that suggest the state needs to increase CalSTRS annual funding by $3.8 billion for the next 30 years accurate?
Recent media reports have suggested that to solve the unfunded liability the state will have to increase CalSTRS funding by $3.8 billion a year for 30 years for a total of more than $114 billion.
How is CalSTRS communicating the potential, unintended consequences new GASB accounting standards may have on school employers?
On October 13, 2011, CalSTRS along with a number of our stakeholders participated in GASB’s public hearing and formally recommended the Board to suspend adoption of the Exposure Drafts as they are currently written until more appropriate accounting standards can be implemented.
Will the Governor’s 12-point pension reform proposal affect reciprocity between CalPERS and CalSTRS?
CalSTRS is thoroughly reviewing the Governor’s pension reform proposal and any potential implications that may follow. It is important to keep in mind that this is currently only a proposal and will be further discussed in the Legislature.
What is the Governmental Accounting Standards Board’s intent behind new accounting rules?
GASB‘s intent behind the new accounting rules is to implement improved financial reporting, which CalSTRS supports. However, in their current state, the proposed GASB amendments do not accurately address the cost-sharing accountability structure of the CalSTRS pension system.
Will any of the Governor’s proposed pension reforms have an impact on CalSTRS members who are already retired?
Although we are still analyzing all of the potential implications of the Governor’s pension reform proposal, two provisions – the prohibition of retroactive pension increases and the limitation of post-retirement employment – may apply to retired members if adopted as they are currently written.
What is CalSTRS doing in response to the California State Auditor’s label of the Defined Benefit Program as a ‘High Risk Issue?’
CalSTRS has been very transparent in providing the Legislature and Administration with financial data that illustrates the need to address a $56 billion funding shortfall, the gap between projected future assets and obligations to retired educators. CalSTRS assisted the State Auditor in developing the information for the report which further underscores that, absent any thoughtful action, the fund is projected to be depleted in the early 2040s.
Did CalSTRS recently suspend its home loan program because of the funding shortfall?
CalSTRS is temporarily suspending its Home Loan Program because the program’s administrator and loan servicing agent, Bank of America, has decided to sell their correspondent lending business. The suspension, effective October 1, 2011, is not in any way related to CalSTRS long-term funding shortfall.
I understand that CalSTRS is funded until 2043. What percent is CalSTRS funded?
The last actuarial valuation, a snapshot of the CalSTRS fund’s assets and liabilities, as of June 30, 2010, shows the fund is 71 percent funded. Another important number from the actuarial valuation is the amount of the funding shortfall. This difference between projected future assets and future benefit payments is currently $56 billion.
News reports say public pensions pay outrageous retirement benefits. Are CalSTRS retirees receiving shockingly high pensions?
The fact is, California’s educators work long careers at modest salaries. The CalSTRS retirement average is a pension of $37,968 after more than 26 years of service at nearly 61 years of age.
How did CalSTRS get into a position where there is now an unfunded liability?
It’s true that the percentage of program liabilities covered by current assets have declined significantly from a previous high at the beginning of the decade.
Is there a possibility that the formula for calculating CalSTRS Defined Benefit will change?
The benefit formula for current and retired members is set by state law.
The Colorado legislature has rolled back benefits for new hires, existing workers and even retirees. Can this happen here?
Your core benefit under CalSTRS is protected both by the California Constitution, and by the U.S. Constitution. By core benefit I mean your defined benefit retirement, your disability and your survivor benefit.
Will CalSTRS ever get involved in providing health benefits to retirees?
CalSTRS does not provide health care benefits as they are collectively bargained at the local school district level. Although CalSTRS primary focus is the pensions of California’s educators, the availability of affordable health care can have a tremendous impact on the ability of members to maintain their standard of living in retirement.
What is the latest news about Social Security and my CalSTRS benefits?
The good news is that the CalSTRS Defined Benefit pension is not affected by Social Security and any funding shortfalls Social Security might experience. There is no decrease in the CalSTRS pension amount if a retiree is also receiving Social Security. However, California educators did not pay into Social Security for their public school employment covered by CalSTRS, therefore any Social Security benefits paid to CalSTRS members earned from other employment or from a spouse’s income will likely be reduced due to two provisions in federal law.
CalSTRS has historically been a most reliable money manager. Given the recession, what are you doing to get back to the top?
Thanks for the observation about how CalSTRS is a sophisticated professional investment management operation. CalSTRS acted to manage market volatility and to take advantage of opportunities presented by the financial meltdown. CalSTRS investments are poised for recovery following the economic crisis. Proactive steps, such as adopting a more diversified investment mix, taken at the height of the crisis have helped prepare CalSTRS for the emerging economic recovery.