Assumptions Adjustments May Impact Members
You have likely heard or read here that the Teachers’ Retirement Board has lowered several long-term actuarial assumptions, including the important investment return assumption. These changes increase CalSTRS projected long-term funding shortfall, but that only illustrates more clearly that the state must act to adopt a responsible funding solution.
After months of thoughtful analysis and discussion, the board exercised its fiduciary responsibility and determined that lowering the assumptions was a necessary adjustment after historic market downturns and ongoing concerns about the future of the financial markets.
Impact on Members
I also want to make you aware that reducing the assumptions will have impacts on CalSTRS benefit programs in ways that may affect your individual retirement planning. For instance, lowering the investment return and inflation rate assumptions will make it necessary to increase the amount you’ll need to pay to purchase additional service credit in the future. We expect the board to adopt the rates for fiscal year 2011-12 at its April 2011 meeting.
They will also affect future contribution rates for the Reduced Workload Program, as well as the option factors for future service and disability retirement elections.
We’re working on the specifics and details at this time and we’ll provide that information to you on CalSTRS.com as soon as it is available. As always, I encourage you to visit and review the information provided on CalSTRS.com as you make your retirement planning decisions.
In the meantime, let’s keep in mind that funding for CalSTRS retirement benefits is a shared responsibility, with contributions from members, employers and the State of California coupled with investment earnings.
Working together, the funding shortfall is solvable.