Blog: Plan Perspective

Plan Perspective: Jack’s Blog

Overview

A perspective on the current and future state of the CalSTRS Defined Benefit Program from CalSTRS CEO, Jack Ehnes.

Blog entry Jack Ehnes

An Article of Interest

Every now and again, an article filters through the pop culture clutter of the online and print community and examines an unpopular and often contentious topic. It gets attention because it asks difficult questions that may lead to unpleasant answers. 

Blog entry Jack Ehnes

An Engaged Conversation on Divestment

A movement to divest from fossil fuel companies stirs the emotions of many. The urgency behind such requests reflects increasing concern about global warming. While there is no doubt about the underlying devastating risks of climate change driving this advocacy, the question of divestment versus engagement as an effective strategy warrants exploration.

Blog entry Jack Ehnes

Healthy Short-Term Returns Are Not Enough to Cure Chronic Underfunding

In the last three years, CalSTRS has experienced significant market volatility.  In fiscal year 2011, CalSTRS catapulted to a 23.1 percent investment return high. The following   fiscal year investment returns plummeted to 1.8 percent and then rebounded up to this year’s 13.8 percent. The good news that we’ve significantly exceeded our 7.5 percent investment assumption for three years still does not change current projections of depleting our assets in roughly 30 years.

Blog entry Jack Ehnes

Understanding the CalSTRS Valuation

Every April the Teachers’ Retirement Board adopts the latest actuarial valuation. The actuarial valuation is a snapshot of the CalSTRS fund’s assets and liabilities as of June 30, 2012.

The new valuation shows an increase in the unfunded actuarial obligation or unfunded liability from $64 billion to $70 billion. This increase holds consistent with projections reported in all actuarial valuations since 2003.

Blog entry Jack Ehnes

CalSTRS Celebrates 100 Years

Each new year brings the promise of a fresh start. For CalSTRS, 2013 marks an especially significant year for the fund when we celebrate 100 years of service to California’s educators and their families. CalSTRS began in 1913 with 16,020 active and retired members, and has grown to presently include 862,000 members with a portfolio value of more than $157 billion. One hundred years of service is an accomplishment to be proud of, and wonderful, time-honoring events are in store to commemorate this special occasion.

Blog entry Jack Ehnes

Tragedy Serves as a Reminder of Responsibility

To the families affected by the horrific and disturbing events that took place December 14, 2012, at Sandy Hook Elementary School, we offer our deepest sympathy. Our thoughts and prayers are with you through this very difficult and troubling time. We understand there is nothing we can say or offer to make up for the tremendous losses you suffered.

Blog entry Jack Ehnes

Reverse Mortgages: Risk or Opportunity?

Americans suffered considerable loss of assets through the devaluation of their homes during this past recession. The mortgage crisis has hurt the finances of the young and the old. Relative to seniors, however, there has been emerging data that gives some important insights.

Blog entry Jack Ehnes

CalSTRS Takes Pension Abuse Seriously

As fiduciaries of retirement benefits for California’s 856,000 educators, CalSTRS takes its responsibility very seriously. As a public entity, transparency is critical. A significant part of this duty is the ability to appropriately address and improve business processes. A recent review by the State Controller was rightfully critical of CalSTRS history of addressing pension spiking, or the inappropriate enhancement of a member’s income to increase pension benefits.

Blog entry Jack Ehnes

Long Term Investing Steadies the Course

A recent article in the Los Angeles Times says anxious investors nearing retirement are day trading with their life savings. While one can sympathize with the anxiety and desperation felt by those individuals, it doesn’t take an expert to realize this type of investment strategy comes with considerable risks.

Blog entry Jack Ehnes

The Importance of Good Governance

With the recent allegations of corporate misconduct, fraud and bribery, corporate accountability has become a high-profile issue. Media reports of questionable leadership underscore the role boards of directors play in the long-term growth of publicly held companies. Concerned investors like CalSTRS, want assurance that governance safeguards and effective internal controls are put in place to mitigate any future risk.

Blog entry Jack Ehnes

Educator Pensions Aid Healthy Economies

This year’s National Institute on Retirement Security conference held in early March, “Pensionomics 2012: Measuring the Economic Impact of DB Pension Expenditures,” featured a new report that demonstrates how defined benefit pensions support economic activity and how this activity keeps California’s local economies stable. There are a couple of key points made during the conference I would like to highlight.

Blog entry Jack Ehnes

Perspective on Pensions, Felonies and the Law

Disturbing allegations about some Los Angeles area teachers and their unthinkable and illicit actions against students have generated a lot of media coverage recently. You have probably seen the stories.

In addition to sparking public outrage over how such things could happen in our schools, these reports have prompted some to question why a teacher who is alleged to have so seriously violated the public trust and students’ innocence should continue to receive pension benefits. We understand this frustration.

Blog entry Jack Ehnes

A Balanced Investment Strategy

On Thursday, February 2, 2012, the Teachers’ Retirement Board voted to lower the investment return assumption a quarter of a percent to 7.5 percent. The move, based on the recommendation of outside actuarial firm Milliman, Inc., marks the second time in 14 months the board has lowered the assumed rate of return. So why is this important?

Blog entry Jack Ehnes

A Glance at Governor Brown’s Twelve-Point Pension Plan

On October 27, 2011, Governor Brown unveiled his 12-Point Pension Plan. As the debate around pension reform continues, it’s important to emphasize that the most pressing need facing CalSTRS was not included in the Governor’s proposal: A plan of action to address the long-term funding needs of the system. To be clear, the authority and responsibility for this action rests with the Governor and the Legislature.

Blog entry Jack Ehnes

New Accounting Rules Cause Concern

It’s important to share with you some information about a little-known organization, the Governmental Accounting and Standards Board, who sets industry standards for how government finances are reported. On July 8, 2011 GASB released Exposure Drafts which include new accounting rules for how public pension fund liabilities are reported.

Blog entry Jack Ehnes

We’re Serious About Preventing Spiking

As I go around the state speaking to teachers groups, I’m starting to get more questions about what CalSTRS is doing to prevent pension spiking. CalSTRS is the steward of your pension funds and we are working hard to ensure spiking is prevented, detected and corrected.

However, it’s important to recognize what the law says CalSTRS can and cannot do.