CalSTRS Funding Plan
CalSTRS Funding Plan
The CalSTRS Funding Plan, enacted by Assembly Bill 1469 as part of the 2014-15 budget, puts the CalSTRS Defined Benefit Program on the path to full funding in 32 years through incremental shared contribution increases among the program’s three contributors: CalSTRS members, employers and the state.
The contribution rates established in the funding plan would fully fund the Defined Benefit Program based on the actuarial assumptions in place at the time it was designed in 2014. Those assumptions are periodically adjusted by the Teachers’ Retirement Board based on experience. The funding plan gives the board limited authority to adjust employer and state contribution rates accordingly.
For accessible versions of files on this page, contact ADACoordinator@CalSTRS.com.
Member Contribution Increases
AB 1469 increased member contributions on compensation that is creditable to the Defined Benefit Program, which had not been increased beyond 8 percent since 1972.
|Effective Date||Pre-Funding Plan
Member Contribution Rate
|Rate Changes Under AB 1469|
|2% at 60 Members||2% at 62 Members*|
|July 1, 2014||8%||8.15%||8.15%|
|July 1, 2015||8%||9.20%||8.56%|
|July 1, 2016||8%||10.25%||9.205%|
|July 1, 2017||8%||10.25%||9.205%|
|July 1, 2018||8%||10.25%||10.205%|
CalSTRS members who performed creditable service on or after January 1, 2014, are guaranteed their 2 percent Annual Benefit Adjustment, also referred to as the improvement factor, in exchange for increased contributions to the Defined Benefit Program. This includes members who retired in 2014. For members who retired prior to January 1, 2014, no change in benefits will occur.
Employer Contribution Increases
Increases in the employer contribution rate are being phased in over seven years. Prior to the funding plan, the employer contribution rate had not been increased since 1990.
Starting in 2021-22, the funding plan provides the board limited authority to adjust the employer contribution rate, if necessary, to fully fund the remaining unfunded liability by 2046. Those adjustments are limited to 1 percent annually, not to exceed 20.25 percent of creditable compensation.
|Effective Date||Pre-Funding Plan Employer Contribution Rate||Increases Under AB 1469|
|Increase from Pre-Funding Plan Rate||Total|
|July 1, 2014||8.25%||0.63%||8.88%|
|July 1, 2015||8.25%||2.48%||10.73%|
|July 1, 2016||8.25%||4.33%||12.58%|
|July 1, 2017||8.25%||6.18%||14.43%|
|July 1, 2018||8.25%||8.03%||16.28%|
|July 1, 2019||8.25%||9.88%||18.13%|
|July 1, 2020||8.25%||10.85%||19.1%|
|July 1, 2046||8.25%||Increase from pre-funding plan rate ceases in 2046-47|
State Contribution Increases
The CalSTRS Funding Plan maintained the state’s base contribution rate of 2.017 percent and the purchasing power benefit contribution of 2.5 percent. It replaces the portion of the state contribution rate that was formerly dedicated to paying for the 1990 benefit structure with an amount that fully funds those benefits over 32 years.
The funding plan provides the board limited authority to adjust the state’s contribution rate; however, the rate cannot be increased by more than 0.5 percent each year.
As of July 1, 2018, the state’s contribution rate is 9.828 percent
Increased member and employer contributions under AB 1469 are only payable for compensation that is creditable to the Defined Benefit Program.
Excess contributions received by CalSTRS for service creditable under the Defined Benefit Supplement Program that are also attributable to increases under the funding plan are returned to school district employers. School district employers are responsible for returning excess member contributions to their employees, and the returned pre-tax contributions are considered taxable income in the year they are received by the employee. This occurs regardless of when the contribution was initially paid.
The bill requires CalSTRS to submit a funding status report to the Legislature every five years, with the first report due on or before July 1, 2019.
This legislation represents a prominent milestone in CalSTRS’ funding history and demonstrates the leadership and commitment of the Legislature, Administration and our stakeholders. With a responsible funding plan firmly in place, CalSTRS is on target to meet the promise of a secure financial future for California’s educators.