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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.

History of action

The CalSTRS Funding Plan is the result of years of focused discussions, stakeholder outreach, legislative visits and hearings. Since 2006, guided by the Teachers’ Retirement Board, CalSTRS committed to promoting the development of a comprehensive strategy to address the long-term funding needs of the system.

The biggest challenge in this effort was that unlike most other pension plans in California, the board lacked the authority to raise contribution rates and instead had to rely upon action from the Legislature and the Governor, who enacted a responsible funding plan in 2014.

In 2013, CalSTRS submitted a report of possible funding strategies, “Sustaining Retirement Security for Future Generations: Funding the California State Teachers’ Retirement System,” to the Legislature pursuant to Senate Concurrent Resolution 105. The report, developed with input from affected stakeholders, identified funding options and illustrated the implications of gradual, incremental contribution increases necessary to close the Defined Benefit Program’s funding gap and secure the long-term needs of the fund.

Enactment of the funding plan in the 2013-14 legislative session fulfills the Legislature’s expressed intent in SCR 105 to restore long-term viability to fund and uphold the state’s promise to a secure retirement for California’s educators. CalSTRS believes the funding plan enacted in AB 1469 achieves the right balance of time, commitment and comprehensiveness needed to set the Defined Benefit Program on a sustainable path.