CalSTRS Releases Analysis of Governor’s Pension Reform Proposal

News release Ricardo Duran

WEST SACRAMENTO, CA – CalSTRS Staff drafted an analysis of the Governor’s 12-point pension reform proposal, which Deputy CEO Ed Derman presented to the Conference Committee on Public Employee Pensions at its December 1, 2011 hearing. The CalSTRS Board has not taken a position on the Governor’s pension reform proposal.

For CalSTRS, the most significant reform that wasn’t included in the Governor’s proposal is a plan of action to address the system’s $56 billion long-term funding shortfall, which only the Legislature and Governor have the authority to develop and implement.

While the Governor’s proposal does not differentiate among the structural differences in existing pension plans and the specific challenges each plan faces, one of the more significant components that does impact CalSTRS is a possible 40-percent average reduction in total retirement benefits for future members compared to current levels.

CalSTRS is prepared to assist the Legislature, the Governor and our stakeholders in developing scenarios that show the potential impact of increased contributions on the plan’s funding status. During the hearing, Assemblyman Warren Furutani asked CalSTRS to develop such scenarios.

CalSTRS will continue to work with the Legislature and its stakeholders to develop a plan that protects the fund and its members while addressing proposed contribution increases to ensure they are gradual, predictable and fair to all parties.

The California State Teachers’ Retirement System, with a portfolio valued at $148.2 billion as of October 31, 2011, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of a traditional defined benefit, cash balance and defined contribution plan, as well as disability and survivor benefits. CalSTRS serves California’s 852,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.

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