Under the CalSTRS Funding Plan, contribution rates from all parties—members, employers and the state—to the Defined Benefit Program were increased gradually over several years.
The Defined Benefit Program contribution rates for members vary slightly depending on your benefit structure:
- CalSTRS 2% at 60 members (first hired to perform service that could be credited to the Defined Benefit Program on or before December 31, 2012): Your contribution rate is 10.25% of your creditable earnings.
- CalSTRS 2% at 62 members (first hired to perform service that could be credited to the Defined Benefit Program on or after January 1, 2013): By law, you must contribute 50% of the normal cost of your retirement benefits. Your total contribution will be adjusted up or down depending on whether there are changes to the normal cost of benefits. The normal cost is assessed each year based on the actuarial valuation, the snapshot of CalSTRS’ financial status presented to the Teachers’ Retirement Board each spring. For 2020–21, your contribution rate is 10.205% of your creditable earnings.
Your contributions are withheld from your earnings by payroll deduction, and service up to one year is credited to your Defined Benefit account.
Defined Benefit Supplement Program
The Defined Benefit Supplement Program contribution rates for members also vary slightly depending on your benefit structure:
- CalSTRS 2% at 60 members: Your contribution rate is 8% of earnings in excess of one year of service. Limited-term payments or retirement incentives are also creditable to the Defined Benefit Supplement Program for 2% at 60 members only.
- CalSTRS 2% at 62 members: For 2019-20, your contribution rate is 9% of earnings in excess of one year of service.
For more information about your contributions, see the CalSTRS Member Handbook.
Employer pick-up of contributions
Most employers participate in the federal Employer Pick-Up Program under Internal Revenue Code section 414(h)(2). Under this provision, your employer “picks up” your CalSTRS contributions so that you can defer income taxes on that portion of your compensation.
Your contributions must be deducted from your compensation and considered creditable compensation for retirement purposes.
Your tax-deferred contributions are credited to your Defined Benefit account as “Employer-Paid Member Contributions.” The contributions are taxable when returned to you or your beneficiaries as a lump sum or monthly benefit.
Your employer’s contributions
For 2020–21, your employer—school district, community college district, participating charter school or county office of education—contributes an amount equal to 16.15% of your creditable earnings to CalSTRS.
Your employer’s contributions are not credited to your Defined Benefit account but are deposited into the Teachers’ Retirement Fund to help fund the benefits paid to all members and beneficiaries.
The current rate reflects changes from the 2020-21 state budget that re-direct the supplemental payment paid by the state on behalf of employers as part of the 2019-20 state budget. The supplemental payment is now solely being used to reduce the contribution rate for employers for fiscal years 2019-20, 2020-21 and 2021-22. Under the CalSTRS Funding Plan, beginning in 2021–22, the Teachers’ Retirement Board has limited rate-setting authority to adjust the employer contribution rate up or down by no more than 1% per year up to a maximum contribution rate of 20.25%. However, as a result of the 2020-21 state budget changes, the employer contribution rate for 2021-22 will be 2.18% of payroll less than the rate that will be set by the board.
Defined Benefit Supplement Program
The employer contribution rate for compensation creditable to the Defined Benefit Supplement Program is 8.25%.
Of this amount:
- 8% is credited to your Defined Benefit Supplement account.
- 0.25% is credited to the DB Program to pay for the cost of service credit for unused sick leave.
For more information about employer contributions, see the CalSTRS Member Handbook.
The state’s contributions
The state contributes 7.828% of members’ annual earnings to the Defined Benefit Program.
The state also contributes an additional 2.5% of member earnings into the CalSTRS Supplemental Benefit Maintenance Account. The SBMA account is used to maintain the purchasing power of benefits.