With the Cash Balance Benefit Program, your employer generally matches your contribution dollar for dollar. Typically, you contribute 4 percent of your salary and so does your district. This combined contribution usually will total 8 percent.
Alternative rates may be set, depending on your collective bargaining agreement, but for contracts entered into or changed on or after January 1, 2014, you must contribute at least 4 percent, and the combined contribution must total at least 8 percent. You cannot contribute less than your employer.
Your contributions are made on a pre-tax basis, reducing the amount of your taxable income.
You are immediately eligible for a benefit equal to the sum of the balance of contributions, including compound interest earned on your and your employer’s accounts.
Guaranteed Interest Rate
The interest rate is set annually by the Teachers’ Retirement Board based on the average 30-year Treasury rate. The current rate through June 30, 2017 is 2.88 percent.
The Cash Balance Benefit Program is a separate benefit structure managed by CalSTRS. Contributions to the program are invested at the direction of the Teachers’ Retirement Board.
Gain and Loss Reserve
During years when the rate of return is less than the guaranteed interest rate, funds accumulated in a Gain and Loss Reserve account are used to credit interest to your account.
Additions to the Gain and Loss Reserve are determined by the board, on an annual basis. Additions are based on earnings exceeding the need to credit the guaranteed interest rate and pay administrative costs.
The Gain and Loss Reserve also ensures adequate funds are available in the Annuitant Reserve for monthly annuity payments.