Statement Gretchen Zeagler

Statement on Joint Committee Hearing to Address CalSTRS Funding Needs
Earlier Action Reduces Overall Costs

WEST SACRAMENTO, Calif. – California State Teachers’ Retirement System (CalSTRS) Chief Executive Officer Jack Ehnes issued the following statement on the joint informational hearing of the Assembly Committee on Public Employees, Retirement and Social Security and the Senate Committee on Public Employment and Retirement held March 19, 2014.

“The most effective means to close the $71 billion funding gap is to increase the contributions made by all parties. A strategy that achieves full funding of the program in 30 years remains the definitive approach since it reduces overall expenses, adheres to accepted accounting standards and actuarial guidelines while consistent with the Teachers’ Retirement Board’s responsibilities as fiduciaries. For example, full funding that occurs within 40 years is 35 percent more costly as opposed to a plan that achieves full funding in 30 years, even though the contribution rates are lower under the 40-year scenario.

“However, CalSTRS recognizes the Legislature may consider other funding alternatives which have been explored in our presentation of additional funding scenarios. Although contribution increases can be deferred and gradually implemented, the earlier they are enacted the lower their total cost will be.”

Funding scenarios and a history of contribution rates as submitted to the Committee can be found here.

A link to the presentation on CalSTRS and Proposition 98 presented by the Legislative Analyst’s Office can be found here.

The California State Teachers’ Retirement System, with a portfolio valued at $180.8 billion as of February 28, 2014, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California’s 868,000 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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