Statement on Joint Committee Hearing to Address CalSTRS Funding Needs
Annual Benefit Adjustment offers comparable offset to member contribution increase

Statement Gretchen Zeagler

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 April 9, 2014.

“A key consideration for the Legislature in addressing CalSTRS long-term funding needs is determining how contribution increases should be allocated. Because member contribution rates of 8 percent are set in statute, strong legal precedent dictates that any increase in member contributions must be offset by a comparable new advantage. CalSTRS submitted one instance of how this exchange could take place during the hearing.

“Currently retired members receive a 2 percent Annual Benefit Adjustment after retirement that is not a guaranteed benefit, as are other parts of the Defined Benefit Program. The Legislature reserves the right to reduce or eliminate the benefit adjustment should economic conditions dictate, although no suggestions to eliminate or reduce this benefit have been made. If the Legislature were to guarantee the benefit adjustment in exchange for an increase in contributions paid by current members, this would create a comparable new advantage. This exchange would occur at no additional cost to the program because the cost of providing the benefit adjustment is already reflected in the financing of the Defined Benefit Program.”

Detailed legal and actuarial analysis along with a fact sheet of the vested rights doctrine 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.

For accessible versions of files on this page, contact