Annuity Factor Changes in 2011
Effective September 1, 2011, present value (annuity) factors will change. The change was approved by the Teachers” Retirement Board at its December 2010 meeting and will not impact current retirees.
Present Value Factors
Present value factors are used for converting Cash Balance (CB) and Defined Benefit Supplement (DBS) accounts to annuities. It is the overall average rate based on:
- The demographics of members who recently retired under the Defined Benefit Program.
- Regular interest that determines present value on the effective date of retirement.
These factors will change based on new actuarial assumptions. The recalculation will decrease annuity benefits for some future retirees electing a DBS or CB benefit on or after September 1, 2011.
Members electing their DBS or CB benefit as any of the following with an effective date on or after September 1, 2011 will be affected:
- Member-Only Annuity
- Beneficiary Annuity
- Period-Certain Annuity for either:
- Direct payment
- Rollover (3-9 years only)
For a member participating in the CB Program with the following figures:
- Member’s account balance (including employer match): $20,000
- Option election: Member-Only Annuity
- Member’s age: 65
|Current Calculation||$8.21||$20 X $8.21 = $164.20|
|New Calculation||$7.90||$20 X $7.90 = $158.00|
The modified monthly annuity benefit is reduced $6.20 or 3.8 percent.
Members Not Affected
Members electing their DBS or CB benefit as a lump-sum for direct payment or rollover will not be affected.
Members who have already retired or have elected their DBS or CB benefit prior to September 1, 2011 are also not affected.
To learn more about annuity elections and calculation estimates, see Chapter 6 of the CalSTRS Member Handbook.
If you have questions regarding the new present value factors, contact CalSTRS online or at 800-228-5453.