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CalSTRS: Needs More Funding

February 7, 2013

Interesting article about CalSTRS pension funds.  If you are a teacher in California you might want to take notice.  CasSTRS is dangerously underfunded at this time.  A turnaround in their investments could fix this, but if their current portfolio does not do well, it will mean a hike in contributions by members…

A CalSTRS draft report says combined contributions by teachers, school districts and the state would have to rise 15% a year over the next three decades to close the retirement system’s $64 billion funding gap.

 The $157.8 billion California State Teachers’ Retirement System, West Sacramento, which has a 69% funding level, would deplete its assets by 2046 if there were no contribution increase, the report says.

The 15% hike would bring the retirement system to a 100% funding level, “an optimal goal,” the report says. But it also suggests other options, such as a 12.1% hike, to bring the system to an 80% funding level, the level at which plans are considered to be in healthy financial shape.

Another “more modest outcome” the report suggests, would be to set contribution rates to ensure the fund would be able to pay benefits due each year, which would require a 9.5% increase.

Currently, school teachers pay 8% of salary, school districts pay 8.25% of payroll and the state contributes around 5.3% of payroll and inflation costs. The Legislature must approve any change to the formula.

The final report, required by the Legislature, is due Feb. 15. The CalSTRS board is scheduled to discuss the draft at its Feb. 8 meeting to determine whether any modifications should be made before it is submitted to state lawmakers.

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