By Dave Earl Carpenter
With recent reports of the California State Teachers’ Retirement System (CalSTRS) being underfunded, we took some time to speak with CTA legislative advocate Jennifer Baker to discuss the situation.
Educator: Do mass teacher layoffs adversely affect the CalSTRS pension?
Jennifer Baker: No. Teachers’ CalSTRS Defined Benefit Plan is guaranteed by the California Constitution.
Can you explain what a “defined benefit pension” is?
It is a guaranteed, secure retirement plan that is based upon a formula for determining benefits. The benefits are not directly dependent on the member and/or employer contributions as well as the interest that is earned on those contributions.
Example: CalSTRS offers a defined benefit plan which is guaranteed by the California Constitution. Contributions are made by members, school districts and the state. The benefits are based upon a formula which varies depending on an individual’s final compensation, age and years of service. There are other factors that also influence the formula, such as longevity, career factor, and survivor benefit options. (See helpful benefits calculator at www.calstrs.com/calculators.)
There have been recent reports in the news about CalSTRS “unfunded actuarial obligation.” Can you explain what that means?
The amount of money needed at a projected future date to meet the anticipated liabilities for all of CalSTRS’ members.
Example: CalSTRS has a potential $43.5 billion unfunded actuarial obligation, which means that in order to pay all of the earned retirement benefits to current members and their beneficiaries for the next 30 years it will cost $43.5 billion more than the current assets and current contribution rates will be able to provide in that 30-year period.
What is CalSTRS doing to correct the situation?
CalSTRS has been steadily informing the Teachers’ Retirement Board, which oversees the CalSTRS fund, as well as constituent groups and the Legislature. This issue is quite complex, particularly given the current fiscal climate in the state, which will likely make this issue something that is discussed in context with long-term state budget issues. CTA is committed to working with CalSTRS to ensure no member loses any retirement benefits.
Does CalSTRS have a plan to deal with the projected funding shortfall?
CalSTRS is working with constituent groups including CTA and the Legislature to craft a long-term solution. CalSTRS has discussed possible increases in state, employer and employee contribution rates over a period of time.
To be considered successful, does a pension fund have to be funded at 100 percent?
No. CalSTRS itself has had great fluctuations in its funding status and has only reached 100 percent and over once. CalSTRS’ fiduciary goal is to reach 100 percent funding, but if they reach 90 percent they will be better funded than most retirement systems in the country.
What percentage is STRS funded at?
The projected shortfall of $43.5 billion would leave the system funded at a 77 percent level.
What is the current age a member can retire and begin to receive a CalSTRS pension?
A teacher may retire as early as 50 years old if she has a minimum of 30 years of service credit. For all others who have a minimum of five years accumulated service, the minimum retirement age is 55. The median age of retirement is 61.3 years.
For those who leave the teaching profession and go to another profession, can they still receive their CalSTRS pension?
Yes, provided they have a minimum of five years vested into CalSTRS. They cannot receive this until they reach 55.
Where can members go for up-to-date CalSTRS info?
The website www.calstrs.com is a great resource.
Members retiring in fiscal year 2007-08
Median age at retirement
Median service credit
Average monthly CalSTRS benefit