Pension legislation signed

Educators may notice a little extra going out of their paychecks into to the California State Retirement System (CalSTRS) beginning this month, but that’s a good thing since the money will not only come back to them at retirement, it will stabilize the retirement system into the future.

After years of attempts to close a shortfall in the teachers retirement system that has mounted to $74 billion, the Legislature in June approved Gov. Jerry Brown’s pension plan that provides increased contributions from educators, school districts and the state.

“For roughly the last 10 years our highest priority and our members’ most pressing concern has been to secure the long-term stability of the Defined Benefit Program,” said Harry Keiley, chair of the Teachers’ Retirement Board and member of the Santa Monica-Malibu Classroom Teachers Association.

The historic action calls for member contributions to increase from 8 to 10.25 percent over the next three years. School and community college district contributions will increase from 8.25 percent to 19.1 percent over seven years while the state’s portion would increase from the current 3.041 percent to 6.3 percent in the next three years. The increases began to take effect July 1.

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In Capitol Today, Educators Advocate for Increased Funding, Mandatory Kindergarten, Secure Retirement

The War Against California Pensions

Originally posted at

Benjamin Gamboa doesn’t know John Arnold, but they are linked by a shared concern over the fate of public-employee pensions in California.

“I’m proud to have a pension,” the 30-year-old Gamboa says. “I believe every American should have a pension.”

The two men live in very different worlds. Gamboa is a research analyst at Crafton Hills College in Yucaipa, California. Arnold is a hedge-fund billionaire from Houston, Texas.

There’s another difference between them: Arnold recently had a representative present at a secret “pension summit” held at a Sacramento hotel, where strategies to limit public employee retirement benefits were discussed; Gamboa, a union member, did not – representatives of labor were specifically not invited.

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Capitol News: Everything They Wanted to Know About Pensions – But Might Have Been Afraid to Ask

On Feb. 14, CTA Legislative Advocate Jennifer Baker and Ed Derman, Chief Deputy Executive Officer of the State Teachers' Retirement System (CalSTRS) helped lawmakers' staff members get a better understanding of how the teachers' pension fund works and the challenges facing it in the years ahead.

These staff persons will be responsible for advising the legislators they work for on these very important issues.

The task ahead will be addressing how the State will handle the CalSTRS unfunded liability.

For more information about the retirement system and pension issues, see the retirement section of


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Capitol News: State Teachers' Pension System Releases Report on Making Ends Meet

The California State Teachers' Retirement System (CalSTRS) Board has just released its report about how the multi-billion dollar pension system can continue funding its defined benefit plan.

The report, which the legislature requested by passing SCA 105 (2012), has been posted on the retirement system's web page as the CalSTRS Final Draft, SCR 105 Report.

You can also read more about retirement at Retirement section.

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Capitol News: Most Pension System Changes Affect New Hires

The effective date of laws "reforming" the state's public pension systems – CalSTRS and the California Public Employees' Retirement System (CalPERS) -- is January 1, 2013.  These changes generally impact new employees, although some of the revisions will also affect employees hired on or before December 31, 2012.

Please visit the CTA website, which provides more information on retirement legislation.

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Beginning 2015: Huge Increase in CalPERS Long-Term Care Insurance Premiums

Many members are alarmed after hearing that CalPERS is planning an 85% premium increase in their Long-Term Care (LTC) insurance program and has closed the program to new applications.  CalPERS has announced that this increase will go into effect in 2015 for over 110,000 state workers and retirees.  Without a LTC program available through CalSTRS, members are looking for other alternatives.  Remember that NEA Member Benefits offers the NEA Long-Term Care Insurance Program exclusively for CTA/NEA members and their families.

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Governor's Pension Plan Will Hurt Recruitment, Retention of Public Workers

On Tuesday, Gov. Brown unveiled a public employee pension reform package that contains some important changes for newly hired educators in California schools.
  1.  All changes apply to NEW CalSTRS members – those hired after the bill has passed and enacted into law.
  2.  All new CalSTRS members would be required to pay half of the normal cost of their retirement. The language is very unclear on the impact this would have for local school districts and school funding under Proposition 98.
  3. Changes the formula for determining retirement benefits from 2% at age 60 to 2% at age 62, and from 2.4% at age 63 to 2.4% at age 65.
  4. Eliminates the ability of teachers width more than 25 years of service to use their single highest year salary when calculating retirement benefits. All future teachers would be required to use their three highest years of salary.
The changes and others in the governor's plan  would undermine the state's ability to recruit and retain teachers, firefighters, police officers, and other key employees.

The California Teachers Association has sent a letter of opposition to the Legislature, urging lawmakers to vote against the bill containing the governor's proposal, AB 340.

More information about the measure can be obtained from the CTA letter of opposition (below).
















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What’s happening with CalSTRS valuation?

The final impact of the devastating financial losses in 2008-09 was felt by CalSTRS, which this week reported a two percent decrease in the funding status of its Defined Benefit Program.

Nevertheless, the results of the Defined Benefits Program valuation were greeted width guarded optimism by CalSTRS officials, who maintain that this is the last valuation that will signal a loss. Beginning width this valuation, and over the next two, the valuation will reflect the 23.1 percent investment return from 2010-11.

The latest valuation shows a funding status sufficient to cover 69 percent of projected liabilities, leaving the fund width a $64.5 billion funding shortfall. The funding status means that for every dollar in pension obligations the fund has 69 cents worth of assets available. The previous valuation showed the funding shortfall at $56 billion.

The growth in the funding shortfall, however, is $4.3 billion less than was previously predicted, due primarily to the initial recognition of a 23.1 percent investment return for the 2010-11 fiscal year.

"Although healthy returns in 2010-11 reduced the magnitude of required future contributions, we cannot count purely on investment earnings to bring this crucially important fund back to financial health," said CalSTRS Chief Executive Officer Jack Ehnes. "What's needed now in the pension reform discussion is a long-term funding plan that only the Legislature and Governor have the authority to implement. CalSTRS is committed to working width all of our stakeholders to develop a plan that is both gradual and predictable for our members, their employers and the State of California."

In the meantime, CTA’s leadership and staff are working width legislative leaders and the governor’s office to begin those discussions around long-term solutions.

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Full Funding is Needed for Schools, Retirement System, CTA Advocate Declares

CTA Legislative Advocate Jennifer Baker (at center) declares at a Sacramento Bee Wednesday evening forum on teachers’ retirement that a measure of the state’s commitment to public education will be its willingness to fully fund its obligations to the California State Teachers’ Retirement System.

Serving on a panel width Baker were (from l.) Ed Derman of CalSTRS, Pension Foe Marcia Fritz and Jason Sisney of the Legislative Analyst’s Office (not pictured). During the panel, Baker noted that a secure pension is vital to helping the state recruit and retain its highly qualified instructional force.

Baker also stressed the importance of the state securing new revenues to provide adequate funding for schools.

She stressed that teachers had given up a number of concessions, including incentives designed to keep educators working longer to stave off a shortage.

Baker also pointed out that unlike private workers, teachers and other public employees do not earn Social Security benefits, and those entering the teaching profession width Social Security credits are penalized when they try collecting the federal retirement benefits they earned in their prior working life.

CalSTRS’s Derman stated that about 70% of the system’s members are women, and the average retirement age is 62.

Derman attributed the system’s unfunded liability under new federal accounting standards reflects the recent stock market volatility. He said the system invests for the long term and that a combination of changes, including the recovery of the stock market, will help the system address the accounting shortfall.

While Fritz acknowledged that CalSTRS provides only “modest” retirements to educators, she applauded the governor’s hybrid plan and said pensions should be capped so that no educators – including administrators – would receive more than $100,000 in retirement earnings.

Sisney said that the governor and legislators are faced width a hard choice of either securing more funding for the retirement system or reducing benefits for future employees, width both practicality and court rulings limiting reductions to current employees’ pensions.

A number of CTA members, including key members of the State Legislation Retirement Committee, and retired teachers attended the panel presentation, including Dana Dillon, who serves on the CalSTRS Board, and Maggie Ellis, who chairs the CTA Retirement Committee.



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