Issue link: http://educator.cta.org/i/9051
System (CalSTRS) being underfunded, we took some time to speak with CTA legis- lative advocate Jennifer Baker to discuss the situation. EDUCATOR: Do mass teacher layoffs adversely affect the CalSTRS pension? JENNIFER BAKER: No. Teachers’ CalSTRS Def ined Benef i t 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 determin- ing 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 Contribution amounts STATE 2.017 % SCHOOL DISTRICTS 8.25 % EDUCATORS 8 % (CalSTRS contributions as percentage of teacher’s pay.) CalSTRS update with CTA legislative advocate W ith recent reports of the California State Teachers’ Retirement are made by members, school districts and the state. The benefits are based upon a f o rmu l a whic h va r ies depending on an individual’s final compensation, age and years of service. There are other fac tor s that a l s o influence the formula, such as longevity, career factor, and survivor benefit options. ( S e e h e l p f u l b e n e f i t s calculator at www.cal strs. 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 un- funded actuarial obligation, which means that in order to pay all of the earned retire- ment benef i ts to cur rent members and their beneficia- ries 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’ Re- tirement Board, which over- sees the CalSTRS fund, as well as constituent groups and the Legislature. This is- sue is quite complex, particu- larly given the current fiscal climate in the state, which wi l l 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 mem- ber loses any retirement ben- efits. 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 possi- ble increases in state, employ- er 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 fund- ing status and has only reached 100 percent and over once. Cal- STRS’ fiduciary goal is to reach 100 percent funding, but if they reach 90 percent they will be better funded than most retire- ment 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 ear- ly as 50 years old if she has a minimum of 30 years of ser- vice credit. For all others who have a minimum of five years accumulated service, the min- in fiscal year 2007-08 Members retiring NUMBER RETIRING 12,568 MEDIAN AGE AT RETIREMENT 61.3 YEARS MEDIAN SERVICE CREDIT 29.0 YEARS AVERAGE MONTHLY CALSTRS BENEFIT $4,329 imum 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 vest- ed into CalSTRS. They can- not receive this unt i l they reach 55. Where can members go for up-to-date CalSTRS info? The website www.calstrs.com is a great resource. DAVE EARL CARPENTER SEPTEMBER 2009 | www.cta.org 31 OCTO