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2014

Latest CalSTRS Valuation Released

Categories: California Developments
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School Services of California Inc., by Michelle McKay Underwood, April 4, 2014

As expected, with the release of the California State Teachers’ Retirement System (CalSTRS) Board agenda for next week, the latest actuarial valuation was made public. The actuarial valuation identifies the extent to which the current and future assets of CalSTRS are sufficient to pay the benefits promised to its members under current law over a 30-year period. If the actuarial value of CalSTRS’s assets is less than the actuarial obligation for benefits to current members and benefit recipients, an unfunded liability or shortfall exists.

Due to a banner investment year in 2013, CalSTRS’s factors did not significantly change from 2012:

  • The unfunded liability increased by $2.7 billion to $73.7 billion (which is $2.2 billion less than what was anticipated as of June 30, 2012, when the last valuation was adopted)
  • Funded ratio (value of assets divided by value of liability) decrease by 0.1% to 66.9% (a healthy ratio is 80%)
  • 2046 is the projected depletion date, the date by which the funded ratio is projected to equal 0%, three years later than the most recent valuation

Additionally, the “normal cost rate” expected to be adopted by CalSTRS is 16.059%, a small increase from the current 15.9% rate. This factor is significant because “new” members must contribute at least half of the “normal cost” of their pension plan under pension reform (Assembly Bill 340). Because the normal cost rate change was not significant, the Board will likely retain the current member contribution rate of 8% for these new members. The CalSTRS Defined Benefit Program 2013 Valuation is available here.

These figures do not change the conversation that will need to happen in the State Capitol to address the unfunded liability of CalSTRS. The next informational hearing on the topic is scheduled for April 9, 2014.

 

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