Does the CalSTRS Board Have Authority to Increase Rates After Last Statutory Increase?Categories: California Developments,Pension Rate Stabilization
School Services of California, May 3, 2017
Q: Does the California State Teachers’ Retirement System (CalSTRS) Board have the authority to make rate adjustments after the last statutory increase is implemented in 2020-21?
The CalSTRS Board has the authority to increase or decrease the contribution rates for fiscal year 2021-22 and each year thereafter. The CalSTRS Board, however, cannot increase rates by more than 1% in a year and cannot exceed 12% overall, until the remaining unfunded actuarial obligation is eliminated. Recall that these are increases from the 8.25% employer contribution rate in effect on June 30, 2014. Based on Education Code Section 22950.5:
(a) Commencing July 1, 2014, the amount of contributions required under subdivision (a) of Section 22950 shall increase by the following percentages of the creditable compensation upon which members’ contributions under the Defined Benefit Program are based:
(1) On July 1, 2014, by 0.63 percent.
(2) On July 1, 2015, by 2.48 percent.
(3) On July 1, 2016, by 4.33 percent.
(4) On July 1, 2017, by 6.18 percent.
(5) On July 1, 2018, by 8.03 percent.
(6) On July 1, 2019, by 9.88 percent.
(7) On July 1, 2020, by 10.85 percent.
(b) (1) For fiscal year 2021-22 and each fiscal year thereafter, the board shall increase or decrease the percentages paid specified in this section from the percentage paid during the prior fiscal year to reflect the contribution required to eliminate by June 30, 2046, the remaining unfunded actuarial obligation with respect to service credited to members before July 1, 2014, as determined by the board based upon a recommendation from its actuary.
(2) If a rate adjustment is required, the percentages authorized in paragraph (1) shall not change in any single fiscal year by more than 1.00 percent of the creditable compensation upon which members’ contributions to the Defined Benefit Program are based. The percentages described in subdivision (a) and as may be adjusted pursuant to this subdivision shall not exceed 12.00 percent of the creditable compensation upon which members’ contributions to the Defined Benefit Program are based, inclusive of the percentages identified in subdivision (a).
(3) The board shall not increase the rates in order to supplant the state’s obligation pursuant to Section 22955.1.
(c) (1) Except as described in paragraph (2), this section shall become inoperative on July 1, 2046, and as of January 1, 2047, is repealed.
(2) Notwithstanding paragraph (1), on July 1 of the first fiscal year after a 30-day notice has been sent to the Joint Legislative Budget Committee and the Controller in compliance with subdivision (d) of Section 22957, this section shall become inoperative and, as of the following January 1, is repealed.