Resounding applause is in order for enactment of this plan to fully fund the Defined Benefit Program in a manner consistent with sound actuarial and accounting practices,” said CalSTRS Chief Executive Officer Jack Ehnes. “This historic legislation alleviates the risk of a looming liability for the world’s largest educator-only pension fund and sets a course for its long-term viability. We believe this plan achieves the right balance of time, commitment and completeness.”As much as I don't like having even less money in my wallet, I can't help but think this is a good thing--and I've long railed against the problem on this blog. The California State Teachers Retirement System was racing towards insolvency, and the only way to save it was to increase contributions or to decrease benefits. Since decreasing benefits would be severely unpopular, more money has to be pumped into the system by teachers, school districts, and the state. This, then, means school districts will have less money available with which to offer pay raises. Scylla and Charybdis.
Increases in pension contributions for all parties take effect July 1, 2014, and will be phased in over the next several fiscal years. Contributions rates for all CalSTRS members will increase from 8 percent of payroll to 8.15 percent of payroll in the first fiscal year.
CalSTRS members hired prior to January 1, 2013, not subject to provisions of the Public Employees’ Pension Reform Act of 2013, will see their contributions increase by a total of 2.25 percent of payroll phased in over the next three fiscal years. Contribution increases for CalSTRS members hired after January 1, 2013, who are subject to the provisions of PEPRA, will be phased in over three years with their total increases capped at 1.205 percent.
CalSTRS members who were actively working on or after January 1, 2014, will receive a guarantee of the existing 2 percent Annual Benefit Adjustment, also referred to as the improvement factor, in exchange for their contribution increases. For members who retired prior to January 1, 2014, no change in benefits will occur.
Employer contributions currently at 8.25 percent will increase gradually by an additional 10.85 percent phased in over the next seven years, for an eventual total of 19.1 percent. State contribution rates, which are currently 5.541 percent, when the contributions for purchasing power protection are included, will increase over the next three years to a total of 8.828 percent by fiscal year 2016-17.
Other highlights of the new legislation include granting the Teachers’ Retirement Board limited rate-setting authority for contributions. Member rates remain fixed in statute. CalSTRS will also be required to submit a funding status report to the Legislature every five years to ensure the plan continues to sustain an appropriately funded benefit program.
Thursday, September 11, 2014
Less Take-Home Pay
No pay raise. Union dues are up. Retirement costs are up: