CalSTRS Ups Member Contributions to Bridge Funding Gap

Members of the California State Teachers’ Retirement System (CalSTRS) are to pay more towards the pension to help bridge its $74 billion funding gap.

Yesterday California Governor Edmund Brown signed a state legislature which will increase contributions from July 1 for teachers, schools, and the state.

Active members’ contributions will increase from 8% to 8.15% in the next 12 months, with further subsequent increases depending on when members were hired. Employer contributions are also set to rise from the current level of 8.25% to 19.1% by 2021, CalSTRS said in a statement.

Staff, employers, and the state will contribute a total of $276 million in the next fiscal year, and this level will eventually rise to more than $5 billion a year. The pension will report every five years on its funding status.

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The changes follow a report published by CalSTRS in February 2013 stating that it would need contributions of $4.5 billion a year to plug its deficit.

Jack Ehnes, CalSTRS CEO, said: “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.”

A press release issued by Governor Brown’s office stated that, without additional contributions, CalSTRS would have run out of money to pay benefits to its 868,000 members by 2047. Instead the office said the unfunded liability is expected to be eliminated by 2046.

Verne Sedlacek is to leave his role as CEO and president of Commonfund after 11 years, the service provider has announced.

Sedlacek will remain in the role until a replacement has been found—a process which Commonfund’s board said could take as long as a year. The board has already hired an executive search firm to assist in identifying a successor.

Commonfund is a not-for-profit company which manages nearly $25 billion and provides outsourced investment services—including outsourced CIO services—to other non-profit businesses, pensions, and family offices.

Robert Litterman, chair of Commonfund’s board, said: “On behalf of our entire board I would like to thank Verne for his outstanding leadership and his unwavering commitment to serving Commonfund clients.”

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Sedlacek described his 11-year tenure as “an honor and a privilege”.