The California Legislature has passed a long-time funding plan for the California State Teachers’ Retirement System that is aimed at averting the $183.8 billion retirement fund’s running out of money by 2044.
The bill, approved by both the California Assembly and Senate early Monday, is expected to be signed by California Gov. Edmund G. “Jerry” Brown J. in the next 30 days, ending a funding crisis for the nation’s second largest public pension system.
School districts, employees and the state, however, will pay more in contributions to keep the system afloat.
The school districts, which now pay 8.25% of payroll to CalSTRS, will see contributions increased to 19.1%, phased in over a seven-year period starting with the new state fiscal year on July 1.
Employees, the bulk of whom contribute 8% of their salary, will see a 2.25-percentage-point increase over a three-year period starting July 1. The state’s contribution to the plan will go to 6.328% from the current 3.041% over a three-year period, also starting July 1.
“All along CalSTRS has said that the funding shortfall can be managed but it will require increased contributions, which can be gradual, predictable and fair to all parties involved,” said CalSTRS CEO Jack Ehnes in a statement.
West Sacramento-based CalSTRS’ funding level fell significantly in the 2008 fiscal year after plan assets declined 25%. The pension plan was 67% funded as of June 20, 2013.
The plan is to fully fund CalSTRS within 32 years.