US - A bill that would repay over time a US$500m state contribution that has been withheld from the US$125bn California State Teachers' Retirement System (CalSTRS) has been passed by the Assembly committee on public employees, retirement and social security in a unanimous vote.
CalSTRS said the committee vote on AB 55 (Mullin) brings the fund one step closer to recovering the payment, that supports supplemental payments to about 63,000 retired educators and their survivors, without continued litigation.
These quarterly payments are made from the fund’s supplemental benefit maintenance account to retirees when inflation erodes their monthly benefit below 80% of its original consumer purchasing power.
Two years ago, Senate Bill 20x amended the law to withhold US$500m of the annual contribution from the total amount due in the 2003-04 fiscal year. The AB 55 bill would restore the missed contribution in payments over the next five years.
Jack Ehnes, CEO of CalSTRS, said: “We’re encouraged by this positive step towards restoration of the state’s contribution and anticipate a successful conclusion to our efforts.
“Our goal has always been to use the legislative process, rather than litigation, to get the funds due to our retired members.” While current supplemental benefit recipients and those in the near future will not be affected by the missed contribution, the CalSTRS board opposed SB 20x due to the supposed “long-term threat” it presents to the fund.
CalSTRS previously filed suit in October 2003 to recover the funds in Sacramento County Superior Court.
“The complaint sought to invalidate SB 20x on the grounds that it violated an enforceable commitment to the state to pay those funds and jeopardised the capability of CalSTRS to make the supplemental payments because there is a possibility that the funds will never be repaid,” CalSTRS explained.
The second hearing on CalSTRS’ motion for summary judgement will be heard in the Sacramento County Superior Court on Friday, April 22.
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