US - The California's Teachers' Retirement System (CalSTRS) has approve principles to close its US$20bn long term funding gap and reach 100% funding.
No changes to existing benefits will be made and the system planned to increase member contributions by 0.5%. Any increases to contributions will be done incrementally over time and will begin no earlier than 1 July 2009.
The increase in the employer contribution rate was still to be determined by the Teachers' Retirement Board to fund the defined benefit scheme within 30 years.
The next step in plugging the funding gap will be to draft legislation which must be signed into law by the legislature and the governor.
"We have worked closely with our members and thoroughly researched all of the options to reach our goal of 100 percent funding," said Carolyn Widener, CalSTRS board chair.
The $144bn fund also approved new asset allocations that balance its tolerance for investment risk with positive long-term investment returns.
The new asset allocation long-term targets allow for more opportunistic investments in private equity and real estate and further diversify the system's investment portfolio.
We have had exceptional returns on our investments but we know positive returns alone cannot bridge our funding gap, said Widener. Although the funding status has improved since last year, we know that the sooner we tackle this issue, the less expensive it will be."
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