US - Some 91% of the board of the California State Teachers' Retirement System favours increasing employer contribution rates in order to cope with its US$20bn unfunded liabilities.
CalSTRS actuarial obligation, valued in June 2005, stands at $20.3bn representing a funding ratio of 86%.
This unfunded actuarial obligation is equivalent to an increase of 3.753% of credible salaries over 30 years. More significantly however is the fund’s claim that the figure will not amortise over any given time period.
In a bid to resolve the issue, the board was presented in December 2005 with 13 options to consider for final vote in June 2006. These included increasing contributions from employees, employers or the state; issuing pension obligation bonds; determine final compensation based on three consecutive school years of salary rates and eliminate the career factor.
The results of the survey found that 91% of the 11-man board would “recommend” or “strongly recommend” including the option to increase employer contribution rates.
To next most popular option was to hike the general fund contribution rate (73%) or impose employer contribution for post-retirement compensation (73%).
No one recommended eliminating the 2% annual benefit adjustment on all future service or members.
Eight teacher-affiliated organisations in California were also given the opportunity to vote on the issue. The organisations’ most popular choice was to impose employer contribution for post retirement compensation. Increasing employers’ rates was the third most popular option.
Increasing contribution rates would be subject to judicial review.
By Daniel Flatt