Board Approves Additional Earnings Credits for Defined Benefit Supplement and Cash Balance Programs

The CalSTRS board approved additional earnings credits (AECs) for two supplemental programs based on the June 30, 2024 valuations and board policy criteria.

For the Defined Benefit Supplement (DBS) program, staff recommended and the board approved a 4.81% additional earnings credit to be applied to the account balances of non‑retired members as of June 30, 2024. Milliman and staff reported the DBS had a surplus greater than the policy threshold and that the AEC would reduce an approximately $4.35 billion surplus by about $611 million while topping the interest credit toward the long‑term target rate. Presenters noted members have received strong long‑term average returns when minimum credits and AECs are combined.

For the Cash Balance Benefit Program, the board approved a 3.65% additional earnings credit under the board’s policy. The cash balance program’s funded status rose to roughly 18% at the valuation date; the single-step AEC was within the policy guardrails and would lower the program’s surplus while maintaining a conservative reserve cushion.

Board members asked about member notification and the policy thresholds that trigger step 1 and step 2 credits. Staff said active members will see the AEC reflected on retirement progress reports and retirees receive direct notice; the board’s policy uses an 11% funded threshold for step 1 and a 22% threshold above target for step 2.