CalSTRS valuation shows 76.7% funded ratio; board approves additional earnings credits and death benefit increase

CalSTRS staff presented the 06/30/2024 actuarial valuation and recommended the board maintain current contribution rates while granting targeted benefit credits and an increase to the lump‑sum death benefit.

Nick (actuarial presenter) reported the system's funded ratio as of June 30, 2024 was 76.7%, up from 75.9% a year earlier, and that investment returns were roughly in line with the 7% assumption. Staff attributed a roughly $2 billion increase in the actuarial obligation mainly to higher‑than‑expected teacher salary increases.

Based on board policy thresholds, staff recommended and the board approved the following actions by voice vote: a 4.81% additional earnings credit (AEC) for the Defined Benefit Supplement program to be applied to balances of nonretired members as of June 30, 2024; a 3.65% AEC for the Cash Balance program (step 1 only); and a 2.75% increase to the lump‑sum death benefit, which staff said reflects California inflation but is capped by the 2.75% long‑term assumption.

Actuarial staff explained the DBS program was about 129% funded before credits and that granting AECs per policy would reduce the surplus by an estimated $611 million. For Cash Balance, staff said the funded status would drop from 118% to about 114% after the 3.65% credit. Board members asked technical questions about timing and member notification; staff said active members will see AECs on their retirement progress reports and retired members will receive a letter explaining the AEC and options.

The board also heard scenario analyses showing that under a range of negative return scenarios the funding plan would likely keep the system ahead of schedule but that most downside volatility would affect the state's contribution share, not employer rates. Staff recommended keeping contribution rates at current levels for the upcoming fiscal year.