Comments on: Why CalSTRS fix is impossible: It would force cut in teacher take-home pay

By: David G. Pipes, CLU

David G. Pipes, CLU — Thu, 12 Jun 2014 21:44:19 +0000

In the next few months teachers are going to hear a lot about the condition of CalStrs and steps proposed to “fix it.” Before becoming involved in the recriminations and recitations of incompetency and failed promises there are a few things you should know.
CalStrs is a modified defined benefit pension plan. It is modified because it takes contributions from teachers, districts and the state. It is a defined benefit plan because the individual participants do not have separate accounts but receive benefits based upon a formula that includes years of service, age, and highest wage (this is determined in different ways for different groups.) The benefit does not have a direct relationship to the amount that the individual teacher puts into the plan.
Defined benefit plans are the domain of people trained as actuaries. Using death statistics they project how many participants will actually live to receive the defined benefit. They also determine the life expectancy of those who draw the benefits.
This is a monumental task, especially when you consider that highest salary is a “moving target” and that the plan guarantees annual increases in the basic benefit. However, the thing that makes this whole thing work is interest or earnings on investments.
CalStrs is based on an assumed rate of interest of approximately 8%. They have actually realized much lower results. It is likely that those results will remain below 8% for the foreseeable future as the federal government pursues a low interest environment. Today the plan has large “unfunded liabilities.”
Unlike the federal government the state cannot print money to remedy its problems so at some point CalStrs must return to fiscal solvency. The large wave of “baby boomer” teachers places enormous pressure on the system. Like any system that depends upon earnings or interest, whenever you run out of earnings you must consume capital which then further reduces earnings.
How can CalStrs system return to fiscal viability? The answer is, “money.” The last question is, “whose money?”

By: Ted O'Steele, CEO

Ted O'Steele, CEO — Tue, 15 Apr 2014 00:17:01 +0000

In reply to Leotis Ahmad Jones.

Or, oh wait— yes— turns out it was an American idea clothed in contract language and written by the doomers representatives in the elected gov…..lol—–

By: Leotis Ahmad Jones

Leotis Ahmad Jones — Mon, 14 Apr 2014 00:15:12 +0000

Ok, Sybill, a French communist is still a communist. 30 years of hardly working, with a sweet retirement…That may be a French idea.

By: S Moderation Douglas

S Moderation Douglas — Sun, 13 Apr 2014 20:02:15 +0000

Ce qu’il y a de certain c’est que moi, je ne suis pas Marxiste.

By: billybs

billybs — Sun, 13 Apr 2014 13:05:35 +0000

Not true, Sybill.

By: Ted O'Steele, CEO

Ted O'Steele, CEO — Sun, 13 Apr 2014 02:48:19 +0000

In reply to billybs. Billbs--- your lack of knowledge of Karl M is amazing!

By: billybs

billybs — Sun, 13 Apr 2014 01:10:58 +0000

Sybil, Straight out of the Manifesto, good job,but give the author his due. Karl is his name.

By: Queeg

Queeg — Sat, 12 Apr 2014 16:29:49 +0000

No pensions from globalists on stinking service jobs driving forklifts of high priced tech gadgets….from China.

Why rail on someone getting a hard earned pension…..go after the bad boy globalists cleaning you out daily.

By: S Moderation Douglas

S Moderation Douglas — Sat, 12 Apr 2014 05:26:25 +0000

“If the CTA and CFT are that ruthless and Machiavellian — and they are, they are”

It’s gonna be bad!

By: Ted Steele, CEO

Ted Steele, CEO — Sat, 12 Apr 2014 04:16:34 +0000

In reply to Ulysses Uhaul.

They have to do CWD Republikabooki dance first………bigger yaaaaaaaaaaaaaaaawn.