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The format of this email was messy when I
received it. I hope you can at
least extract some of the information. M.
CRTA Area V Members,
Â
Below is our CRTA Liaison Report on the last STRS Board Meeting.Â
I have
highlighted items previous brought to our attention.Â
There are positive
indicators for our financial well being. Also, the
1988 retirees step up
to receive an additional quarterly SBMA benefits which is 80%
purchasing
power, offset by the annual 2%.
Â
CRTA, both volunteers and staff, continue to work for improvement
ofÂ
benefits for our retirees.
Â
Many thanks to Pat Geyer,
Irene Wetzel, CRTA Area V Legislation Chair, www.crtav.org
1682 El Cerrito Court, San Luis Obispo, CA 93401
(805)543-2145Â Â iawetzel@juno.com
Â
Report on STRS Meetings, April 5,6,7, 2006
       Â
      Â
   By Pat Geyer CRTA Liaison
Executive Summary
1.    STRS is pursuing making
the death benefit tax free by introducing
a bill in the legislature in 2007
2.    In September, 2006, CalSTRS
will pay a Supplemental Benefit from
the SBMA for all STRS members who have retired in 1988 and before
3.    STRS proposes seeking
legislation to change the limitations on
post-retirement earnings. It seeks such amendments
to AB 2970 (Pavley)
4.    A motion to move forward
to divest in companies doing business
with the Government of Sudan was passed.
5.     As of June 30,
2005 STRS was 86% ($121B) funded up from 83%
($114B) funded June 30, 2004. The reasons were a
higher investment return
(12%) rather than the 8% predicted, lower than anticipated salary
increases,
and a correction to prior salary estimates.Â
6.    Given the economic predictions
of 3.25% inflation, 4.25% wage
growth and 8% investment return, STRS is not expected to grow
its way out of
debt. Milliman estimates that STRS will need 3.7%
in additional
contributions to become fully funded
7.     The January 31,
2006 value of the STRS fund is $141.8 billion.
8.     STRS Board voted
to take eliminating the 2% annual benefit
adjustment (COLA) off the list of options for meeting the STRS
unfunded
obligation
9.     The Legislative
Analyst Office under the Budget Proposal
suggested putting the School Land Bank Fund under STRS management.Â
Such
would be in a separate trust for the SBMA account
10. The STRS Board voted to oppose ACA 23 (Richman)
11. SB 1207 (Alarcon) will require nominees for positions
on Board of
directors of California-based public corporations be elected by
a majority
vote when running unopposed. The STRS Board voted
to co-sponsor
12. AB 456 (Torrico), which imposes criminal penalties
on CalSTRS members
who make false statements in order to receive STRS benefits, is
now
inactive. But AB 5X (Torrico) on the same subject
is active..
13. AB2462 (Mullin) authorizes STRS to supply services
for
employer-sponsored 403b plans. All costs would be
paid out of the plans
returns. This is a STRS bill and an IRS regulation.
14. SJR 15 (Dutton) requests the President and Congress
to remove the
Government Pension Offset (GPO) and the Windfall Elimination Provision
(WEP)
from Social Security. SJR 15 will be heard in the
Assembly PER&SS
Committee on April 19. This bill is sponsored by CRTA
15. The next STRS Board meeting will be June 7, 8,
9. The Client
Advisory Committee will meet at 3:45 pm on June 8, 2006.
Board Education Committee
CalSTRS staff reported that they have an updated disaster plan.Â
All
departments will be up and running in 5 days or less.Â
Some services like
investments and retirement payments will be operating in 2 hours,
most
others in 24 hours. STRS has a secure second site
at the Franchise Tax
Board on Bradshaw Road. All computer files are backed
up at another
center.
Â
Board Governance Committee
The Board heard a panel discussion on ethical, fiduciary and governance
issues and potential revisions to Section 600. There
was a discussion on
the accepting and reporting of campaign contributions to members
of the STRS
Board, including elected officials, from companies doing business
with
STRS. Should STRS have a policy of not doing business
with any company
that gave campaign contributions of a STRS Board member?Â
STRS present
practice is to have the Board member disclose such contributions.Â
Should
that policy be extended to elected officers?
Some private equity and real estate funds use placement agents
who present
the investment opportunity to STRS. Should the names
of placement agents
be disclosed to the Board when considering investments.Â
STRS now requires
that all gifts and gratuities to a Board member from a business
hoping to
work with STRS must be disclosed. Should gifts be
more restricted? Board
members must disclose any communication with any person interested
in doing
business with STRS. All of these issues will be discussed at the
STRS April
retreat.
Â
Benefits and Services Committee
The Committee reviewed the lump sum death benefit and elected
to leave it
the same at $6,163 rather than adjust it for inflation, because
of the
unfunded liability of STRS. However, STRS is pursuing
making the death
benefit tax free in 2007, by establishing a group term life insurance.Â
Such a change would require legislative approval.Â
The Board also set
interest rates for the Defined Benefit Program (4.25%) and the
Defined
Benefit Supplement and Cash Balance Program (4.75%).Â
These are interest
rates applied to employee and employer accounts not the STRS fund.
In 2006, CalSTRS pays a Supplemental Benefit from the SBMA for
all STRS
members who have retired in 1988 and before.
STRS proposes seeking legislation to change the limitations on
post-retirement earnings. The new requirements would
be (1) an earning
limit equal to 50% of average memberâ?Ts salary rate unless
the retired
member has earned no creditable compensation for at least 12 months
after
retirement. (2) For members who are at least age
60 there are no earnings
limit on post-retirement earnings, (3) Requires employers
to make STRS
contributions on compensation earned by any retired member.
Â
Investment Committee
The Committee heard the status reports on the STRS fund asset
classes.
During the reports STRS heard from students from UC, Sacramento
State and
other campuses plus other individuals urging STRS to dump all
investments in
companies doing business with the government of Sudan because
of the murders
by the government-backed militias, called Janjaweed.Â
Treasurer Angelides,
whose gubernatorial campaign subsidized the cost of student travel,
proposed
a divestiture motion. The motion reads as follows:
It is the intent of the
Board to move forward to divest itâ?Ts holdings from companies
identified as
doing business with the Government of Sudan, taking into consideration
the
same general criteria utilized by the UC Regents and subject to
the
investment staff determining that such action would be prudent
and
consistent with the Systemâ?Ts fiduciary duties and that
suitable
alternative investments would be available. Staff
is directed to bring
back at the June meeting any appropriate analysis, legal opinions,
and
procedural requirements as required. Such action
would be subject to the
indemnification of the Board members, consistent with the indemnification
of
the UC Regents. The motion passed with Gary Lynes
and Jerilyn Harris
(retiree representative) abstaining. David Crane,
senior economic advisor
in the Governorâ?Ts office was absent.
At 12:30, Assemblyman Keith Richman spoke to the STRS Board about
ACA 23
which will close the existing STRS defined benefit program to
future
employees and offer a smaller defined benefit program (1.7% instead
of 2%
with 30 years of teaching and the retirement age raised to 65)
plus a
supplemental defined contribution plan like a 403b.Â
STRS took no action at
this meeting.
Â
Client Advisory Committee
Retiree groups and STRS staff met to discuss legislation, the
actuarial
evaluation, and the unfunded liability. Since these
topics were also
covered at the STRS Board meeting they will be reported under
Board
Committee report.
Â
Teachersâ?T Retirement Board
Carolyn Widener was re-elected Chair and Dana Dillon was re-elected
vice-chair of the STRS Retirement Board. Both members
represent active
teachers.Â
Milliman, consultants and actuaries, presented the STRS actuarial
evaluation. Â As of June 30, 2005 STRS was 86% funded up
from 83% funded
June 30, 2004. The fund has grown from $114 billion
to $121 billion. The
unfunded liability has declined from $24 billion to $20 billion.Â
The
reasons were a higher investment return (12%) rather than the
8% predicted,
lower than anticipated salary increases, and a correction to prior
salary
estimates. However, given the economic predictions
of 3.25% inflation,
4.25% wage growth and 8% investment return, STRS is not expected
to grow its
way out of debt. Milliman estimates that STRS will need 3.7% in
additional
contributions to become fully funded. The January 31, 2006 value
of the STRS
fund is $141.8 billion.
The STRS Board discussed the survey of Board priorities and Client
group
priorities for meeting the unfunded obligation. There
was no clear
consensus, but it was clear that no group wanted to eliminate
the COLA.Â
STRS Board voted to take eliminating the 2% annual benefit adjustment
(COLA)
off the list of options for meeting the STRS unfunded obligation.
As of June 30, 2005 the Defined Benefit Supplement account was
110% funded
and the Cash Balance Plan was 104% funded. STRS needs
a policy about these
excess funds.
Ed Derman, Deputy Chief Investment Officer, reported on legislation.Â
The
Legislative Analyst Office under the Budget Proposal proposed
to put the
School Land Bank Fund under STRS management. Such
would be in a separate
trust for the SBMA account. The School Land Bank
Fund is presently all
invested in Treasury Bills, and STRS believes that it would be
able to
substantially increase the fundâ?Ts return.
AB 2970 (Pavley) expands eligibility for retired members to post-retirement
earnings exemption. The STRS Board voted to support if amended.
STRS plans
to add amendments to simplify the post-retirement earnings rules,
The STRS Board voted to oppose ACA 23 (Richman)Â with
Roger Kozberg
abstaining and Ann Sheehan (Department of Finance) and David Crane
(Governorâ?Ts appointee) voted no..
SB 1514 (Maldonado), ST 1457 (Simitian) and AB 2793 (Arambula)
are all
proposals to require GASPE compliance. STRS voted
no position because
these will be implemented at the national level.Â
SB 1207 (Alarcon) will require nominees for positions on Board
of directors
of California-based public corporations be elected by a majority
vote when
running unopposed.Â
AB 456 (Torrico), which imposes criminal penalties on CalSTRS
members who
make false statements in order to receive STRS benefits, is now
inactive.Â
But AB 5X (Torrico) on the same subject is active.
AB2462 (Mullin) authorizes STRS to supply services for employer-sponsored
403b plans. All costs would be paid out of the plan
returns. This is a
STRS bill and an IRS regulation.
SJR 15 (Dutton) requests the President and Congress to remove
the Government
Pension Offset (GPO) and the Windfall Elimination Provision (WEP)
from
Social Security. SJR 15 will be heard in the Assembly
PER&SS Committee on
April 19. This bill is sponsored by CRTA.
The next STRS Board meeting will be June 7, 8, 9.Â
The Client Advisory
Committee will meet at 3:45 pm on June 8, 2006.