Cost of Waiting

The longer we wait, the more difficult and costly the funding gap will be to solve. Based on current actuarial assumptions, CalSTRS actuaries project that the Defined Benefit Program will deplete its assets by the early 2040s.

At that time, the state of California—as the plan sponsor—would be obligated to fund benefits on a pay-as-you-go basis. The impact on the state General Fund is estimated in today’s dollars at $9 billion a year.

Deferring contribution increases and providing for a gradual increase in rates over time is possible. But the cost of waiting does affect the long term costs of the plan. Deferring increases by as much as 15 years can increase the required rate increase by almost 60 percent - 63 percent. Phasing in those increases over a period of years would further increase the long-term required contribution rate.