Glossary of Terms

Review terms and definitions in alphabetical order to learn more about a specific word or subject referenced in our website.

Actuarial Valuation
The actuarial valuation is a snapshot of the fund’s assets and liabilities. It projects the extent to which the current and future assets of the Defined Benefit Program are sufficient to pay the benefits promised for prior service.

Assets and Liabilities
An asset is the amount of money identified as being currently in the pension fund. A liability is money owed.

Benefit
A benefit is the amount payable to a retired member, disabled member or beneficiary. This benefit represents a retired member’s sole income from their public education service, as members do not pay into social security on their CalSTRS earnings, and in most cases, do not receive employer-supported health benefits.

CalSTRS
The California State Teachers' Retirement System (CalSTRS) is the largest public educator pension fund in the nation, serving all educators in the California public school system.

Core Benefits
Core benefits are the retirement, disability and survivor benefits. These benefits are guaranteed by the U.S. and California constitutions.The 2 percent benefit improvement factor, or annual adjustment, is not a core benefit and, therefore, is not guaranteed.

Defined Benefit Program
The Defined Benefit Program provides retirement benefits based on the member’s age, service credit and final compensation at retirement.

Funding Gap
A funding gap is the difference between the current assets of the fund and the amount needed to fulfill projected member benefits, which is also known as an unfunded actuarial obligation.

Governmental Accounting Standards Board (GASB)
The Governmental Accounting Standards Board (GASB) is an independent organization that establishes standards of account and financial reporting for U.S., state and local governments.

Service Credit
Service credit refers to the accumulated period of time in years, or partial years, when a person earned compensation subject to contributions to CalSTRS.

Smoothing
Smoothing is an averaging process that spreads gains and losses over period of time, which for the DB Program is three years. It is used in calculating CalSTRS actuarial valuation and allows CalSTRS to determine the long-term ability to cover benefits already earned by members. Smoothing is a standard practice that meets the Government Accounting Standards Board’s rules governing public pension funds.

Spiking
Spiking is a situation where a one-time pay or salary increase enacted shortly before retirement is used to elevate a member’s final compensation – and his or her pension amount – to a level that does not reflect the compensation that member has earned over the course of their career. CalSTRS has mechanisms in place to prevent spiking.

Unfunded Actuarial Obligation (UAO)
The unfunded actuarial obligation (UAO) refers to the amount of additional actuarial assets needed on the valuation date to meet the expected liabilities of the plan incurred from members’ past service. The term "shortfall" is also used to describe an unfunded actuarial obligation, which is also known as a funding gap.