What is a UAO?
Since 2006, CalSTRS has communicated to members, employers and the Legislature about the projected funding shortfall or unfunded actuarial obligation (UAO). The shortfall is based on an actuarial valuation, which is a snapshot of the fund’s assets and liabilities.
CalSTRS assets must balance with cost of future benefits over the long term to pay the pension promise to all generations of teachers. Based on current projections, CalSTRS has assets to pay benefits through the early 2040s. If there is no change to contribution levels, the state of California becomes the guarantor of the benefit payments.
CalSTRS funding level has fluctuated over 98 years. Historically, investment returns have contributed about 60% of the retirement benefit. The 2008 world economic turmoil and the 2001 dot com bust created lower than expected investment returns. Contribution rates for members and employers have not changed for more than 20 years.
What It Means for Members
Benefits and contribution rates are unchanged as educators, school employers, the California Legislature and CalSTRS develop a plan to deal with the funding challenges.
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