CalSTRS Funding: Important Changes and Considerations for School Districts

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1 CalSTRS Funding: Important Changes and Considerations for School Districts

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3 Meet the Teachers Retirement Board

4 Teachers Retirement Board (12 Members) Dana Dillon Sharon Hendricks Harry M. Keiley State Controller Betty Yee State Treasurer John Chiang Director of Finance Michael Cohen Paul Rosenstiel Joy Higa Thomas Unterman Nora Vargas Superintendent Retiree Tom Torlakson Representative

5 CalSTRS Member Snapshot

6 CalSTRS Members by the Numbers As of June 30, 2016

7 CalSTRS Members by the Numbers As of June 30, 2016

8 CalSTRS Distribution of Annual Benefit* of All Recipients As of June 30, 2016 The average benefit recipient receives about $46,608 on an annual basis. *Annual retirement benefit excluding DBS and SBMA benefits. Includes all types of retirement.

9 CalSTRS Distribution of Annual Benefit* of All Recipients As of June 30, % *Annual retirement benefit excluding DBS and SBMA benefits. Includes all types of retirement.

10 CalSTRS Distribution of Annual Benefit* of All Recipients As of June 30, % *Annual retirement benefit excluding DBS and SBMA benefits. Includes all types of retirement.

11 Ratio: CalSTRS Active to Retired Members

12 Retirement Now Lasts Nearly 20 Years Life expectancy 8 years 19 years Full Social Security eligibility 22 yrs in retirement? Average retirement age Source: Center for Retirement Research at Boston College, 2006 and U.S. Social Security Administration, 2009.

13 Life Expectancy Rates: CalSTRS, CalPERS and Social Security For a member retiring at age 62

14 Retirement Security 2017: American s Views of the Retirement Crisis Updated March 1, 2017

15 Updated March 1, 2017

16 Updated March 1, 2017

17 Updated March 1, 2017

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19 Federal Legislative Outlook New President, New Congress, Big Questions California s Secure Choice Retirement Savings Program debate in U.S. House and Senate. Recent Orders by President Trump: Rollback of Dodd-Frank Wall Street Reform and the Consumer Protection Act. Dept. of Labor Review of the Fiduciary Rule.

20 State Legislative Outlook Senate Bill 32: Post-PEPRA Pension Reform. Introduced by Senator John Moorlach (R-Orange County). Senate Bill 560: Climate Risk of pension investments by Senator Ben Allen (D-Los Angeles) Assembly Bill 1597: Divestment from Turkish investments by Assembly Member Nazarian (D San Fernando Valley) Assembly Bill 20: Divestment from Dakota Access Pipeline Project. Introduced by Assembly Member Ash Kalra (D-San Jose). Assembly Bill 946: Divestment from border wall construction companies. Introduced by Assembly Members Tiing (D-San Francisco) and Gonzalez-Fletcher (D-San Diego)

21 Public pensions in the courtroom California Rule Marin case appealed to the California Supreme Court.

22 Delivering on Our Promise

23 Your Voice Matters! Trust in Financial Industry Declining

24 72% of Our Members Trust CalSTRS Source: 2015 Annual Member Satisfaction Survey

25 CalSTRS Investments Overview

26 30% 20-Year Performance of CalSTRS Investment Returns 20% 10% 0% -10% -20% -30% Actual Return Assumed Rate of Return

27 CalSTRS Top 10 Portfolio Holdings As of June 30, 2016 Security Name Shares Market Value ($) Security Name Shares Market Value ($) 15,221,475 $1,455,173,010 1,147,047 $820,849,774 1,687,897 $1,178,261,801 25,081,657 $789,570,562 20,965,031 $1,072,780,636 17,981,754 $776,991,590 11,397,213 $1,068,374,747 5, $758,860,317 8,163,447 $990,226,121 6,621,511 $756,706,277

28 An Investments Leader: CalSTRS Closely Monitors Asset Class Fees in Cost Disclosure

29 CalSTRS Costs Rank Below Investment Peer Average Trend in Investment Costs (Excluding transaction costs and carried interest) Basis Points CalSTRS is a low cost plan CalSTRS Peer Avg U.S. Avg CalSTRS Peer Avg. U.S. Avg.

30 CalSTRS Funding Status: Important Board Discussions Experience Study Assumptions (Adopted February 1, 2017) Actuarial Valuation Report (Presentation on April 6, 2017)

31 CalSTRS Funding Plan Implementation Long-term, shared responsibility: CalSTRS members; Employers; and The State of California. (32-Year Funding Plan, Assembly Bill 1469, Enacted July 2014)

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41 The Retirement Big Picture in the U.S.: Are individuals financially prepared?

42 Chipmunk s Plan For Future Better Crafted Than That Of 8 Out Of 10 Americans You Decide Fake News or Not?? 80 percent of our human subjects were entirely incapable of looking beyond their next meal or that night s television programming

43 How Much Money Do You Think You Will Need for Retirement?

44 Amount of Retirement Savings Americans Think They Need Source: EBRI, 2015 Retirement Confidence Survey

45 And Reality Hits Average 401(k) Balances Source: Vanguard, How America Saves 2016

46 Women in Retirement Women aged are three times as likely to live in poverty, compared to men. Women 80% more likely to face financial hardship in retirement. Women in education, health care and public service have higher incomes and lower rates of poverty, due to DB pensions.

47 47 Published October 21, 2016

48 Be Aware of Investment Fees: The $10,000 Difference from Paying 1% Less $37K Paying 1% less in fees could mean $10,000 more in your account in 30 years. $27K Account balance with 0.50% annual fee Account balance with 1.50% annual fee For both accounts: You invest $10,000 for 30 years, make no contributions and earn an average of 5 percent.

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50 Compare products and fees online 403bCompare.com

51 Defined Contribution savings plan (Participation is voluntary). Low cost and flexible 403(b), Roth 403(b), 457(b) options. Tax-deferred now, or tax-free income later Visit

52 Stay Connected with CalSTRS

53 CalSTRS on Social Media Facebook Twitter Instagram Pinterest YouTube LinkedIn Google+

54 Thank You! Any Questions?