CalSTRS Adjusts Return Assumption
CalSTRS has lowered its investment return assumption from 7.75% to 7.5%, the second largest pension fund in the nation revealed Thursday.
The California State Teachers’ Retirement System also adopted a new set of actuarial returns.
The changes stem from a four-year experience analysis that set the parameters for determining the financial health of the system. CalSTRS said these assumptions “have a significant impact on the valuation of the plan.”
In April 2011, a valuation report present to the Board revealed a $56 billion funding shortfall. Updated valuation figures will be presented this April, the Feb. 2 release noted.
In addition to lowering the investment return assumption, the current experience analysis also recommends that CalSTRS change the mortality assumption to reflect the fact that members are living longer, and lower the assumption of wage growth from 4% to 3.75% annually.
“Of these, the most significant change is the investment return assumption, because the projected lower future returns makes it much more likely that we cannot invest our way to financial health,” said CalSTRS CEO Jack Ehnes in the statement. “We’re still feeling the effects of he global financial crisis.”
As of Dec. 30, 2011, the plan’s portfolio was valued at $144.8 billion.
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