INSIDE:3 Board Election Planned

for Fall 2019

4 One-Time Death Benefit Amounts Increase

5 Apply Now: Money for Your Special Classroom Project

8 Include Health Care Costs in Your Retirement Planning

9 Introducing Our New Hybrid Benefits Specialists

10 Working After Retirement: Rules You Need to Know

CALIFORNIA STATE TEACHERS’ RETIREMENT SYSTEM • FALL 2018

R E A C H I N G YO U R R E T I R E M E N TS E M I A N N U A L P U B L I C A T I O N F O R A C T I V E A N D I N A C T I V E C a l S T R S M E M B E R S

continued on page 12

From the Galapagos Islands to Alaska and from Finland to the Arctic, Michael Wing has traveled all over the world bringing science lessons back to his students, thanks to grants that allow him to do fieldwork during his travels. He’s even written a book in the pursuit of his passion for science and teaching that helps guide others to do the same.

Wing has spent his entire 21-year teaching career at Sir Francis Drake High School. He learned how to get grants more than 10 years ago when he was accepted into a program in the Galapagos Islands.

He discovered there’s only a small group of teachers applying for all the grants they can find and they run into each other regularly in these teacher travel programs. “I became one

of them. I began applying for stuff. The chore of applying for a grant doesn’t seem onerous at all. That first taste of success meant I could apply for anything and not worry about whether I would get it. More teachers should apply for more stuff and find more things to do with their kids.”

Getting students involvedThanks to grants, Wing has done fieldwork in such places as the Arctic, Costa Rica, Finland, Namibia, India, the Pacific Ocean and the United Arab Emirates. His projects have captured national attention, including from NPR’s Science Friday. He wrote a book to help other teachers develop creative projects of their own: Passion Projects for Smart People. He also has been published in several academic journals, with five of his students getting credit as co-authors.

One of his projects had students prepare glass and marble tiles, which Wing got placed around the world in extreme locations such as high mountains and hot and polar deserts. The long-term project allows students to study the cyanobacteria growing under the tiles.

Wing and his students also built a greenhouse at the University of California’s

Science Teacher Shares How to Land Grants, Writes Book

Teacher Talk: Spotlight on California’s Educators

Also inside:

Your Retirement Progress Report Available on myCalSTRS

See page 2

Michael Wing Science (Ninth and 10th grade)

Sir Francis Drake High School Tamalpais Union High School District

printed on recycled paper

Editor Laura Martin

Designer Baotran Bui

Contributors Ruth Latendorf Melissa Wiese

Statements in this publication are general and the Teachers’ Retirement Law is complex and specific. If a conflict arises between information contained in this publication and the law, any decisions will be based on the law.

CalSTRS Connections is published twice a year for members of the California State Teachers’ Retirement System. Send your comments or suggestions to:

Editor, Communications CalSTRS MS 34 P.O. Box 15275 Sacramento, CA 95851

CalSTRS Mission:

Securing the financial future and sustaining the trust of California’s educators

Teachers’ Retirement BoardDana Dillon, ChairSharon Hendricks, Vice ChairKeely BoslerJohn ChiangJoy HigaHarry M. KeileyPaul RosenstielTom TorlaksonNora E. VargasKaren YamamotoBetty Yee

Jack Ehnes Chief Executive Officer

Christopher J. Ailman Chief Investment Officer

Keep Track of Your Account and Service Credit Balance

View Your 2017–18 Retirement Progress Report on myCalSTRS

Your Retirement Progress Report for 2017–18 is now available online. To view or print your report, log on to your myCalSTRS account at myCalSTRS.com, select View Your Retirement Progress Report and then select the year and account type. You can also:

• Review your current and pastreports online.

• Use the online glossary if you haveany questions about terms used inthe report.

• Select the Employer Detail screen toview a breakdown of your earnings,contributions, compensation earnableand service credit by employer and byassignment.

In support of our commitment to sustainability, CalSTRS securely and automatically delivers your annual Retirement Progress Report to your online myCalSTRS account, reducing paper and postage costs. However, if you want a printed version of next year’s report mailed to you, submit the Retirement Progress Report Delivery Preference form, available at CalSTRS.com/forms, by July 1, 2019.

Retirement Progress Report 2018

Your Annual Account Statement and Planning Guide

Cash Balance Benefit Program as of June 30, 2018

Retirement Progress Report 2018Your Annual Account Statement and Planning GuideDefined Benefit Program as of June 30, 2018

Have You Received Unsolicited Email About CalSTRS Retirement Planning?

When communicating via email, a CalSTRS representative

will always have “@CalSTRS.com” in the email address—

for example: noreply@CalSTRS.com. We will never ask for

your personal information in an unsolicited email or other

type of electronic communication.

If you believe there’s a discrepancy in your report, contact your employer immediately.

CalSTRS Connections: Reaching Your Retirement - Fall 20182

Board Election Planned for Fall 2019

Next fall, CalSTRS active members will elect three of the 12 members on the Teachers’ Retirement Board. CalSTRS will hold the election October 1 through November 30, 2019, for the following board seats:

• One preK–12 or county office of educationemployee who is an active CalSTRS DefinedBenefit Program member or Cash Balance BenefitProgram participant. This person cannot be anadministrator.

» Elected by all preK–12 and county office ofeducation employees who are active membersor participants.

• One preK–12 or county office of educationemployee who is an active member or participant,including administrators.

» Elected by all preK–12 and county office ofeducation employees who are active membersor participants.

• One community college instructor who is an activemember or participant.

» Elected by all active members or participantswho are community college faculty.

CandidatesA Notice of Election and important candidate information, including nomination petitions, can be found on CalSTRS.com by clicking What’s New, then Board Elections to Be Held in 2019—Candidate Information. Nomination petitions with at least 250 valid signatures are due January 8, 2019.

Board Member ResponsibilitiesBoard members set policy, make rules and are responsible for ensuring CalSTRS pays benefits according to the law. The board appoints a chief executive officer who is responsible for the administration of CalSTRS according to the board’s policies and rules. The board also appoints a chief investment officer who is responsible for the investment of the Teachers’ Retirement Fund, in keeping with the board’s policy.

The board has six standing committees: Appeals, Audits & Risk Management, Benefits & Services, Board Governance, Compensation, and Investment.

Interested in a Board Seat?If you are interested in running for a board seat, contact CalSTRS at 916-414-1411.

Contribution Rate Increase Effective July 1, 2018

For CalSTRS 2% at 62 members—members first hired to perform service that could be

credited to the Defined Benefit Program on or after January 1, 2013—your contribution rate

is connected to the normal cost of your retirement benefits. Normal cost is dependent on

our assumptions about factors such as retiree lifespan and how much we expect to earn on

investments. CalSTRS recently changed these assumptions. When changes in normal cost

meet certain thresholds defined by law, your contribution rate is adjusted. The normal cost is

assessed each year based on the actuarial valuation—a snapshot of CalSTRS’ financial status

presented to the Teachers’ Retirement Board each spring. For the 2017–18 fiscal year, your

contribution rate was 9.205 percent of your creditable earnings, up to the compensation cap.

This rate increased on July 1, 2018, to 10.205 percent for 2018–19. Employer contribution

rates increased to 16.28 percent per the CalSTRS Funding Plan, and the State of California’s

rate increased from 9.328 percent to 9.828 percent.

CalSTRSConnections: Reaching Your Retirement - Fall 2018

3

CalSTRS Reports 9 Percent Net Investment Return for 2017–18 CalSTRS posted a 9.0 percent return on investments for the 2017–18 fiscal year, exceeding the 7.0 percent assumption rate for the second consecutive year and helping advance the fund toward full funding. As of June 30, 2018, the total fund value was $223.8 billion. For more details, including returns by asset class and benchmark performance over several years, go to CalSTRS.com/17-18investmentreturn.

June 30, 2017, Actuarial Valuation ResultsThe results of the June 30, 2017, actuarial valuation for the Defined Benefit Program were presented to the board at its May 2018 meeting. The unfunded actuarial obligation increased from $96.7 billion to $107.3 billion as of June 30, 2017. The increase was anticipated and occurred primarily due to the lowering of the investment return assumption from 7.25 percent to 7.0 percent. More information is at CalSTRS.com/2017actuarialvaluation.

Investment Assumption: 7.0% return over 30 years

1-Year3-Year5-Year10-Year20-Year25-Year

9.0%9.2%

7.7%6.5% 6.3%

7.8%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

CalSTRS Funding News

CalSTRS Investment Fund Performance: A Long-Term, Historical PerspectiveNet of Fees—as of June 30, 2018

At its May 2018 meeting, the Teachers’ Retirement Board approved a 3.4 percent increase to the one-time

death benefit payable to designated recipients of Defined Benefit Program members. Effective July 1, 2018,

if you die after retirement or while receiving a CalSTRS disability benefit, the benefit amount is $6,372.

If you die before retirement and while performing creditable service, the benefit is $6,372 under Coverage A

and $25,488 under Coverage B.

One-Time Death Benefit Amounts Increase

Name your one-time death benefit recipient using myCalSTRS. Be sure to keep your recipient

information current.

CalSTRS Connections: Reaching Your Retirement - Fall 20184

Apply Now: Money for Your Special Classroom Project

More than 1,000 K–12 educators and their schools across the nation have funded innovative classroom projects through awards totaling nearly $5 million from the Voya Unsung Heroes program. Each year, 100 educators are selected to receive $2,000 to help fund these projects, and three are chosen to receive the top awards of an additional $5,000, $10,000 and $25,000.

The 2018 Unsung Heroes from California listed below will each receive $2,000 toward classroom projects that focus on subjects such as 3D house design, musical collaboration, video production, spoken word performance, agriculture engineering, theater arts, and peer-to-peer teaching.

Applications for the 2019 Voya Unsung Heroes program are being accepted now through April 30, 2019. Winners will be announced in fall 2019. For more information, visit Pension2.com. Voya Financial is the record-keeper for the CalSTRS Pension2 403(b) and 457(b) plans.

Five educators have been named as the 2019 California Teachers of the Year by State Superintendent of Public Instruction Tom Torlakson. Presented by California Casualty and the California Teachers of the Year Foundation, the award program began in 1972 to honor outstanding teachers and encourage new teachers to enter the profession. The 2019 winners are:

Rosie Reid: teaches English to ninth through 12th grade students at Northgate High School, Walnut Creek. She was also nominated as California’s representative for the 2019 National Teacher of the Year competition.

Erica Boomer: a ninth through 12th grade agriculture teacher at Upper Lake High School, Upper Lake.

Kim Holz: a fourth grade multiple-subject teacher at Opal Robinson Elementary, Manhattan Beach.

Michael Henges: teaches 12th grade government and economics at Redondo Union High School, Redondo Beach.

Angel Mejico: a seventh and eighth grade art teacher at El Cerrito Middle School, Corona.

County offices of education nominate winners through county-level competitions. The teachers are interviewed by the California Department of Education and the state superintendent then selects the five awardees. For more information, visit cde.ca.gov.

2019 California Teachers of the Year Announced

Unsung Heroes 2018 California Winners

Maria Teresita AniagNew Designs Charter School–Watts, Los Angeles

Marcia BarryteCarson High School, Carson

Julia ColeMurray Manor Elementary School, La Mesa

Melissa GalvanLincoln Elementary School, Pomona

Thea Garcia and Ruth MalignaggiNogales High School, La Puente

Daniel McKinneySanta Rosa Academy, Menifee

Robin Newsom-Wuertz and Jessica ParkerSage Creek High School, Carlsbad

Susan WaltonMontera Middle School, Oakland

CalSTRSConnections: Reaching Your Retirement - Fall 2018

5

Keeping Your CalSTRS Account Secure

Protecting your CalSTRS personal and financial information is among our highest priorities. We have strict policies and procedures in place to help ensure your personal information remains private and secure. Here are a few of our security measures, along with steps you can take to help protect the security of your CalSTRS information:

• We will never send you an unsolicited email or call you to request confidential or personal information. We will call or email you only in response to receiving a call on our 800 line or written correspondence from you, or a secure email message from you through your myCalSTRS account or CalSTRS.com/contactus. We do send email messages periodically to members with general information such as CalSTRS workshop opportunities in your area or relevant news about CalSTRS.

I f you receive a suspicious email that looks like it came from CalSTRS requesting confidential or personal information, do not click on any links within the message. Call us immediately at 800-228-5453.

Exceptions: You may receive a phone call from us if we suspect fraudulent activity on your account. In addition, if a natural disaster hinders postal delivery of your benefit check, we may call you with instructions on alternative methods of receiving your payment.

• We use your Client ID (or your Social Security number if you don’t have your Client ID handy) for identification verification. Your Client ID is a randomly generated number.

• We record all telephone conversations when you call our 800 line. This is primarily for internal use to ensure the accuracy of the information we provide.

• When you call to speak with a CalSTRS representative, we will ask a few security questions to ensure we are speaking with you. If you authorize someone else to speak with us about your account, we need your permission. We will ask you to confirm and authorize over the phone that the person has your permission to speak to us on your behalf. Unless you have a power of attorney on file with us, we will do this for every call.

CalSTRS Connections: Reaching Your Retirement - Fall 20186

Protect Your myCalSTRS Password

• CalSTRS staff will never ask for your password.

• Do not give your password to anyone for any reason.

• Change your password immediately if you know or suspect it hasbeen compromised.

• Forgot your password? Go to myCalSTRS.com and select the Forgot YourUsername or Password? link. Check out CalSTRS.com/myCalSTRS-help-videosfor easy instructions on resetting your myCalSTRS password.

Confirmation for Address Updates

CalSTRS will send you a letter and an email confirming any updates or changes you make to your mailing address. If you receive a confirmation letter or email and did not make a change, contact us immediately.

Update your mailing address using your myCalSTRS account, by submitting the Address Change Request form or by calling us (you must have a valid email address to use this option).

Retiring soon? We will send a letter and an email confirming any updates or changes to your bank account or direct deposit information. You can update your direct deposit information by using myCalSTRS or the Direct Deposit form.

Forms are available at

CalSTRS.com/forms or by

calling us at 800-228-5453

to have a form mailed to you.

CalSTRS Connections: Reaching Your Retirement - Fall 2018 7

CalSTRS does not provide health coverage in retirement, so budgeting health care costs into your retirement income as you plan for your future can help you feel more confident that you will have enough money to live comfortably.

Be sure to familiarize yourself with Medicare and what it covers, whether or not you qualify for premium-free Medicare Part A, and what additional coverage you may need based on your current health status. Contact the Social Security Administration at 800-772-1213 to find out your Medicare benefit eligibility status through your own work history or through your spouse.

In addition, discuss with your employer if they subsidize health care for retirees and, if they do, how long that coverage lasts. If you retire before age 65, this coverage could help bridge the gap between the employer-subsidized coverage you may have now andMedicare coverage, which does not begin until you turn 65. This can help you predict how your costs might change as you transition to retirement.

An informational report titled Health Care and Retirement Security was presented at the September Teachers’ Retirement Board meeting, outlining the

CalSTRS Retired Members Who Are Over 100 Years Old As of June 30, 2018

CalSTRS retired members

over 100 years old

age of oldest retired member

323271

52 107females

22.2average years of service credit

7,162total years of service credit

males

Include Health Care Costs in Your Retirement Planning

basics of Medicare and featuring some estimates on the cost of health care for CalSTRS retirees. You can find the report on CalSTRS.com/teachers-retirement-board under Public Meeting Notices and Agendas.

For more information on health care in retirement, see “Planning for Retirement” in the Member Handbook. Check out our Financial Awareness Series workshops (CalSTRS.com/financial-awareness) to learn about estimating your income and expenses in retirement.

By law, school districts, community colleges

and county offices of education must offer

retiring CalSTRS members—and their

spouses or registered domestic partners—

the opportunity to continue their health

insurance at their own cost. CalSTRS can

deduct health insurance premiums from

your monthly retirement benefit and forward

them to your insurance carrier. If you’re

getting ready to retire, contact your employer

to learn more.

CalSTRS Connections: Reaching Your Retirement - Fall 20188

In California, retirement benefits are community property and may be affected by divorce, legal separation or termination of a registered domestic partnership. Your court order may address CalSTRS benefits and might specify that your former spouse or partner is entitled to a share of your accounts and benefits, including death benefits.

Divorce, legal separation or termination of a registered domestic partnership can invalidate your one-time death benefit designation of your former spouse or partner. To learn more, see the CalSTRS Community

Property Guide at CalSTRS.com.

Introducing Our New Hybrid Benefits Specialists Learn more from our experts about saving additional money for your future

CalSTRS hybrid benefits specialists offer in-depth information about CalSTRS Pension2, our voluntary defined contribution plan, as well as your CalSTRS retirement benefit. They are available by appointment at all of our member service centers and ouroffices in Fresno and Redding.

Back row left to right: Arjuna Singh (Glendale), Wade Mnich (Riverside), Preston Jackson III (West Sacramento), Marcus Hoey (Santa Clara).

Front row left to right: Tammy Gellis (Redding), Wendy Cabrera (Fresno), Margaret Schwartz (Irvine), Christina Portugal (San Diego)

Exploring ways to grow your nest egg can be overwhelming. That’s why we added a team of specially trained hybrid benefits specialists to help you take advantage of the CalSTRS hybrid retirement plan.

In addition to their thorough knowledge of the Defined Benefit and Defined Benefit Supplement programs, these experts offer in-depth information about CalSTRS Pension2, our voluntary defined contribution plan that offers low cost, flexible 403(b)s and 457(b)s for additional retirement savings.

Hybrid benefits specialists are available at each of our member service centers as well as our benefits planning offices in Fresno and Redding. To learn more about how Pension2 complements your CalSTRS retirement benefit, make an appointment with a hybrid benefits specialist by calling 888-394-2060 or emailing Pension2@CalSTRS.com. Visit CalSTRS.com/member-service-centers to find a member service center near you.

Divorcing? Your Retirement Benefits May Be Affected

CalSTRS can provide you with information on your benefit choices but does not provide advice. For financial advice, consider consulting a financial professional.

CalSTRS administers a hybrid retirement system consisting of traditional defined benefit (Defined Benefit Program), cash balance (Defined Benefit Supplement and Cash Balance Benefit programs) and voluntary defined contribution (CalSTRS Pension2) plans.

Manage your beneficiary elections online through myCalSTRS. If you don’t have a myCalSTRS account,

sign up today at myCalSTRS.com and get immediate, secure access to your accounts.

Visit 403bCompare.com to compare your employer’s 403(b) plans. The contribution limit for 2019 for 403(b) and 457(b) plans increased from $18,500 to $19,000; the catch-up contribution for those age 50 and older remains unchanged at $6,000.

CalSTRSConnections: Reaching Your Retirement - Fall 2018

9

Are You Ready to Retire and Already Thinking About Returning to Teaching? Important Rules You Need to KnowIf you take a job outside of CalSTRS-covered employment, you can continue to receive your full CalSTRS retirement benefit with no earnings limitations. However, if you perform retired member activities in the California public school system, including substitute teaching, as an employee, an independent contractor or an employee of a third party, you’re subject to a separation-from-service requirement and a postretirement earnings limit.

Milestones

June 30, 2019Denise will terminate service with her employer on June 29, 2019, and apply for service retirement with an effective retirement date of June 30, 2019.

Your retirement effective date

Denise is interested in returning to work as a substitute. If she does so within the first 180 calendar days after her retirement, CalSTRS will collect back every dollar she earns from her retirement benefit, up to her total service retirement benefit amount. For example, if shemakes $1,000, her retirement benefit will be reduced by $1,000.

December 27, 2019180 calendar days later

Every fiscal yearJuly 1, 2019, through June 30, 2020, and every fiscal year after

The 2018–19 annual earnings limit is $45,022. The annual earnings limit for 2019–20 is $46,451.

Example Timeline Example Details

Denise decides to wait until the separation-from-service period has passed before she returns to work. She is still subject to an annual earnings limitation, so she should continue to monitor her earnings against the annual limit to know when she may be near the earnings limit.

Because of delays in employer reporting, we may not notify her that she is close to exceeding the limit until after it has occurred.

CalSTRS Connections: Reaching Your Retirement - Fall 201810

D

22ID YOU KNOW THAT

%OF RETIRED MEMBERS CONTINUE TO WORK AFTER RETIREMENT?

For more information on what you need to know if you plan to work after retirement, visit CalSTRS.com/working-after-retirement or read our fact sheet, Working After Retirement, available at CalSTRS.com/publications.

You must terminate all creditable service with your employer prior to retirement.

Federal law requires a bona fide separation from service before retirement benefits can be distributed.

The California Education Code implements this federal requirement during your first 180 calendar days after retirement, known as the separation-from-service period. During the separation-from-service period, we will reduce your monthly service retirement benefit by your earnings from California public school employment.

After 180 days have passed, you are still subject to an annual earnings limitation. The Teachers’ Retirement Board adjusts the earnings limit each fiscal year. Look for the new amount each spring.

Applicable Rules for Defined Benefit Program Members

To learn about the rules for Cash Balance Benefit Program participants, see the Working After Retirement fact sheet at CalSTRS.com/publications.

CalSTRS Connections: Reaching Your Retirement - Fall 2018 11

Wing and his students also built a greenhouse at the University of California’s White Mountain Research Station in the mountains near Bishop, where conditions are Arctic-like at 12,500 feet. The cold frame greenhouse, which was at the research station from 2009 to 2015, became the highest test plot in North America. They demonstrated it was possible to grow winter wheat and radishes in the extreme environment, and could replicate what conditions may exist for a colony trying to grow food on Mars.

While conducting the greenhouse study, Wing and his students saw bristlecone pines, among the longest-living trees

in the world. They noticed some trees twisted left while others twisted right or grew straight. Asking around, he heard several theories, but as a scientist and teacher, he put the students to work. Teams measured 600 trees over several

years, and the data showed the twist wasn’t correlated with environmental factors but instead was found to probably be genetic. From their findings, Wing published a paper.

Why did you become a teacher?“I needed a job is the short answer. I worked in environmental consulting in research. I wasn’t necessarily a natural teacher. I think I was a little shy of high school students when I first started. I got over it, but they were scary at first.”

What’s one thing you’re proud of as a teacher? “I’ve discovered that teachers can live like university professors. It does benefit their students. Students appreciate having a teacher who is a real expert on something. It engages them and makes them proud and happy.”

continued from page 1

Teacher Talk: Spotlight on California’s Educators

Ready to Retire? Applying Online Is Easy With myCalSTRS

If you are within six months of your retirement date, you can complete and submit your Service Retirement Application online at myCalSTRS.com for quicker processing. Step-by-step guidance helps you complete the application accurately. It’s easy, fast and secure!

my retirement

Changing Employers? Make Sure to Transfer Your Sick Leave

At service retirement, CalSTRS will convert your unused sick leave to additional service credit. However, we can only accept unused sick leave from each employer you worked for during your last school year.

If you change employers during your career, work with your previous employer to arrange the transfer of unused sick leave to your current employer. See the Member Handbook for more information.

Teacher Talk is a series of profiles on California

teachers and other educators featured on our

website. For the full-length version of this story,

visit CalSTRS.com/teacher-talk-profiles.

CalSTRS Connections: Reaching Your Retirement - Fall 201812

Scott Chan began his tenure August 1 as CalSTRS’ new deputy chief investment officer, replacing Michelle Cunningham who retired in December 2017. Chan was the senior managing director of the University of California Regents’ $55 billion global equities portfolio. Before that, he was the chief investment officer for the Sacramento County Employees’ Retirement System and a partner and portfolio manager for a number of hedge fund partnerships.

CalSTRS New Hires

Julie Underwood officially came on board as CalSTRS’ new chief financial officer on July 16, replacing Robin Madsen who retired in March. Underwood was the CFO of the $9.9 billion San Bernardino County Employees’ Retirement Association, a multiple-employer defined benefit

pension plan. She previously held various accounting and tax positions with the Superior Court of California, County of San Bernardino, and public accounting firms, including Ernst & Young.

Did You Know:

CalSTRS contributed to reducing

greenhouse gas emissions, improving air

quality, and shifting toward a carbon-

free economy via our participation in

the Roosevelt Wind Project. Learn more

about our sustainability performance

and related efforts in our fourth annual

sustainability report, Global Stewardship

at Work. View the full 2016–17 report at

CalSTRS.com/2016-17-sustainability-report.

2016–17 Sustainability Report

WORK

GLOBAL

AT

XXXXX ● 2016-17 SUSTAINABILITY REPORT 1

Kirsty Jenkinson has been hired as the director of corporate governance and will start in January 2019, replacing Anne Sheehan who retired in March. Jenkinson comes to CalSTRS from Wespath Benefits and Investments in Illinois where she has led Wespath’s sustainable investment strategies team since 2014.

She also directs Wespath’s environmental, social and governance integration, corporate engagement, portfolio screening and proxy voting activities.

Look for our fifth annual sustainability report to be released in early 2019.

CalSTRS Connections: Reaching Your Retirement - Fall 2018 13

Corporate Governance at CalSTRS: Investing and Engaging for the Long TermBy Jack Ehnes, CalSTRS CEO

I am pleased to announce the release of the most recent CalSTRS Corporate Governance Annual Report: Investing and Engaging for the Long Term. For us, “long term” is key to maintaining the financial security of California’s educators.

The CalSTRS Corporate Governance team works to ensure that the companies in which we invest adequately monitor and mitigate environmental, social and

governance risks in a manner that will help to maintain the companies’ value over the long term and maximize returns. Below are a few highlights from the report:

Climate Change: In 2017, CalSTRS supported shareholder proposals at ExxonMobil and Occidental Petroleum Corporation that requested reports on the business impacts on climate change and what these companies are doing to address climate risk. Both proposals passed with a majority vote. We continue to actively engage other companies to improve their disclosure on climate change or other sustainability risks.

Diversity: In addition to working with the Thirty Percent Coalition, a group of institutional investors with more than $3.2 trillion in assets focused on gender diversity on corporate boards, in 2017, CalSTRS specifically targeted 112 portfolio companies that are headquartered in California and have no women on their boards.

Financial Reform: Congress introduced the Financial CHOICE Act of 2017 in an attempt to roll back many of the investor protections under the Dodd-Frank Wall Street Reform and Consumer Protection Act. In response, CalSTRS actively engaged members of Congress to voice opposition to the provisions of the CHOICE Act.

Executive Compensation and Other Governance Issues: In 2017, the pharmaceutical company Mylan N.V. was embroiled in EpiPen pricing controversies. CalSTRS, along with other investors, initiated a shareholder campaign contending the company’s compensation plan contained poor pay-for-performance alignment and excessive pay arrangements with the company’s chair, among other governance concerns.

View the full report atCalSTRS.com/report/corporate-governance-annual-report.

CalSTRS Connections: Reaching Your Retirement - Fall 201814

Board News

Board Elects Chair and Vice Chair At its May meeting, the Teachers’ Retirement Board re-elected Dana Dillon to serve as chair and Sharon Hendricks to continue to serve as vice chair for the 2018–19 term.

View board meeting highlights at CalSTRS.com/board-highlights.

Higa Reconfirmed by SenateJoy Higa has been reappointed by Gov. Edmund G. Brown Jr. to a second term on the board and reconfirmed by the State Senate. Higa is the vice president, Regulatory Affairs, for UnitedHealthcare’s West and Central regions, where she manages

relationships and policy activities. She previously served as deputy chief of staff to the state controller and chief deputy cabinet secretary in the Office of the Governor. She received her B.A. from Cornell University. Higa serves as vice chair of two standing committees: Investment and Audits & Risk Management.

Board HighlightsSeptember 19–21, 2018 Teachers’ Retirement Board Meeting

Securing the financial future and sustaining the trust of California’s educators

Board Member Profiles:

Harry M. KeileyK-12 Classroom Teacher

Harry M. Keiley is a high school teacher

with the Santa Monica-Malibu Unified

School District, and was elected to the

Teachers’ Retirement Board in 2007.

He has served as the president of

Santa Monica-Malibu Classroom Teachers Association

and chair of the California Teachers Association Political

Involvement Committee. Mr. Keiley serves as Chair of

the Investment Committee, as well as on the Audits &

Risk Management, Benefits & Services and Board

Governance committees.

Nora E. Vargas School Board Representative

Nora E. Vargas has served as the vice

president of Community & Government

Relations for Planned Parenthood of

the Pacific Southwest since 2009.

Ms. Vargas is president of the South-

western Community College District Governing Board.

She is the board chair of Hispanas Organized for Political

Equality (HOPE), and has been active in public service

since 1998, with a focus on access to education, health

care and Latino issues. In 1997 and 1998, Ms. Vargas

was a presidential appointee to the United States Selec-

tive Service System. Ms. Vargas serves as Vice Chair of

the Board Governance Committee and sits on the

Audits & Risk Management, Compensation and

Investment committees.

Why Full Funding Matters

When the funding of pension systems is mentioned in media reports, the notion of

80 percent funding as a benchmark for a “healthy” pension system is often noted. But

according to a CalSTRS report, it’s not the snapshot in time that denotes the health of

the system, but the funding trajectory over time. For example, in 2009, CalSTRS was nearly

80 percent funded. What the number alone did not tell was that the funding trend was

moving downward toward depletion. CalSTRS is now on track to reaching full funding in three

decades thanks to changes in contributions by members, employers and the state, despite

being 63 percent funded.

The actuarial profession agrees full funding is the best option. In 2014, the American

Academy of Actuaries published a report calling 80 percent funding a myth and advocated

for all plans to aim at a 100 percent funding target. Funding toward a target of less than full

funding may result in lower contributions in the short term, but doing so would simply push

continued on next page

The board’s Benefits and Services Committee was provided with an informational

presentation on the Supplemental Benefit Maintenance Account. The SBMA provides

quarterly payments to CalSTRS benefit recipients whose purchasing power has fallen

below 85 percent of their initial allowance, as long as funds are available.

At the May 2018 meeting, the board was presented with a required report on options

for using excess SBMA resources. At that meeting, the board directed staff to work with

stakeholders and the Legislature to analyze options that could be used to help CalSTRS

members who are most in need of economic assistance while not compromising the

financial integrity of the SBMA and its long-term ability to provide inflation protection. In

September 2018, the board and stakeholders received an overview of how the program

operates, how it is funded, how inflation is measured, which members receive inflation

protection today, and how the financial integrity of the SBMA is directly related to future

levels of inflation. continued on next page

Board Receives Report on Purchasing

Power Protection

Dana Dillon

Board Chair

Sharon Hendricks

Vice Chair

Keely Bosler

Ex-Officio Member, Director of Finance

John Chiang

Ex-Officio Member, State Treasurer

Joy HigaPublic Representative

Harry M. Keiley

K-12 Classroom Teacher

Paul Rosenstiel

Public Representative

Tom Torlakson

Ex-Officio Member, State

Superintendent of Public Instruction

Nora E. Vargas

School Board Representative

Karen Yamamoto

Retiree Representative

Betty YeeEx-Officio Member, State Controller

Dana Dillon is an elementary school teacher with the Weed Union Elementary School District and has served on the board since 2003, including stints as chair and vice chair. She has been active in the California Teachers Association for 36 years, serving as state council

representative, chair of the Retirement Committee and board member.

Sharon Hendricks is a communications studies professor with the Los Angeles Community College District and was elected to the board in 2011. She also serves as treasurer of the American Federation of Teachers, Local 1521, Los Angeles College Faculty Guild. Ms. Hendricks is active

in the Community College Council of the California Federation of Teachers.

Retiree Member Yamamoto ConfirmedKaren Yamamoto, the retiree representative to the board, has been confirmed to her appointment by the State Senate. She is a retired elementary school teacher from West Sacramento and taught

second grade for 15 years before retiring in 2007. She was a member of the California Department of Education’s Curriculum Development and Supplemental Materials Commission from 1999 to 2003, acting as chair in 2003. Before becoming an educator, she also served as a legislative assistant in the California State Legislature. She serves on the Appeals, Benefits & Services, Board Governance, and Investment committees.

Board Members Confirmed

CalSTRS Connections: Reaching Your Retirement - Fall 2018 15

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