STATE TEACHERS’ RETIREMENT SYSTEM • FALL 2018

REACHING YOUR RETIREMENT SEMIANNUAL PUBLICATION FOR ACTIVE AND INACTIVE CalSTRS MEMBERS

Teacher Talk: Spotlight on California’s Educators Science Teacher Shares How to Land Grants, Writes Book

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 INSIDE: of his passion for science and teaching that helps guide others to do the same. 3 Board Election Planned for Fall 2019 Wing has spent his entire 21-year teaching career at Sir Francis Drake High School. He 4 One-Time Death Benefit learned how to get grants more than 10 years Amounts Increase ago when he was accepted into a program in 5 Apply Now: Money for Your Michael Wing the Galapagos Islands. Science (Ninth and 10th grade) Special Classroom Project He discovered there’s only a small group of 8 Include Health Care Costs Sir Francis Drake High School teachers applying for all the grants they can in Your Retirement Planning Tamalpais Union High School District find and they run into each other regularly in 9 Introducing Our New Hybrid these teacher travel programs. “I became one Benefits Specialists 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 10 Working After Retirement: worry about whether I would get it. More teachers should apply for more stuff and Rules You Need to Know find more things to do with their kids.” Getting students involved Thanks 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 Also inside: Projects for Smart People. He also has been published in several academic journals, Your Retirement with five of his students getting credit as co-authors. Progress Report 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 Available on myCalSTRS polar deserts. The long-term project allows students to study the cyanobacteria See page 2 growing under the tiles. Wing and his students also built a greenhouse at the University of California’s continued on page 12 Keep Track of Your Account and CalSTRS Mission: Service Credit Balance Securing the financial future and sustaining View Your 2017–18 Retirement Progress Report the trust of California’s on myCalSTRS educators Your Retirement Progress Report for 2017–18 is now available online. To view or print

Teachers’ Retirement Board your report, log on to your myCalSTRS account at myCalSTRS.com, select Dana Dillon, Chair View Your Retirement Progress Report and then select the Sharon Hendricks, Vice Chair year and account type. You can also: Keely Bosler John Chiang Retirement Progress Report 2018 • Review your current and past Your Annual Account Statement and Planning Guide Joy Higa Cash Balance Benefit Program as of June 30, 2018 Harry M. Keiley reports online. Paul Rosenstiel Tom Torlakson • Use the online glossary if you have Retirement Progress Report 2018 Your Annual Account Statement and Planning Guide Nora E. Vargas Defined Benefit Program as of June 30, 2018 Karen Yamamoto any questions about terms used in Betty Yee the report.

Jack Ehnes • Select the Employer Detail screen to Chief Executive Officer view a breakdown of your earnings, Christopher J. Ailman contributions, compensation earnable Chief Investment Officer and service credit by employer and by assignment.

Editor In support of our commitment to Laura Martin sustainability, CalSTRS securely and automatically Designer delivers your annual Retirement Progress Report to your Baotran Bui online myCalSTRS account, reducing paper and postage Contributors costs. However, if you want a printed version of next year’s report mailed to Ruth Latendorf you, submit the form, available at Melissa Wiese Retirement Progress Report Delivery Preference CalSTRS.com/forms, by July 1, 2019. Statements in this publication are general and the Teachers’ Retirement Law is complex and specific. If a conflict If you believe there’s a discrepancy in your report, arises between information contained in this publication contact your employer immediately. 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 Have You Received Unsolicited Email About CalSTRS MS 34 CalSTRS Retirement Planning? P.O. Box 15275 Sacramento, CA 95851 When communicating via email, a CalSTRS representative will always have “@CalSTRS.com” in the email address— for example: [email protected]. We will never ask for your personal information in an unsolicited email or other type of electronic communication. printed on recycled paper

CalSTRS 2 Connections: Reaching Your Retirement - Fall 2018 Board Election Planned for Fall 2019

Next fall, CalSTRS active members will elect three of Candidates the 12 members on the Teachers’ Retirement Board. A Notice of Election and important candidate CalSTRS will hold the election October 1 through information, including nomination petitions, can November 30, 2019, for the following board seats: be found on CalSTRS.com by clicking What’s New, • One preK–12 or county office of education then Board Elections to Be Held in 2019—Candidate employee who is an active CalSTRS Defined Information. Nomination petitions with at least 250 Benefit Program member or Cash Balance Benefit valid signatures are due January 8, 2019. Program participant. This person cannot be an administrator. Board Member Responsibilities » Elected by all preK–12 and county office of Board members set policy, make rules and are education employees who are active members responsible for ensuring CalSTRS pays benefits or participants. according to the law. The board appoints a chief executive officer who is responsible for the • One preK–12 or county office of education administration of CalSTRS according to the board’s employee who is an active member or participant, policies and rules. The board also appoints a including administrators. chief investment officer who is responsible for the » Elected by all preK–12 and county office of investment of the Teachers’ Retirement Fund, in education employees who are active members keeping with the board’s policy. or participants. The board has six standing committees: Appeals, • One community college instructor who is an active Audits & Risk Management, Benefits & Services, member or participant. Board Governance, Compensation, and Investment. » Elected by all active members or participants Interested in a Board Seat? who are community college faculty. 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.

CalSTRS Connections: Reaching Your Retirement - Fall 2018 3 CalSTRS Funding News

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.

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

10.0% 9.2% 8.0% 9.0%

7.7% 7.8% Investment Assumption: 6.0% 6.5% 6.3% 7.0% return over 30 years

4.0%

2.0%

0.0% 25-Year 20-Year 10-Year 5-Year 3-Year 1-Year

June 30, 2017, Actuarial Valuation Results The 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.

One-Time Death Benefit Amounts Increase

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.

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

CalSTRS 4 Connections: Reaching Your Retirement - Fall 2018 2019 California Teachers Apply Now: of the Year Announced Money for Your Special Classroom Project

Five educators have been named as the 2019 More than 1,000 K–12 educators and their schools across California Teachers of the Year by State the nation have funded innovative classroom projects Superintendent of Public Instruction Tom through awards totaling nearly $5 million from the Voya Torlakson. Presented by California Casualty Unsung Heroes program. Each year, 100 educators are and the California Teachers of the Year selected to receive $2,000 to help fund these projects, and Foundation, the award program began in 1972 three are chosen to receive the top awards of an additional to honor outstanding teachers and encourage $5,000, $10,000 and $25,000. new teachers to enter the profession. The 2019 The 2018 Unsung Heroes from California listed below will winners are: each receive $2,000 toward classroom projects that focus Rosie Reid: teaches English to ninth through on subjects such as 3D house design, musical collaboration, 12th grade students at Northgate High School, video production, spoken word performance, agriculture Walnut Creek. She was also nominated engineering, theater arts, and peer-to-peer teaching. as California’s representative for the 2019 Applications for the 2019 Voya Unsung Heroes program National Teacher of the Year competition. are being accepted now through April 30, 2019. Winners Erica Boomer: a ninth through 12th grade will be announced in fall 2019. For more information, visit agriculture teacher at Upper Lake High Pension2.com. Voya Financial is the record-keeper for the School, Upper Lake. CalSTRS Pension2 403(b) and 457(b) plans. Kim Holz: a fourth grade multiple-subject teacher at Opal Robinson Elementary, Unsung Heroes 2018 California Winners Manhattan Beach. Michael Henges: teaches 12th grade Maria Teresita Aniag government and economics at Redondo Union New Designs Charter School–Watts, Los Angeles High School, Redondo Beach. Angel Mejico: a seventh and eighth grade art Marcia Barryte teacher at El Cerrito Middle School, Corona. Carson High School, Carson County offices of education nominate winners Julia Cole through county-level competitions. The Murray Manor Elementary School, La Mesa teachers are interviewed by the California Department of Education and the state Melissa Galvan superintendent then selects the five awardees. Lincoln Elementary School, Pomona For more information, visit cde.ca.gov. Thea Garcia and Ruth Malignaggi Nogales High School, La Puente

Daniel McKinney Santa Rosa Academy, Menifee

Robin Newsom-Wuertz and Jessica Parker Sage Creek High School, Carlsbad

Susan Walton Montera Middle School, Oakland

CalSTRS Connections: 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 6 Connections: Reaching Your Retirement - Fall 2018 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 has been compromised. • Forgot your password? Go to myCalSTRS.com and select the Forgot Your Username or Password? link. Check out CalSTRS.com/myCalSTRS-help-videos for 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 Forms are available at and did not make a change, contact us immediately. Update your mailing address using your myCalSTRS CalSTRS.com/forms or by account, by submitting the Address Change Request form calling us at 800-228-5453 or by calling us (you must have a valid email address to use this option). to have a form mailed to you. 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.

CalSTRS Connections: Reaching Your Retirement - Fall 2018 7 Include Health Care Costs in Your Retirement Planning

CalSTRS does not provide health coverage in basics of Medicare and featuring some estimates on the retirement, so budgeting health care costs into your cost of health care for CalSTRS retirees. You can find retirement income as you plan for your future can the report on CalSTRS.com/teachers-retirement-board help you feel more confident that you will have under Public Meeting Notices and Agendas. enough money to live comfortably. For more information on health care in retirement, see Be sure to familiarize yourself with Medicare and “Planning for Retirement” in the Member Handbook. what it covers, whether or not you qualify for Check out our Financial Awareness Series workshops premium-free Medicare Part A, and what additional (CalSTRS.com/financial-awareness) to learn about coverage you may need based on your current health estimating your income and expenses in retirement. status. Contact the Social Security Administration at 800-772-1213 to find out your Medicare benefit eligibility status through your own work history or By law, school districts, community colleges through your spouse. and county offices of education must offer In addition, discuss with your employer if they retiring CalSTRS members—and their subsidize health care for retirees and, if they do, how spouses or registered domestic partners— long that coverage lasts. If you retire before age 65, this coverage could help bridge the gap between the the opportunity to continue their health employer-subsidized coverage you may have now and insurance at their own cost. CalSTRS can Medicare coverage, which does not begin until you deduct health insurance premiums from turn 65. This can help you predict how your costs your monthly retirement benefit and forward might change as you transition to retirement. them to your insurance carrier. If you’re An informational report titled Health Care and getting ready to retire, contact your employer Retirement Security was presented at the September Teachers’ Retirement Board meeting, outlining the to learn more.

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

22.2 271 average years 323 females of service credit 7,162 107 total years 52 age of oldest of service credit CalSTRS retired member retired members males over 100 years old

CalSTRS 8 Connections: Reaching Your Retirement - Fall 2018 Introducing Our New Hybrid Benefits Specialists Learn more from our experts about saving additional money for your future

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 CalSTRS hybrid benefits specialists offer your CalSTRS retirement benefit, make an appointment with a in-depth information about CalSTRS hybrid benefits specialist by calling 888-394-2060 or emailing Pension2, our voluntary defined contribution [email protected]. Visit CalSTRS.com/member-service-centers plan, as well as your CalSTRS retirement to find a member service center near you. benefit. They are available by appointment at all of our member service centers and our CalSTRS can provide you with information on your benefit offices in Fresno and Redding. choices but does not provide advice. For financial advice, Back row left to right: Arjuna Singh (Glendale), consider consulting a financial professional. Wade Mnich (Riverside), Preston Jackson III (West Sacramento), Marcus Hoey (Santa Clara). CalSTRS administers a hybrid retirement system consisting of traditional defined benefit (Defined Benefit Program), cash Front row left to right: Tammy Gellis (Redding), Wendy Cabrera (Fresno), Margaret Schwartz balance (Defined Benefit Supplement and Cash Balance (Irvine), Christina Portugal (San Diego) Benefit programs) and voluntary defined contribution (CalSTRS Pension2) plans. 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.

Divorcing? Your Retirement Benefits May Be Affected 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.

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.

CalSTRS Connections: Reaching Your Retirement - Fall 2018 9 Are You Ready to Retire and Already Thinking About Returning to Teaching? Important Rules You Need to Know If 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 Example Timeline Example Details

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

Denise is interested in returning to work as a substitute. If she does so within the first 180 calendar days after her retirement, CalSTRS 180 calendar December 27, 2019 will collect back every dollar she earns from days later her retirement benefit, up to her total service retirement benefit amount. For example, if she makes $1,000, her retirement benefit will be reduced by $1,000.

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 July 1, 2019, through limitation, so she should continue to monitor her Every fiscal year June 30, 2020, and earnings against the annual limit to know when every fiscal year after 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.

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

CalSTRS 10 Connections: Reaching Your Retirement - Fall 2018 For more information on what you need to DID YOU KNOW THAT know if you plan to work after retirement, visit % CalSTRS.com/working-after-retirement or 22 read our fact sheet, Working After Retirement, OF RETIRED MEMBERS available at CalSTRS.com/publications. CONTINUE TO WORK AFTER RETIREMENT?

Applicable Rules for Defined Benefit Program Members

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.

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 continued from page 1 Teacher Talk: Spotlight my retirement on California’s Educators Ready to Retire? Wing and his students also built a greenhouse at the University of California’s White Mountain Research Station in Applying Online Is Easy the mountains near Bishop, where conditions are Arctic-like With myCalSTRS 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 If you are within six months of your grow winter wheat and radishes in the extreme environment, retirement date, you can complete and and could replicate what conditions may exist for a colony submit your Service Retirement Application trying to grow food on Mars. online at myCalSTRS.com for quicker processing. Step-by-step guidance helps While conducting the greenhouse study, Wing and his you complete the application accurately. students saw bristlecone pines, among the longest-living trees It’s easy, fast and secure! in the world. They noticed some trees twisted left while others twisted right or grew straight. Asking around, he heard several theories, Changing Employers? but as a scientist and teacher, he put the Make Sure to Transfer students to work. Your Sick Leave Teams measured 600 trees over several years, and the data showed the twist wasn’t correlated with At service retirement, CalSTRS will environmental factors but instead was found to probably be convert your unused sick leave to genetic. From their findings, Wing published a paper. additional service credit. However, we can only accept unused sick leave Why did you become a teacher? from each employer you worked for during your last school year. “I needed a job is the short answer. I worked in environmental consulting in research. I wasn’t necessarily a natural teacher. If you change employers during your I think I was a little shy of high school students when I first career, work with your previous started. I got over it, but they were scary at first.” employer to arrange the transfer of unused sick leave to your current What’s one thing you’re proud of as a teacher? employer. See the Member Handbook for more information. “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.”

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 12 Connections: Reaching Your Retirement - Fall 2018 CalSTRS New Hires

Kirsty Jenkinson has been Did You Know: hired as the director of and will start in January 2019, CalSTRS contributed to reducing replacing Anne Sheehan who retired in March. greenhouse gas emissions, improving air Jenkinson comes to CalSTRS from Wespath Benefits quality, and shifting toward a carbon- and Investments in Illinois free economy via our participation in where she has led Wespath’s sustainable investment the Roosevelt Wind Project. Learn more strategies team since 2014. She also directs Wespath’s environmental, social and about our sustainability performance governance integration, corporate engagement, portfolio screening and proxy voting activities. and related efforts in our fourth annual sustainability report, Global Stewardship Scott Chan began his tenure August 1 as at Work. View the full 2016–17 report at CalSTRS’ new deputy chief investment officer, replacing CalSTRS.com/2016-17-sustainability-report. 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. GLOBAL

Julie Underwood officially AT WORK 2016–17 came on board as CalSTRS’ Sustainability Report 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 XXXXX ● 2016-17 SUSTAINABILITY REPORT 1 Association, a multiple- employer defined benefit pension plan. She previously held various and tax positions with the Superior Court of California, Look for our fifth annual sustainability County of San Bernardino, and public accounting firms, including Ernst & Young. 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 Term By 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 at CalSTRS.com/report/corporate-governance-annual-report.

CalSTRS 14 Connections: Reaching Your Retirement - Fall 2018 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.

Dana Dillon is an elementary Sharon Hendricks is a school teacher with the Weed communications studies professor Union Elementary School District with the Los Angeles Community and has served on the board College District and was elected to since 2003, including stints as the board in 2011. She also serves chair and vice chair. She has as treasurer of the American been active in the California Federation of Teachers, Local Teachers Association for 36 1521, Los Angeles College Faculty years, serving as state council Guild. Ms. Hendricks is active representative, chair of the Retirement Committee in the Community College Council of the California and board member. Federation of Teachers.

Board Members Confirmed

Higa Reconfirmed by Senate Retiree Member Yamamoto Joy Higa has been reappointed Confirmed by Gov. Edmund G. Brown Karen Yamamoto, the Jr. to a second term on the retiree representative to the board and reconfirmed by the board, has been confirmed State Senate. Higa is the vice to her appointment by the president, Regulatory Affairs, State Senate. She is a retired for UnitedHealthcare’s West and elementary school teacher from Central regions, where she manages West Sacramento and taught relationships and policy activities. She previously second grade for 15 years before retiring in 2007. served as deputy chief of staff to the state controller She was a member of the California Department and chief deputy cabinet secretary in the Office of of Education’s Curriculum Development and the Governor. She received her B.A. from Cornell Supplemental Materials Commission from 1999 to University. Higa serves as vice chair of two standing 2003, acting as chair in 2003. Before becoming an committees: Investment and Audits & educator, she also served as a legislative assistant in Risk Management. the California State Legislature. She serves on the Appeals, Benefits & Services, Board Governance, Board Highlights September 19–21, 2018 Teachers’ Retirement Board Meeting and Investment committees. Securing the financial future and sustaining the trust of California’s educators Board Member Profiles: Harry M. Keiley K-12 Classroom Teacher Why Full Funding Matters Harry M. Keiley is a high school teacher When the funding of pension systems is mentioned in media reports, the notion of with the Santa Monica-Malibu Unified School District, and was elected to the 80 percent funding as a benchmark, it’s fornot a the “healthy” snapshot pension in time system that denotes is often the noted. health But of a CalSTRS report Teachers’ Retirement Board in 2007. according to He has served as the president of the system, but the funding trajectory over time. For example, in 2009, CalSTRS was nearly Santa Monica-Malibu Classroom Teachers Association 80 percent funded. What the number alone did not tell was that the funding trend was and chair of the California Teachers Association Political moving downward toward depletion. CalSTRS is now on track to reaching full funding in three Involvement Committee. Mr. Keiley serves as Chair of decades thanks to changes in contributions by members, employers and the state, despite the Investment Committee, as well as on the Audits & being 63 percent funded. Risk Management, Benefits & Services and Board The actuarial profession agrees full funding is the best option. In 2014, the American Governance committees. Academy of Actuaries published a report calling 80 percent funding a myth and advocated Nora E. Vargas for all plans to aim at a 100 percent funding target. Funding toward a target of less than full continued on next page School Board Representative funding may result in lower contributions in the short term, but doing so would simply push 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 View board meeting highlights at 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 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. CalSTRS.com/board-highlights. Dana Dillon Board Chair Sharon Hendricks Vice Chair Keely Bosler Ex-Officio Member, Director of Finance John Chiang Board Receives Report on Purchasing Ex-Officio Member, State Treasurer Joy Higa Power Protection Public Representative Harry M. Keiley The board’s Benefits and Services Committee was provided with an informational K-12 Classroom Teacher presentation on the Supplemental Benefit Maintenance Account. The SBMA provides quarterly payments to CalSTRS benefit recipients whose purchasing power has fallen Paul Rosenstiel Public Representative below 85 percent of their initial allowance, as long as funds are available. Tom Torlakson At the May 2018 meeting, the board was presented with a required report on options Ex-Officio Member, State for using excess SBMA resources. At that meeting, the board directed staff to work with Superintendent of Public Instruction stakeholders and the Legislature to analyze options that could be used to help CalSTRS Nora E. Vargas members who are most in need of economic assistance while not compromising the School Board Representative financial integrity of the SBMA and its long-term ability to provide inflation protection. In Karen Yamamoto September 2018, the board and stakeholders received an overview of how the program Retiree Representative operates, how it is funded, how inflation is measured, which members receive inflation Betty Yee protection today, and how the financial integrity of the SBMA is directly related to future Ex-Officio Member, State Controller levels of inflation. continued on next page CalSTRS Connections: Reaching Your Retirement - Fall 2018 15 PRSRT STD U.S. POSTAGE PAID PERMIT NO. 25 SACRAMENTO, CA CalSTRS Resources

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