External Meetings: Definitions Meeting with CalSTRS

The meeting discussed the potential application of the major swap participant (MSP) definition to the California State Teachers’ Retirement System (CalSTRS).  CalSTRS requested that the final rule clarify that a pension system’s obligations to its pension beneficiaries are not included in determining if the system is “highly leveraged” for purposes of the MSP test, or the test should compare the system’s liabilities to its assets (not equity) to determine if it is “highly leveraged.”  CalSTRS is also concerned that any exemptions or elaborations on the MSP test will apply to all pension plans (using the same terms as the statute), rather than being limited to, e.g., “Title I ERISA” plans, since some pension plans such as CalSTRS are not so qualified.  CalSTRS is also concerned that swap dealers will require counterparties such as CalSTRS to run the MSP tests in order to certify that they are not MSPs, even when it is readily evident that the counterparty does not have swap positions that would cause them to be MSPs.