CalPERS Releases New Pension Rates for State, School Employers
The CalPERS Board approved the recommendations by the CalPERS actuaries to adopt the state and school employer contribution rates for the upcoming fiscal year (FY) 2018-19. While the rates will increase compared to the previous FY, the funded status improved for both the state and school plan. The rate increases primarily are driven by the lowering of the discount rate (assumed rate of return), continued phase-in of the effect of investment losses during the two-year period ending
"We have laid the foundation and set a clear path to improve our funded status," said
In the last few years, CalPERS has taken several actions to ensure the long-term future of the fund, including:
* Lowering the discount rate from 7.5 percent to 7 percent over three years;
* Adopting a new strategic asset allocation that supports the 7 percent discount rate; and
* Shortening the amortization period from 30-years to 20-years for employers to pay their prospective unfunded liabilities.
Discount rate changes are being phased-in over a three-year period with the final decrease to 7 percent occurring with the
Combined, the state and school employers' pension costs for FY 2018-19 are approximately
The state's contribution toward pension costs is estimated to increase by
* The normal progression of payments on the unfunded liability;
* Various changes to actuarial assumptions including: 1) the second-year change of the discount rate for state plans from 7.375 percent to 7.25 percent; and 2) various demographic assumption changes based on the recent experience study that resulted in minor changes to life expectancy, retirement rates, and inflation; and
* Payroll growth of 3.7 percent over the previous year, as compared to the payroll growth assumption of 3 percent.
The state plan also achieved a combined reduction to the required contribution of
In 2017, Senate Bill 84 directed the state to pay an additional
The schools pool contributions are estimated to rise by
* The normal progression of payments on the unfunded liability;
* The first-year of the discount rate change for the school pool from 7.5 percent to 7.375 percent; and
* Payroll growth of 5.1 percent over the previous year, at a cost of
Generally, the schools pool provides retirement benefits to members working in school and community college districts in classified school positions. Teachers are covered under the
The state pension plan is approximately 67.4 percent funded, up 2.3 percent from the previous FY, while the schools plan stands at approximately 72.1 percent, up by 0.2 percent as of
"Adopting the actuaries' recommendations is prudent and are in line with our projections. These rates reflect the difficult decisions we've made to strengthen the fund and ensure a stronger bottom line," said
The full 2017 state and school valuation reports that set contribution rates for FY 2018-2019 will be available this summer. The valuation reports provide projected employer contribution rates for the next five FYs.
Read more about the State Valuation and Employer/Employee Contribution Rates (PDF): https://www.calpers.ca.gov/docs/board-agendas/201804/financeadmin/item-7a-00_a.pdf
Read more about the Schools Valuation and Employer/Employee Contribution Rates (PDF): https://www.calpers.ca.gov/docs/board-agendas/201804/financeadmin/item-7b-00_a.pdf
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About CalPERS
For more than eight decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 1.9 million members in the CalPERS retirement system and administers benefits for more than 1.4 million members and their families in our health program, making us the largest defined-benefit public pension in the
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