October 17, 2012
External Affairs Branch
Robert Udall Glazier, Deputy Executive Officer
Brad Pacheco, Chief, Office of Public Affairs
Contact: Bill Madison, Information Officer
CalPERS Approves Long-Term Care Premium Increase
Three alternative plans offered to ease impact on policyholders
SACRAMENTO, CA – The California Public Employees’ Retirement System (CalPERS) Board of Administration today approved an 85 percent premium increase for early purchasers of its Long-Term Care (LTC) Insurance Program policies. The increase, to be spread over two years, is being implemented to help stabilize the Program’s underlying Long-Term Care Fund and will take effect July 2015. Members who opt to cover the increase in a single year will pay only 79 percent.
Policyholders affected by the increase purchased two types of policies between 1995 and 2004: policies with lifetime benefits with inflation protection, and policies with lifetime benefits without inflation protection (California Partnership policies will be excluded).
The premium increase is necessary to offset the effect of higher-than-expected claims, lower-than-expected investment income, the Board’s adoption of a more conservative LTC Fund investment mix, and a lowering of the Fund’s investment discount rate to 5.75 percent to align with the more conservative investment portfolio.
The Board also approved three new optional alternative benefit plans that will provide the affected CalPERS LTC policyholders with options for relief from the financial impact of the 2015 rate increase. These new alternatives will allow policyholders to avoid further premium increases by converting to policies that will still provide adequate protection and possibly lower their premiums.
“We took great care to listen to the concerns of our policyholder constituent groups and weighed staff proposals for these options carefully before making our decision,” said Board President Rob Feckner. “We are taking these actions to ensure the sustainability of the Long-Term Care Fund and the availability of benefits for our policyholders.”
Affected policyholders will be given the opportunity to convert their policies to these new options in the spring of 2013. The policy changes will take effect July 1, 2013. View a list of the proposed new policy conversion options (PDF, 87 KB).
“We feel the plan options we will offer our policyholders make this a win-win situation, especially for those with lifetime benefit policies,” said Priya Mathur, Chair of the Board’s Pension and Health Benefits Committee. “With the average length of stay in a care facility a little over three years, we think the 10-year conversion option will provide more than adequate coverage when our policyholders need it.”
The CalPERS Long-Term Care Program began in 1995 and currently has more than 150,000 members and approximately $3.6 billion in LTC Fund assets. The LTC Program is a voluntary, self-funded, not-for-profit program funded entirely by policyholder premiums and investment earnings.
CalPERS is the nation’s largest public pension fund with approximately $243 billion in assets, providing retirement benefits to more than 1.6 million State, public school, and local public agency employees, retirees, and their families, and health benefits to more than 1.3 million members. The average CalPERS pension is $2,332 per month. The average benefit for those who retired in the fiscal year that ended June 30, 2011, is $3,065 per month. For more information about CalPERS, visit www.calpers.ca.gov.