June 19, 2013
External Affairs Branch
Robert Udall Glazier, Deputy Executive Officer
Brad Pacheco, Chief, Office of Public Affairs
Contact: Amy Norris, Information Officer
State and School Pensions to Cost Less in 2013-14
SACRAMENTO, CA – The State of California will pay less for public employee pensions in the upcoming 2013-14 fiscal year, as compared to last fiscal year, based on new contribution rates approved today by the CalPERS Board of Administration.
The State contributions would have fallen by $71.3 million, but a provision in the pension reform legislation last year, will require some of those savings to be used to pay down the unfunded liability for the State plan. Pensions for classified school employers will decrease by $31.5 million, as part of the approved rates.
“Lower pension costs are good news for the State’s general fund,” said CalPERS Board President Rob Feckner. “By paying down unfunded liabilities, some of these savings will help reduce risk in the system.”
Overall, the State will pay $3.9 billion for pensions and the school plan will require $1.2 billion in contributions for Fiscal Year 2013-14. The lower dollar cost of pensions is a result of a drop in payroll, lower than expected salary increases and additional member contributions required by AB 340.
Though the dollar amount is lower for the State and school plans, the percent of payroll needed to pay for benefits generally increased. The contribution rate for the five State pension plans ranges from 15.7 percent for industrial members, to 34.6 percent for members of the California Highway Patrol. The rate for the miscellaneous plan, the largest group in State service with more than 150,000 active members, is 21.1 percent.
AB 340 reforms not only raised contribution rates for many State employees, it also required the savings realized by the State be offset with additional payments toward the unfunded liability. Therefore, the State will be required to pay an additional $63.3 million or .08-1.32 percent above the base contribution rate for its State employees.
“Even with this additionally required payment, the State is paying $8.2 million less than it did last year,” said George Diehr, Vice Chair of the System’s Pension and Health Benefits Committee. “Our new asset smoothing policy should continue to improve our funded status and reduce overall risk.”
Currently, pension plans for the State are on average about 70 percent funded, and the school plan is approximately 75 percent funded. The unfunded liability for the State plans is approximately $45.5 billion. The unfunded liability for the school plan is $14.6 billion. More details about the contribution rates approved by the Board can be found in the agenda item prepared by the Actuarial Office staff. The full State and school actuarial valuations will be available online in the coming months.
CalPERS is the largest public pension fund in the U.S. with approximately $260 billion in assets. The retirement system administers retirement benefits for more than 1.6 million current and retired California State, public school, and local public agency employees and their families on behalf of more than 3,000 public employers in the state, and health benefits for 1.3 million enrollees. For more information about CalPERS, visit www.calpers.ca.gov.