August 4, 2011
External Affairs Branch
Robert Udall Glazier, Deputy Executive Officer
Brad Pacheco, Chief, Office of Public Affairs
Contact: Clark McKinley, Information Officer
CalPERS OPEB Trust Earns 25 Percent in 2010-11 Fiscal Year
SACRAMENTO, CA – The California Public Employees' Retirement System (CalPERS) today announced that the trust fund for prefunding public employee retiree health benefits and other post-employment benefits (OPEB) earned a 25.0 percent return on investments in the fiscal year that ended June 30, 2011.
"These investment earnings on the voluntary contributions of participating public employers can mean significant future savings in their payments for retiree health benefits that otherwise would be funded entirely by taxpayer dollars," said CalPERS Chief Actuary Alan Milligan.
CalPERS created the California Employers' Retiree Benefit Trust (CERBT) in 2007 to provide California public employers with a low-cost, high-value investment vehicle for prefunding future OPEB costs. OPEB mainly includes retiree health benefits but also can include any employer-paid benefit other than pension, such as dental or vision care.
All California government employers can prefund their OPEB costs by participating in the CERBT. Contracting public agencies can make periodic contributions into the trust fund so that their money can be invested and grow. In the future, participating employers can use investment earnings to pay for retiree health benefits and other post-employment benefits, similar to the CalPERS pension plan in which almost seven out of ten dollars paid in benefits come from investment earnings rather than taxpayer dollars and employer contributions.
As of June 30, 2011, the CERBT had 306 participating public agencies and more than $1.8 billion under management. Trust fund assets are invested in a diversified portfolio that includes U.S. and international stocks, bonds, and real estate investment trusts (REITS), and is managed by CalPERS professional investment staff.
Prefunding OPEB costs offers many benefits:
- Earnings from trust fund investments reduce future employer OPEB costs.
- Employer discount rate assumptions will be higher, which reduces annual accounting expenses.
- Prevents employer OPEB obligations from being a significant liability on balance sheets.
- Lower unfunded OPEB liabilities may improve bond rating.
- Improves financial security for active workers and retirees.
CalPERS is the nation's largest public pension fund with approximately $236 billion in market assets. It administers retirement benefits for 1.6 million active and retired State, public school, and local public agency employees and their families and health benefits for 1.3 million members. The average CalPERS pension is $2,220 per month. For more information about CalPERS, visit www.calpers.ca.gov.