At the November 15-17, 2021 board meetings, the CalPERS Board of Administration voted to hold the current discount rate of 6.8% and adopted new actuarial assumptions. In July 2021, the discount rate was lowered from 7% to 6.8% due to the Funding Risk Mitigation Policy. This policy lowers the discount rate in years of good investment returns to reduce risk in the portfolio. The policy automatically lowered discount rate when CalPERS achieved an investment return of 21.3% for fiscal year (FY) 2020-21.

The decision concludes a nearly yearlong comprehensive review of the pension system’s investment portfolio and actuarial liabilities. Known as the Asset Liability Management process, or ALM, the board conducts the evaluation every four years.


Employers who contract with CalPERS to administer their pension plans for their employees' will see a decrease in median total employer contribution rates, which includes both normal and unfunded actuarial liability costs, from less than 1% in miscellaneous plans to a decrease of more than 2% in some safety plans. The new actuarial assumptions cost increases are fairly modest. Each plan is unique and will vary across plans within public agencies, school districts, and for the State of California. It depends upon the employer's normal cost, the benefit structure, and the unfunded liability.

The 6.8% discount rate went into effect July 1, 2021 and will impact budgets for state and school employers in FY 2022-23 and public agency employers in FY 2023-24.

The normal cost rate is determined by looking at the annual cost of providing benefits to active employees for the upcoming fiscal year. The normal cost should be viewed as the long term contribution rate.

The UAL is determined by looking at the Market Value of Assets of the plan or pool and comparing it with the accrued liability of that plan or pool. To the extent that the assets are different from the liability, the plan or pool will also be assessed an unfunded liability payment. The purpose of the unfunded liability payment is to get the assets and liabilities back to even over time.

The total employer contribution is the sum of the normal cost rate applied to an employer's reported payroll plus the UAL payment. These two components are the required contribution amount that employers pay CalPERS to fund their employees' pension benefits.

For Fiscal Year 2020-21, total combined employer contributions equaled $20 billion.

The overall financial health of the employer's plan is measured by the plan's funded status.

The funded status represents the funded market of the assets minus the discounted value of the future liabilities. Sort of by definition, when the discount rate is reduced, it decreases the funded status because basically all of those future liabilities have less discounting as they go out into the future, is the way to think about it.

Each employer in the CalPERS system has their own specific funded status, which can be found in your actuarial valuation report. A change in the discount rate will affect each employer a little differently because of the timing of cash flows and the structure of their liabilities.

The current estimated funded status of the PERF for June 30, 2021 is 82% with a 7% discount rate and 80% with a 6.8% discount rate. The Funding Risk Mitigation Policy triggered the lowering of the discount rate from 7% to 6.8% on July 1, 2021.

The June 30, 2022, public agency valuations that set the rates for FY 2023-24 will be available in the summer of 2023. These plans will show the updated projections for each of the specific plans. Employers can run estimates through the Pension Outlook tool and model the 6.8% discount rate using their current actuarial valuations of June 30, 2020.


Members retiring or re-retiring on or after November 18, 2021, are affected. Those who retired before that date aren't affected. There is no impact on an active employees’ take-home pay.

For Classic members there are no changes since the contribution rates are set by statute.

For PEPRA members the discount rate and actuarial assumption changes will increase contribution rates. Most PEPRA employees will see median increases ranging from 1.2% in miscellaneous plans to 1.5% in safety plans in their total normal cost. Check with your bargaining unit for updates.

Retirement benefit options will be calculated using the ultimate discount rate of 6.8% with the new actuarial assumptions. This affects service, disability, and industrial disability retirements.

Retirement allowances may increase a few dollars ($2 to $3) per $1,000 of the retirement allowance for member’s that choose the option that provides benefits for a spouse or beneficiary. It does not impact rates for member’s that choose the unmodified retirement benefit.

Some service credit purchase selections will be affected and the cost to purchase will increase. Specifically the types of present value service credit that are impacted are:

  • Leave of Absence
  • Military
  • Alternate Retirement Program (ARP)
  • Peace Corps, AmeriCorps VISTA (Volunteers in Service to America), or AmeriCorp Fellowship
  • National Guard
  • Fellowship
  • Comprehensive Employment & Training Act (CETA)

These changes do not apply to all service credit purchase types.

You can log in to your myCalPERS account and request a service credit purchase estimate to see what you may be eligible to purchase and the potential cost.

For members who re-retire on or after November 18, 2021 and select a payment option that provides a benefit for a spouse or beneficiary or an Actuarial Equivalent Reduction will be impacted.

Contact the CalPERS Customer Contact Center at 888-CalPERS (or 888-225-7377).