Managing the Unfunded Accrued Liability
We provide tools that public agencies can use to proactively manage a pension plan’s Unfunded Accrued Liability. These tools allow agencies to increase a plan’s funded status, stabilize contribution requirements, reduce future required contributions, and reduce long-term debt. Our policies allow for a great deal of flexibility to help agencies accumulate assets for future benefit payments in a systematic and disciplined manner during the career of the members earning benefits. Every dollar that is set aside earlier than required is expected to increase the amount of investment earnings available to pay benefits and reduce the total contributions required of the agency. The following options are among those available to public agencies.
Additional Discretionary Payments (ADP): Aside from required employer contributions, many agencies elect to make additional contributions, either on an ad hoc basis or in accordance with the agency’s own funding policy. Public agencies may make additional payments at any time and in any amount in order to reduce the agency’s Unfunded Accrued Liability and increase the assets earning an investment return within the fund.
Payments may be made by Electronic Funds Transfer (EFT) through myCalPERS or by wire transfer through the State Treasurer’s Office. Contact a CalPERS actuary before making an ADP. See instructions below:
|EFT through myCalPERS||Email FCSD_public_agency_wires@calpers.ca.gov at least two business days prior to the payment date. A receivable in the amount of the payment will be established. Once notified that the receivable has been established, sign in to myCalPERS and submit payment via EFT.|
Bank of America
2000 Clayton Road Bldg. D, 5th Floor
For credit to State of CA, CalPERS
Email FCSD_public_agency_wires@calpers.ca.gov and the CalPERS actuary on the day of the wire to ensure timely crediting to the correct rate plan. Any individual wire totaling over $5,000,000 requires 72-hour notice.
Amortization Schedule Adjustments: Adjustments may be made to the amortization schedule, including a fresh start of the amortization schedule. This can dramatically stabilize contribution requirements. This can be done independently of or in conjunction with an ADP. It can be initiated by the agency or by the actuary. A CalPERS actuary is available to discuss. For assistance, call the Customer Contact Center at 888 CalPERS (or 888-225-7377).
Section 115 Pension Trust: Public agencies can set aside assets in a tax qualified trust that can be used for future pension contributions. We administer a Section 115 trust fund, the California Employers' Pension Prefunding Trust (CEPPT) Fund, dedicated to prefunding employer contributions to defined benefit pension systems for eligible public agencies. By joining this trust fund, public agencies can use investment earnings provided by CalPERS to help finance pension benefits. Unlike an Additional Discretionary Payment to a specific rate plan, CEPPT assets can be applied to any rate plan, can be used to satisfied required Unfunded Accrued Liability or Normal Cost contributions, and can be invested in accordance with the agency’s risk tolerance.
- Governmental Accounting Standards Board (GASB)
- Managing the Unfunded Accrued Liability
- Pension Outlook Overview
- Public Agency Actuarial Valuation Reports
- Required Employer Contributions
- Risk Pooling