CalPERS Adopts New Pension Contribution Rates for State, Schools
April 16, 2014
Robert Udall Glazier, Deputy Executive Officer
Brad Pacheco, Chief, Office of Public Affairs
Contact: Amy Morgan, Information Officer
SACRAMENTO, CA - The California Public Employees' Retirement System (CalPERS) Board of Administration today approved new contribution rates for the State of California and contracting school districts beginning July 1, 2014.
The State will pay a total of approximately $4.3 billion towards pensions and schools will pay $1.2 billion. These required contributions are an increase by more than $450 million for the State and $55 million for school employers over current rates.
New demographic assumptions adopted by the CalPERS Board in February have the largest impact on rates for the State plan due to public employees living longer. At the State's request, CalPERS is implementing the new assumptions in Fiscal Year (FY) 2014-15. School and public agency employer's rates will reflect the new assumptions beginning in FY 2016-17. The increased rate for school districts adopted today continues to recognize asset losses from prior years.
"We have had to make some difficult decisions in recent months in order to strengthen the future of our Fund," said Rob Feckner, President of the CalPERS Board. "The changes will ensure CalPERS is on even stronger footing for generations to come."
In addition to the new assumptions, the effects of the Public Employees' Pension Reform Act (PEPRA) will also result in an automatic contribution rate increase for one membership category. Employees who work for the Legislature or California State University in the Peace Officers and Firefighters plan will contribute 0.5 percent more than their current rate of 10.5 percent. PEPRA affects members who were hired on or after January 1, 2013. PEPRA also carries a provision that requires any realized savings from negotiated employee rate increases for State employees to be allocated to pay down the unfunded liability of the State plan.
The State pension plan is approximately 66 percent funded while the school plan stands at approximately 80 percent as of June 30, 2013.
In February, the CalPERS Board voted to implement new actuarial assumptions for the State in FY 2014-15 with the cost spread over 20 years and the increases phased in over three years, and for school employers in FY 2016-17 with the cost also spread over 20 years and the increases phased in over five years.
"Rates will continue to rise over the next few years as we gradually phase in our new assumptions, but the costs more adequately reflect what is needed to pay for promised pensions," said Bill Slaton, Chair of the Finance and Administration Committee.
CalPERS pays out more than $16 billion in retirement benefits each year.
CalPERS is the largest public pension fund in the U.S., with more than $285 billion in assets. CalPERS administers health and retirement benefits on behalf of 3,089 public school, local agency and state employers. There are nearly 1.7 million members in the CalPERS retirement system and more than 1.3 million in its health plans. For more information about CalPERS, visit www.calpers.ca.gov.