More Employers Choosing to Prefund Retiree Health Benefits Through CalPERS
April 16, 2014
External Affairs Branch
Robert Udall Glazier, Deputy Executive Officer
Brad Pacheco, Chief, Office of Public Affairs
Contact: Fred Sater, Information Officer
Participation in program reaches 400 employers and total assets of $3.4 billion
SACRAMENTO, CA - The Upper San Gabriel Valley Municipal Water District became the 400th local government employer to contract with the California Public Employees' Retirement System (CalPERS) to prefund health care obligations to public employee retirees.
The California Employers' Retiree Benefit Trust (CERBT), an optional program administered by CalPERS, helps employers to prefund Other Post-Employment Benefits (OPEB) such as medical, dental and vision care insurance for retirees. With 400 participating employers and total assets of $3.4 billion, CERBT is currently the largest OPEB trust fund in California.
If employers don't prefund retiree health care costs, premiums must be paid out of operating expenses. CERBT participants contribute funds on a voluntary schedule. These funds are invested by CalPERS so that returns can be used to pay premiums in the future, lowering costs for employers.
"Employers that participate in our CERBT program are taking a proactive step to ensure the long-term sustainability and security of health benefits promised to retirees," said Priya Mathur, Chair of CalPERS Pension & Health Benefits Committee. "Four hundred employers is a testament to the success of our program and its effectiveness in reducing retiree health care costs for those agencies that participate."
The CERBT program closed the year ending June 30, 2013, with total assets of $2.7 billion. Employers made $370 million in contributions this year and the fund provided $13 million in reimbursements for OPEB costs.
"CalPERS has improved the trust fund by offering a choice of investment strategies to suit different levels of employer risk tolerance and by implementing an online employer account record-keeping system," said Donna Lum, CalPERS Deputy Executive Officer of Customer Services and Support. "As a result, we expect more agencies to choose prefunding, which will ultimately lower costs per employer."
Information about the CalPERS CERBT program can be found on CalPERS On-Line.
CalPERS is the largest public pension fund in the U.S., with $286 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.