CalPERS State, School Pension Contribution Rates Lower Than Projected; Rise for New Fiscal Year
April 14, 2015
Robert Udall Glazier, Deputy Executive Officer
Brad Pacheco, Chief, Office of Public Affairs
Contact: Amy Morgan, Information Officer
Funding of both state and school plans increases by approximately 6 percent
SACRAMENTO, CA - The California Public Employees' Retirement System (CalPERS) Finance and Administration Committee recommended the Board of Administration adopt new pension contribution rates for State of California and school employers that are less than originally projected, but up from the 2014-15 Fiscal Year (FY). The changes in the rates for the 2015-16 FY are driven primarily by payroll growth, salary increases, and retirees living longer.
"As the Fund matures, and the retired population grows, it's important that the rates reflect the changing demographics of our members," said Richard Costigan, Chair of the Finance and Administration Committee. "Pension plans require stable funding, and the new rates incorporate the Board's actions over the last several years that will reduce rate volatility in the long term."
The Board has adopted several actions to reduce risk to the Fund and ensure long-term stability, including new demographic assumptions, in 2014 and a change to amortization and smoothing policies in 2013. This is the first year of the five-year phase-in of the amortization and smoothing policy that spreads out rate increases and decreases, and amortizes the gains and losses over a fixed 30-year period.
The state's contribution towards pensions is estimated to increase by $487 million from $4.2 billion to $4.7 billion from the previous fiscal year, while the estimated increase for the schools pool will rise to $111 million from $ 1.2 billion to $1.3 billion.
The state contributions are increasing due to the second year of the new phased-in demographic assumptions that account for public employees living longer, the implementation of the new smoothing policies, and because the payroll of state employees covered under CalPERS has increased by about 7 percent over the previous year.
The schools pool contribution is increasing as a result of the new smoothing policies and also as a result of an increase of about 8 percent in the payroll of school employees covered by CalPERS. School rates will reflect the new assumptions beginning in the 2016-17 FY.
"We continue to work with our stakeholders through outreach and education as we phase in implementation of the new rates," said Cheryl Eason, CalPERS Chief Financial Officer. "This outreach helps guide our stakeholders to make the most informed decisions about their specific financial situation."
The state pension plan is approximately 72 percent funded, while the school plan stands at approximately 86 percent, as of June 30, 2014. This represents an approximately 6 percent increase for both plans over the previous fiscal year. The total CalPERS Fund is estimated at 77 percent funded as of June 30, 2014.
The full 2014 state and school valuation reports will be available this summer. The valuation reports provide projected employer contribution rates for the next five fiscal years.
Read more about the state contribution rates and valuation.
Read more about the school contribution rates and valuation.
For more than eight decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 1.7 million members in the CalPERS retirement system and administers benefits for 1.4 million members and their families in our health program, making us the largest defined-benefit public pension in the U.S. CalPERS' total fund market value currently stands at approximately $300 billion. For more information, visit www.calpers.ca.gov.