We're working to help public agencies meet their pension demands
By Marcie Frost, CalPERS CEO
There's one thing I often hear when talking to our employer partners: Rising contribution rates are making budget decisions ever more difficult. Cities, counties, schools, special districts, and other public agencies that contract with CalPERS for retirement benefits are having to do more, with less.
We know that the retirement benefits earned by public employees are only as secure as their employers' ability to pay for them. That's why our work to strengthen the CalPERS fund must include employers. Their requests for help in understanding and navigating contribution costs have been clear and consistent.
Here's what we've done — and continue to do — to help:
Paying it Forward
Last year CalPERS supported legislation that enables employers to make contributions today to pay for pensions in the future. The California Employers' Pension Prefunding Trust (CEPPT) program is voluntary and a significant step in helping public agencies plan ahead. Along with our California Employers' Retiree Benefit Trust (CERBT) program, which agencies can use to prefund post-employment benefits like health care, it can lead to real savings, and help reduce economic volatility in local budgets.
Of course, employers can even now make additional, voluntary one-time payments to CalPERS to pay down unfunded liabilities. That saves money and lowers future contribution costs.
Tools to Plan
One of our most important and visible resources for employers takes place next week. Our 20th annual Educational Forum brings together every CalPERS program area in one place for almost three days. Employers can attend workshops to help them better engage with CalPERS experts, learn about new rules and regulations, and better manage the benefits we help them provide their employees. They can seek one-on-one assistance with an actuary, get advice on processing CalPERS forms and paperwork, or network with other employers to share information and best practices.
This years' Educational Forum has something different. We'll be releasing a new pension forecasting tool to help public agencies estimate their future contributions based on different economic variables, including investment returns or making an additional discretionary payment. A city, for example, could see how making an additional one-time payment, coupled with a decade of assumed investment returns, might impact their contribution rates next year and 20 years from now.
Staying on Course
More than a decade removed from the Great Recession, we're still on the long but necessary path to provide members with the retirement security they earned through a career of dedicated public service. We have about $380 billion assets and are 71 percent funded. We've made strong progress, but we aren't where we want or need to be, yet.
We continue to focus on our long-term plan to close the gap and improve the funded status. The emphasis is on sustainable growth, prudent investment decisions, and maintaining the discipline to weather economic forces and global competition. To protect our members, employers and California's taxpayers, we took a hard look at how we do business. We made critical changes.
We lowered our target rate of return, altered our mix of investments, and shortened the period in which employers pay their unfunded liability, enabling them to save a lot of money in the long term. Yes, these decisions greatly improved our financial position. But we know they have also strained already tight public agency budgets.
That's why our new Chief Investment Officer, Ben Meng, has our Investment Office focused solely on achieving the 7 percent return target. Ben will take the appropriate risk when necessary, but he's a patient, prudent investor who's disciplined in his decision-making. He'll invest only when the opportunity properly aligns with our interests.We know the next decade is critical. Pension costs will rise over the next five years, and we are doing all we can on behalf of the 2,800 public agencies that contract with us to control them. We're building the team to achieve our goals — and giving our employer partners more tools to address future costs.