Make your voice heard about a possible discount rate reduction

Cities can send a comment letter or offer testimony

By Johnnie Pina, legislative affairs lobbyist

Cal Cities is urging the California Public Employees’ Retirement System not to lower the fund’s discount rate and expected rate of return. CalPERS’ investment returns for the fiscal year outpaced its discount rate, triggering an automatic review of the benchmark. Cities can make their voice heard by sending a letter or providing testimony during a Sept. 17 meeting. 

The discount rate is comparable to an assumed rate of return and serves as a policy marker for the CalPERS Board of Administration. The board will review the discount rate next year as part of the scheduled Asset Liability Management process.

CalPERS’ preliminary net return for the 12-month period ending June 30 was at 9.3% in July, outpacing the discount rate of 6.8%. Assets as of that date were valued at $502.9 billion. The overall estimated funded status of the Public Employees’ Retirement Fund stands at 75%.

Under the CalPERS Funding Risk Mitigation Policy, the CalPERS Board must review whether to lower the discount rate for future years if returns exceed expectations. This year, the Board could reduce the discount rate and the expected investment return by 0.05%. Lowering the discount rate and expected investment rate of return would increase employer liabilities and contributions.

How to participate

The CalPERS Finance and Administration Committee will discuss a possible lowering of the rate on Tuesday, Sept. 17 at 9:00 a.m. or upon adjournment or Recess of the Pension and Health Benefits Meeting — whichever is later.

Local officials can share how further discount reductions or increased pension costs would affect their city by calling (800) 259-4105 during the meeting. Participants should call a few minutes early, enter the queue, and provide their name, title, and city. The board meeting is available on the CalPERS Board Webcast webpage.

Cities may also send a comment letter to the Board urging them not to reduce the discount rate. Email all letters to board@calpers.ca.gov.

City officials can also refer to Cal Cities’ sample letter, as well as CalPERS’ Funding Risk Mitigation Event Agenda Item, Funding Risk Mitigation Policy, and Funding Risk Mitigation Event Slideshow, for more information.