CalPERS votes to leave discount rate unchanged

By Johnnie Pina, legislative affairs lobbyist

At the urging of Cal Cities, the California Public Employees’ Retirement System voted last month to not lower the fund’s discount rate and expected rate of return. Lowering both would have increased employer liabilities and contributions.

CalPERS’ investment returns for the fiscal year outpaced its discount rate, triggering an automatic review of the benchmark. The discount rate is comparable to an assumed rate of return and serves as a policy marker for the CalPERS Board of Administration.

Under the CalPERS Funding Risk Mitigation Policy, the Board had the option of reducing the discount rate and the expected investment return by 0.05%. 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%.

For more information, please review the CalPERS’ Funding Risk Mitigation Event agenda item, Funding Risk Mitigation Policy, and Funding Risk Mitigation Event Slideshow, CalPERS Board Meeting recording.