CalPERS to consider further adjustments to the discount rate

Cities can offer testimony during a Sept. 17 board meeting

By Johnnie Pina, legislative affairs lobbyist

The California Public Employees’ Retirement System’s 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.

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%.

The CalPERS Finance and Administration Committee will discuss any possible lowering of the rate on Tuesday, Sept. 17. Cal Cities will submit a comment letter when the meeting agenda is released. Cal Cities has historically opposed any reduction to the discount rate based on the financial impact it would have on cities.

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.

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. At the urging of Cal Cities and other stakeholders, CalPERS recently amended its policy to prompt a discussion, rather than an automatic reduction.

The full Board agenda and analysis is scheduled to go on the CalPERS website by Friday.