CalPERS 2022-23 Investment Returns and their Impact on Employers
September 21, 2023
In July, the California Public Employees’ Retirement System (CalPERS) announced an investment return rate of 5.8% for the 2022-23 fiscal year. While this is less than the 6.8% forecasted return rate, it is an improvement over the disappointing negative 6.1% rate of return in 2021-22. Overall, the Public Employee’s Retirement Fund has an estimated funded status of 72% as of June 2023.
In September, CalPERS announced the impact of the 5.8% investment return on public employers. For counties that contract with CalPERS, the 2022-23 investment return will impact employer contribution rates in 2025-26. The 1% investment loss between the forecasted 6.8% and the actual return of 5.8% will be amortized over 20 years, with employer contribution payments beginning in 2025-26. Member contribution rates will not be impacted by the 2022-23 investment return.
For miscellaneous plans, the impact of the investment return loss of 1% in 2022-23 results in an increase in employer contribution rates by approximately 0.2% to 1.6% percent of payroll beginning in 2025-26. The precise impact depends on the plan size and the funded status. For safety plans, the impact is an increase in employer contribution rates of approximately 0.3% to 2.7%.
On Monday, September 18, the CalPERS Board of Administration’s Investment Committee reported in detail on investment strategies and performance. Additionally, during a webinar on September 11, CalPERS emphasized their dedication to maintaining a long-term investment perspective and strategy, citing the average 30-year investment return rate of 7.5%. CalPERS also encourages public employers to use their Pension Outlook Tool to project their plan’s contribution rate. Overall, the webinar also reported on the pension fund’s investment performance, impacts to employer contribution rates, and the outlook for the financial markets. A recording of the webinar is available here.
CSAC will continue to keep counties informed on the health and sustainability of the nation’s largest public pension fund.