CalPERS Employer Contributions Could Change
February 8, 2018
Changes that could impact employer contribution rates to the California Public Employees’ Retirement System (CalPERS) will be heard next week at the CalPERS Committee and Board hearings. Specifically, the actuarial staff is putting forth a recommendation to change the way member agencies pay down their pension debt, also known as amortization. The proposal is critically important for counties that contract with CalPERS as they impact annual payment installments and may consequently require budget adjustments.
The Finance and Admin Committee is scheduled to take action on the Amortization Policy at its meeting on Tuesday, February 13 (see Agenda Item 7). CSAC will be in attendance at the meeting to provide public comment and has issued a letter based on feedback collected to date from counties. The action, if any is taken, will go to the full Board for approval at its meeting the following morning, February 14. The Committee could also choose to table the item for further review.
CalPERS staff is recommending the Board act to shorten the amortization period for investment gains and losses from 30 years to 20 years, modify the direct rate smoothing method, and change the escalation rate from level percentage of payroll to level dollar amortization. It is important to note that these changes, if adopted, would be made on a prospective basis and not affect current liabilities.
As counties may recall, CalPERS staff introduced the proposal in November 2017 in conjunction with the Asset Liability Management (ALM) process. (See impact of ALM action on employer contributions.) Part of the rationale was the 30-year amortization policy was not in line with established best practices for government accounting standards. At that time, the Finance and Administration Committee tabled the discussion and requested that staff conduct impact studies and engage in further vetting.
Three months and numerous stakeholder meetings later, CalPERS staff is coming back to the Committee with line-by-line edits to the existing Actuarial Amortization Policy and figures on the projected annual impact on employer contributions.
The hearings are open to the public and webcast live. CSAC will provide a recap in next week’s edition of the Bulletin and encourages all interested parties to join our CalPERS Feedback Committee for more frequent updates. Also, please note an additional opportunity to get engaged on CalPERS matters by participating in the Annual Business Partner Survey (further detail provided at this link.) Contact Dorothy Johnson or Tracy Sullivan for any questions or to request more information.