CalPERS Forum Mixes Board, Executives, and Members
January 23, 2020
Counties, other local employers, public employees, and retirees had a rare opportunity to meet with and ask questions of the CalPERS board members and executive team this week at what was billed as the first CalPERS Stakeholder Forum. Among the more intriguing topics: forecasting lower returns over the next decade, possible small changes to the discount rate, and a continued focus on enforcing rules related to temporary employees and pensionable compensation, all of which will be of interest to the many counties that provide retirement and health benefits through CalPERS.
CalPERS executive staff made presentations and board members were present and engaged in candid dialogue during the sessions.
Over the next 10 years, CalPERS CIO Ben Meng said that he expects investment returns to likely be lower than for the previous 10, for several reasons, including slowing economic growth and increased efficiency of financial markets. The system will be increasing its investments in private equity to try to increase returns, but Riverside Supervisor Jeff Hewitt asked why the assumed rate of return remains at seven percent. CalPERS board president Henry Jones responded that the board agrees that it should be lower, but that any action has to be measured because it would increase agency contributions.
Even without changing the discount rate, employer contributions are expected to rise by two to three percent by 2024, to an average of 29.1 percent for miscellaneous employees and 55.9 percent for safety employees, then declining slowly after that.
Anne Simpson gave a presentation on another risk to the system, climate change. CalPERS submitted a report on the risks climate change poses to the Legislature on the issue last month pursuant to SB 964. Among other efforts, the report outlines CalPERS’ efforts to advocate changes at the corporate and global governance levels, as an alternative to divestment, so that all investors and companies are subject to the same rules and limitations.
Finally, a presentation on pension administration issues highlighted CalPERS’ continuing interest in making sure that employees are classified correctly, especially temporary employees, and that retirees receive the pension they are entitled to and no more. The issue of pensionable compensation came up most recently in the form of SB 266, which CSAC opposes.