Bloomberg News

Calpers May Phase in Higher Employer Costs Over 2 Years

April 17, 2012

The California Public Employees’ Retirement System should let the state and local governments phase in higher rates they must pay toward pensions over two years, a management committee said today.

The recommendation, which goes to the governing board of the largest U.S. public pension for approval tomorrow, would cut in half an increase in the percentage of payroll that employers must pay into the fund next year. The increase stems from a lower assumed rate of return on investments adopted in March.

The $234 billion fund’s board agreed at a meeting in Sacramento to reduce its forecast for return on assets to 7.5 percent from 7.75 percent. The rate is used to calculate how much money the plan, known as Calpers, will have and how much it will need to cover promised benefits, as well as the size of contributions from employers.

Board members said at the time that they would seek to phase in the higher costs over two years, to ease the burden on cash-strapped local governments.

Under the phase-in, the state and school districts next year would pay 0.61 percentage point to 1.16 percentage points of payroll more than currently. The rate for local governments will increase by between 0.63 percentage point and 1 percentage point. Calpers covers school employees such as bus drivers, cafeteria workers and secretaries.

A one-time increase would mean the employer rate would climb by as much as 2.37 percentage points next year for some state agencies, such as the Highway Patrol. Some local governments would face an increase of 1.94 percentage points.

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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