Rand Anderson

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Pension and Other Post-Employment Benefits
Rand Anderson Manager Constituent Relations Office
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Overview

• Employer Contribution Rates
• Employer Options
• Cost drivers
• Cost deferrals
• Cost reducers
• If time allows OPEB

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Employer Contribution Rates Return to Historical
High
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Employer Contribution Rates - Miscellaneous
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Employer Contribution Rates Return to Historical
High
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Employer Contribution Rates - Safety
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Is CalPERS Sustainable?

• YES
• CalPERS has more than enough money to pay
  benefits for many years into the future. The
  funded status of plans at CalPERS has decreased.
  However, the ability to pay benefits remains
  intact.
• Nevertheless, some employers may consider their
  future costs to be unsustainable.
• Current employer rates are the highest in more
  than 25 years - currently at levels similar to
  the rates in the early 1980s. With the decline
  in investment markets in 2008-2009, rates are
  expected to be the highest they have ever been.

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Cost Drivers

• Payroll increases above projection
• - workforce growth
• - pay rate growth
• - payroll growth
• Benefit improvements
• Investment return

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Cost Increases Caused by More than Benefit
Increases

• Many newspapers blame the benefits provided by SB
  400 and other benefit improvements that took
  place in the last 10 years.
• The reality is that this is only partially true.
• Growth in government has a lot to do with
  increases in dollars being contributed to CalPERS.

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Cost Driver Growth in Workforce
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Cost Driver Growth in Pay Rate
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Cost Driver Growth in Payroll (million )
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Cost Increases Caused by More than Benefit
Improvements
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Growth in Local Agencies Over the Last 10 Years
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Cost Driver Benefit Improvements
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Investment Returns Earned by CalPERS

• CalPERS assumes its long term return will be
  7.75.
• 1 Year Return -24
• 5 Year Return 1.5
• 10 Year Return 2.3
• 15 Year Return 6.9
• 20 Year Return 7.4

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Cost Driver Recent Investment Results
Results as of 9/30/2009. After -24 loss in FY
2008/09, the trust fund results are improving.
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Cost Deferral
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Impact of Temporary Method on Employer Rates

• The approved method will phase in the impact of
  the investment loss in 2008-2009 over 3 fiscal
  years.
• Estimated impact of the -24 investment return in
  2008-2009 on employer rates commencing July 1,
  2010 for State and Schools and July 1, 2011 for
  Public Agencies is

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Projected Employer Contribution Rate
Typical 2 at Age 60 and 2 at Age 55
Miscellaneous Plan with an Asset to Payroll Ratio
of 4 Based on a -24 return in 2008 2009 and
7.75 thereafter
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Projected Employer Contribution Rate
Typical 2 at Age 55 and 3 at Age 60
Miscellaneous Plan with an Asset to Payroll Ratio
of 6 Based on a -24 return in 2008 2009 and
7.75 thereafter
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Projected Employer Contribution Rate
Typical 3 at Age 50 Safety Plan with an Asset to
Payroll Ratio of 10Based on a -24 return in
2008 2009 and 7.75 thereafter
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Cost Reduction
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California Employers Retiree Benefit Trust
(CERBT)

• Investment return
• Other progress
• Challenges
• Next steps

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California Employers Retiree Benefit Trust
(CERBT)
Recent Investment Return
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CERBT Growth Statistics
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CERBT Employer by Program and Type
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CERBT Challenges

• How to reach out to so many California employers?
• Must reach beyond regional offices
• Local employers will host group meetings
• Web conferences
• Association conferences
• How to comply with evolving GASB standards
• Expand employer education to include financial
  reporting changes
• Become the source of compliant financial
  reporting information

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CERBT and Financial Reporting Data
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CERBT Employer Population
PEMHCA ONLY AMM Cost Analysis OK
PEMHCA ONLY Actuarial Valuation Required
PEMHCA ONLY Multiple OPEB Benefits Offered
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CERBT Next Steps

• Steps to maintain reporting compliance
• Immediately implement new GASB requirements
• Educate employers about requirements
• Gradually expand CalPERS ability to generate
  compliant reporting data
• PEMHCA employers who participate in the CERBT
• Self-funded (fee based) valuation services

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Questions? Where to get Information?

• CERBT Web Page
• www.calpers.ca.gov/cerbt
• Email
• CORE4U_at_calpers.ca.gov
• Employer Contact Center
• 888-CalPERS (225-7377)