View the CalPERS board item for April 17
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New employer contribution rates projected as CalPERS board considers increase

At the CalPERS board meeting on April 17, CalPERS staff will recommend that the board approve an increase in the employer contribution rates for local education agencies – a move being taken to further stabilize the system going forward, and which would also increase the individual contribution rates for post-PEPRA employees.

As a result of this action, the employer contribution rate would increase to 18.062 percent for the 2018-19 fiscal year. This represents an increase of approximately 0.36 percentage points over the current projected rate of 17.7 percent for 2018-19, and an increase of 2.531 percentage points over the rate of 15.531 percent for the current fiscal year.

  • Click here to view the CalPERS board item for April 17

Important Note: If the CalPERS board approves this item on April 17, only the employer and post-PEPRA employee contribution rates for 2018-19 would be officially impacted. The chart below shows the current projected CalPERS employer contribution rates through 2023-24, compared to the updated projections; the final projected future schools employer contribution rates will be released in September in the annual Schools Pool Actuarial Valuation report.

Why CalPERS is recommending the increase:

The recommendation to increase the contribution rate is based on the annual schools valuation from June 30, 2017, which uses a “discount rate” (CalPERS’ expected rate of returns on investments) of 7.375 percent, payroll growth of 3 percent and an inflation rate of 2.75 percent.

Over the next two schools valuations, the discount rate will continue to drop until it hits 7 percent in 2019, and payroll growth is expected to go lower. The proposed higher contribution rates are a direct result of the lowering of the discount rate (an action which CalPERS approved in late 2016) and a number of other factors, including changes to the valuing of part-time employees and changes in actuarial assumptions in CalPERS’ 2015 annual valuation.

Where CalPERS system funding sits overall:

On a positive note, CalPERS’ funded status has increased from 71.9 percent to 72.1 percent, ending a two-year slide; this was mainly due to investment returns of 11.2 percent, announced in July 2017, offset by the reduction in the discount rate. While this is positive news, because of the points covered above, CalPERS staff believes that an increase in the employer contributions rates remains a necessary move to stabilize the system going forward and to continue to close its funding gap.

How PEPRA members are affected:

The recommendation is for the rate of contributions for post-PEPRA members (those hired in or after 2013) to increase to 7 percent, an increase of 0.5 percentage points over the current rate.

Next Steps

CSBA will deliver comments during the CalPERS board meeting on April 17 to convey to the board the impact this action will have on public schools.

CSBA continues to advocate for additional funding outside of Proposition 98 (beginning with the 2018-19 budget act and in increasing amounts) from the state to offset rising employer contributions to both CalPERS and CalSTRS, which collectively are set to more than double over a 10-year period from 2014 to 2024.

CSBA encourages members to discuss the impact of pension increases with legislators whenever possible.

Click here to download CSBA’s report on the impacts of pension increases (Updated January 2018)

Click here to download tips for discussing the pension issue with your legislators