PEPRA (A.B. 340)

New CalPERS Assumptions Will Increase Rates

02-23-2014 |

New demographic actuarial assumptions have significant impacts on contribution rates and may also increase certain Member contributions.

CalPERS Board approved new demographic actuarial assumptions on February 18, 2014 based on the 2013 study of recent experience.  These will have a significant impact on contribution rates for CalPERS Agencies and may also increase certain employee contributions.

Contact Bartel Associates to find out the impact for your Agency. 
Read the full article.


CalPERS Assumption Changes

  • The largest impact, applying to all CalPERS groups, is a new 20-year mortality projection reflecting longer life expectancies and that longevity will continue to increase. Since retirement benefits will be paid out for more years, the cost of those benefits increases.
  • Earlier assumed retirements for Police 3%@50, Fire 3%@55, and Miscellaneous 2.7%@55 and 3%@60 will increase costs for those groups.
  • Higher projected pay increases for long-service Safety members will also increase Safety costs.
 Assumption Changes Impact on CalPERS Agencies
  • Contribution rates first affected in FY 2016/17 (based on the 6/30/14 valuation) with full impact in FY 2020/21.
  • Phased in using newly adopted contribution policy: 20 year amortization with 5 year ramp up and 5 year ramp down.
  • Agencies have no options to mitigate or defer the impact.
  • Agencies wishing to pay more will be able to.
  • Estimated increases will be illustrated in 6/30/13 valuation reports.
Assumption Changes Impact on Member Contribution Rates
  • PEPRA Employees first hired after January 1, 2013 pay ½ of the Normal Cost for their benefits, but the rate only changes if the total normal cost changes by more than 1% of pay.
  • Safety Member rates could increase by up to 0.75% of pay beginning in 2016/17.
  • No change anticipated for Miscellaneous Member contribution rates.

No Change in Discount Rate

  • No changes were made to economic assumptions and the discount rate is unchanged at 7.50% based on a new asset allocation.

  New Asset Allocation

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