The California Public Employees’ Retirement System approved a proposal to change how it counts investment losses and gains aimed at filling $87 billion in unfunded obligations.
The fund will now base the contribution rates paid by state and local government taxpayers on how much the system needs to reach 100 percent funding within 30 years. The change is projected to cause the rate those governments are charged to finance public employee pensions to increase by as much 50 percent over six years beginning in 2015.
The $257 billion had spread out losses and gains over 15 years, a policy called smoothing, to ease the potential that cities and other municipal governments would face sudden spikes in rate increases when investment income fails to meet projections.
The Sacramento-based pension, known as Calpers, currently has about 74 percent of the money it needs to pay benefits over 30 years, after dropping to 61 percent in 2009 amid the global financial crisis that wiped out more than a third of the fund’s market value. Under the current rates and smoothing policy, the fund would reach an 80 percent funded status within 30 years.
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