Wednesday, December 21, 2016

CalPERS to Lower Discount Rate to Seven Percent Over the Next Three Years

The California Public Employees' Retirement System (CalPERS) Board of Administration today voted to lower the discount rate from 7.5 percent to 7.0 percent over the next three years.  The discount rate changes approved by the Board for the next three Fiscal Years (FY) are as follows:

FY 2017-2018:     7.375%
FY 2018-2019:     7.25%
FY 2019-2020:     7.00%

Lowering the discount rate, i.e. the assumed rate of return, will result in increases in employers' normal costs and unfunded actuarial liabilities.  

According to CalPERS, the reductions will result in 1-3% rate increases of the normal cost as a percent of payroll for most miscellaneous plans, and 2-5% increases for most safety plans.  PEPRA employees hired after January 1, 2013, will also see their contribution rates rise.