CalPERS may lower its return target;
taxpayers may have to contribute more
Experts have warned for years that the state’s largest public pension plan has overestimated how much its investments will earn, leaving taxpayers to pay billions of dollars more than expected.
Now the board of the California Public Employees’ Retirement System is reconsidering. As soon as Wednesday, the fund’s board could approve a plan that would slowly reduce to 6.5% the current 7.5% it says it expects to earn on its investments.
For taxpayers, that seemingly small change is significant.
Under the proposal, the rate would be reduced slowly by tiny increments. Getting to 6.5% could take 20 years.
Many experts believe that even the 6.5% estimate is too optimistic.
The average corporate pension plan now uses a rate of 4% to determine how much money needs to be contributed, according to a recent study by Milliman, a consulting firm.
This year, after several years of double-digit returns, CalPERS earned just 2.4%.
