Marin County Employees' Retirement Association, San Rafael, Calif., reduced its assumed rate of return to 7% from 7.25% as the result of decreased future return expectations, confirmed Jeff Wickman, retirement administrator, in a phone interview.
Mr. Wickman said the new rate of return, adopted by the board's governance committee on Nov. 1, was the result of a three-year experience study by the plan's actuary, Cheiron, that reviewed the economic and demographic assumptions used to fund the plan.
That study, averaging the estimates of the $2.4 billion pension fund's general investment consultant, Callan, and that of other consultants advising pension plans in California, found that the Marin County plan's expected rate of return over the next 15 years would be 6.77%, including a 2.43% inflation assumption.
The system returned a net 12.34% for the fiscal year ended June 30, but only saw a 2.19% return the previous fiscal year.
The future expected rate of return takes into account the pension fund's asset allocation. It currently has a 31.5% allocation to U.S. equities, 23.4% international equities, 20.1% fixed income, 15.2% real assets and 9.9% private equity.
Mr. Wickman said employers will start paying higher contributions to account for the lower return assumptions, effective July 1, 2018.
The pension plan was 81.5% funded as of June 30, 2016. A calculation for the latest fiscal year has not yet been released.