Updated with correction
Employer contribution rates are expected to continue to rise over the next few years, following CalPERS' adoption of a lower 7% long-term rate of return, actuarial staff for the $401.4 billion Sacramento-based pension plan told the board Tuesday during an education session.
Lowering the discount rate, which stood at 7.5% in 2016, means plans will see increases in both normal costs — the cost of pension benefits accruing in one year for active members — and accrued liabilities, said Randall Dziubek, deputy chief actuary for California Public Employees' Retirement System.
"We're hearing from employers that they are having trouble paying" the increased contributions, he said.
CalPERS has been working with employers to help them manage the increased employer costs, including allowing employers to prepay contributions.
Some employers are asking CalPERS to discontinue a risk-mitigation policy that was adopted in 2016, noted California Controller Betty T. Yee, a CalPERS board member, during the meeting. Under the risk mitigation policy, should CalPERS' returns exceed its current 7% discount rate by 2 percentage points or more, it would trigger a 5 basis-point drop in the discount rate, from 7% to 6.95%, resulting in higher employer contributions, said Fritzie Archuleta, the fund's deputy chief actuary, during the meeting.
"I don't want to jinx it, but it looks like it might be in the cards for this year," Ms. Archuleta said.
If it is triggered, it would be the first time since the policy was adopted, she said.
The matter is expected to be discussed at a future meeting.
CalPERS next asset-liability study is expected to start in late fall 2021, she also said during the session.