SSDA Today - Spring/Summer 2018 - 13

FEATURE

CalPERS
Rate
Increases
Begin to
Stabilize
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BY DERICK S. LENNOX
LEGISLATIVE COUNSEL, CAPITOL ADVISORS GROUP, LLC

T

he CalPERS Board met in December 2017 to
adopt several key investment strategies and
actuarial assumptions that will ultimately
have a direct impact on school employer contribution rates. More broadly, these decisions
are intended to improve the long-term sustainability of the CalPERS Fund, which is currently projected
to meet only 68 percent of its future obligations.
Though schools are well-aware of the projected increases
to employer contribution rates for employee retirement
costs, the CalPERS Board's actions suggest some predictability for the next several years.
The last section of this article will also explore how divestment mandates-which often arise in response to social and
political events-continue to create challenges to public
employees' retirement security.
CALPERS STAYS THE COURSE ON ITS KEY ECONOMIC
ASSUMPTION, THE "DISCOUNT RATE"

The CalPERS Board voted to adopt a four-year investment strategy that reflects a 7.00 percent "discount rate," or assumed
rate of investment returns. By voting to stay the course on our

current three-year discount rate reduction, from 7.50 percent to
7.00 percent, school employer contribution rates will not change
from current projections (see table on page 14), except to the
extent other actuarial assumptions modify the rates.
The Board examined four candidate portfolios and their
respectively risk volatility to the CalPERS Fund, as part of its fouryear Asset Liability Management (ALM) process; they selected
Candidate Portfolio C. The discount rate is the most important
economic assumption driving employer contribution rates.
This figure reflects the expected long-term rate of investment
returns (plus inflation) and helps dictate the asset allocation
adopted by the Board.
In December 2016, CalPERS voted to reduce its discount rate
over a three-year period. At the time, school stakeholders argued
the sudden change in assumptions would dramatically hike
employer contribution rates, which led the Board to delay the
schools' rate reductions by one year. The Board knew the 2017
ALM cycle would provide another opportunity to make further
adjustments, but ultimately, December's vote will not impact
the discount rate phase-in already in place.
The discount rate modification will first impact school
employers and employees hired after January 1, 2013, starting
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13


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Table of Contents for the Digital Edition of SSDA Today - Spring/Summer 2018

EXECUTIVE DIRECTOR’S COLUMN
Student Free Speech: School Officials’ Response to Student Social Media Comments, “Likes” and Followers
CalPERS Rate Increases Begin to Stabilize
New School Nutrition Laws Take Effect
Website Accessibility: How an Educational Entity Can Ensure its Website is Accessible to those with Disabilities
After Years of Debate, Special Education Credential Seems Destined for Changes
School Board Elections and the California Voting Rights Act: Districts Shift from At-Large to District-Based Elections
ADVERTISER’S INDEX
SSDA Today - Spring/Summer 2018 - Intro
SSDA Today - Spring/Summer 2018 - cover1
SSDA Today - Spring/Summer 2018 - cover2
SSDA Today - Spring/Summer 2018 - 3
SSDA Today - Spring/Summer 2018 - 4
SSDA Today - Spring/Summer 2018 - 5
SSDA Today - Spring/Summer 2018 - EXECUTIVE DIRECTOR’S COLUMN
SSDA Today - Spring/Summer 2018 - 7
SSDA Today - Spring/Summer 2018 - 8
SSDA Today - Spring/Summer 2018 - 9
SSDA Today - Spring/Summer 2018 - Student Free Speech: School Officials’ Response to Student Social Media Comments, “Likes” and Followers
SSDA Today - Spring/Summer 2018 - 11
SSDA Today - Spring/Summer 2018 - 12
SSDA Today - Spring/Summer 2018 - CalPERS Rate Increases Begin to Stabilize
SSDA Today - Spring/Summer 2018 - 14
SSDA Today - Spring/Summer 2018 - New School Nutrition Laws Take Effect
SSDA Today - Spring/Summer 2018 - Website Accessibility: How an Educational Entity Can Ensure its Website is Accessible to those with Disabilities
SSDA Today - Spring/Summer 2018 - 17
SSDA Today - Spring/Summer 2018 - 18
SSDA Today - Spring/Summer 2018 - After Years of Debate, Special Education Credential Seems Destined for Changes
SSDA Today - Spring/Summer 2018 - 20
SSDA Today - Spring/Summer 2018 - School Board Elections and the California Voting Rights Act: Districts Shift from At-Large to District-Based Elections
SSDA Today - Spring/Summer 2018 - ADVERTISER’S INDEX
SSDA Today - Spring/Summer 2018 - cover3
SSDA Today - Spring/Summer 2018 - cover4
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