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Is Calpers playing with fire?
Posted by: freeradical
Date: November 16, 2021 01:11AM
Its seems to me that reducing payouts would be the safe play, but what do I know.



Quote

The board of the nation’s largest pension fund voted Monday to use borrowed money and alternative assets to meet its investment-return target, even after lowering that target just a few months ago.

The move by the $495 billion California Public Employees’ Retirement System reflects the dimming prospects for safe publicly traded investments by households and institutions alike and sets a tone for increased risk-taking by pension funds around the country.

Without changes, Calpers said its current asset mix would produce 20-year returns of 6.2%, short of both the 7% target the fund started 2021 with and the 6.8% target implemented over the summer.


[www.wsj.com]
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Re: Is Calpers playing with fire?
Posted by: Michael
Date: November 16, 2021 06:01AM
I don't know about CA, but in GA they can't reduce public pensions once awarded. They can modify the amount of increases and they can adjust the relative contributions of employees and employers while working. In my career, the amount of my monthly contribution went up several times and once went down. It was directly related to the health of our Teacher Retirement System. Right now GA is doing well, likely because the market has done great and also the legislature pumped money into the system several years in a row when it wasn't doing great a few years ago.
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Re: Is Calpers playing with fire?
Posted by: Paul F.
Date: November 16, 2021 10:12AM
I've understood for a decade that the likelihood of CalPERS still being solvent by the time I retire was slim, at best.

I'm waiting for them to say something like "Well, if you have 'x' dollars in savings, or other investments, we're just not going to pay out for you...". Or similar "screw you, you have money, you filthy capitalist" move.



Paul F.
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A sword never kills anybody; it is a tool in the killer's hand. - Lucius Annaeus Seneca c. 5 BC - 65 AD
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Good is the enemy of Excellent. Talent is not necessary for Excellence.
Persistence is necessary for Excellence. And Persistence is a Decision.

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Eureka, CA
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Re: Is Calpers playing with fire?
Posted by: Markintosh
Date: November 16, 2021 03:28PM
I am glad that public school teachers in California have their own retirement system apart from CalPERS. Ours (CalSTRS) seems to be on a slightly better track...



“Live your life, love your life, don’t regret…live, learn and move forward positively.” – CR Johnson
Loving life in Lake Tahoe, CA
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Re: Is Calpers playing with fire?
Posted by: bfd
Date: November 16, 2021 08:41PM
Employers might be able to negotiate reduced payouts to new hires, but anyone who's already in the system gets whatever they were promised when they were first hired on. It used to be that the value of health benefits was used to increase the "base pay" of many employees, and that went away in 2013.

Those hired in recent years are already getting less than their more seasoned co-workers as a result of some critical legislation in 2013 named Public Employees’ Pension Reform Act (PEPRA), they're paying more into the system than older workers, they're having to put their own money away for retirement, and they can't retire with full benefits as early as more seasoned employees. Good overview in the LA Times back then:

[www.latimes.com]

This is true for both CalSTRS and CalPERS. 2% at 60 became 2% at 62 on Jan. 1, 2013. (Safety personnel like police and firefighters can retire at 57 with a 2.7% benefit while teachers can retire at up to 2.4% with sufficient years on the job.)

PEPRA was designed to reform both public employee retirement systems in Cali. More stability comes from increased employee (and employer) contributions (which have wreaked absolute havoc in lots of school district and city/county budgets) and changes in how the pension funds are administered.

But all it takes is for some random financial 'event' like inflation, stock-market "adjustment" or other significant event like Covid-19, to change the dynamics completely. And it looks like we might've almost just hit the trifecta …



Edited 1 time(s). Last edit at 11/16/2021 08:52PM by bfd.
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