Administration April 15, 2015

CalPERS Adjusts Contributions for Increased Longevity

"As the fund matures, and the retired population grows, it's important that the rates reflect the changing demographics of our members," says Richard Costigan, chair of the CalPERS Finance and Administration Committee.
Reported by

The California Public Employees’ Retirement System (CalPERS) Finance and Administration Committee recommended the Board of Administration adopt new pension contribution rates for State of California and school employers that are less than originally projected, but up from the 2014-15 Fiscal Year (FY).

The changes in the rates for the 2015-16 FY are driven primarily by payroll growth, salary increases, and retirees living longer.

Get more!  Sign up for PLANSPONSOR newsletters.

The state’s contribution towards pensions is estimated to increase by $487 million from $4.2 billion to $4.7 billion from the previous fiscal year, while the estimated increase for the schools pool will rise to $111 million from $1.2 billion to $1.3 billion.

The CalPERS Board has adopted several actions to reduce risk to the fund and ensure long-term stability, including new demographic assumptions in 2014 and a change to amortization and smoothing policies in 2013.  

The state contributions are increasing due to the second year of the new phased-in demographic assumptions that account for public employees living longer; the implementation of the new smoothing policies, and because the payroll of state employees covered under CalPERS has increased by about 7% over the previous year. The schools pool contribution is increasing as a result of the new smoothing policies and also as a result of an increase of about 8% in the payroll of school employees covered by CalPERS. School rates will reflect the new assumptions beginning in the 2016-17 FY.

“As the fund matures, and the retired population grows, it’s important that the rates reflect the changing demographics of our members,” says Richard Costigan, chair of the Finance and Administration Committee. “Pension plans require stable funding, and the new rates incorporate the Board’s actions over the last several years that will reduce rate volatility in the long term.”

The state pension plan is approximately 72% funded, while the school plan stands at approximately 86%, as of June 30, 2014. This represents an approximately 6% increase for both plans over the previous fiscal year. The total CalPERS Fund is estimated at 77% funded as of June 30, 2014. 

Compliance April 14, 2015

Fiduciary Rule Review Too Short, FSI Says

The Department of Labor has shared long-awaited rule language that will fundamentally impact the way plan sponsors work with plan advisers, touching off a strong industry provider response.
Reported by

As expected, financial services advocacy groups have plenty to say on the proposed fiduciary rule by the Department of Labor (DOL).

The DOL rule, now in the comment period, addresses how financial advisers and broker/dealers can sell investment products and deliver investment advice to consumers under the Employee Retirement Income Security Act (ERISA).

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

The Financial Services Institute (FSI) expressed disappointment with the amount of time—50 days—that the Office of Management and Budget (OMB) took to review the rule, which they called “highly controversial.” The rule could negatively impact millions of investors, the FSI said in a statement that cited the office taking an average 117 days to review DOL rules.

“Over 200 bipartisan members of Congress have told the DOL and the administration to carefully consider the impact of the proposal on investor access to retirement advice, products and services,” Dale Brown, president and chief executive of FSI, said in a statement. “Most expected the OMB would take as long as necessary to ensure that any final rule avoids serious unintended consequences for Main Street investors. We have serious concerns that could have happened in only 50 days.”

The Financial Planning Coalition called the proposed rule an important step in updating regulation going back to ERISA to provide greater protections for Americans and their retirement nest eggs. “The financial advice Americans are given related to their retirement savings should always be squarely in their best interest, and should not undermine their efforts to meet financial goals,” a coalition spokesman said in a statement. “The DOL’s rulemaking should proceed without further delay to full and open public evaluation and comment.”

The Financial Planning Coalition comprises the Certified Financial Planner Board of Standards (CFP Board), the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA).

FSI advocates on behalf of independent financial advisers and independent financial services firms.

«