Administration March 15, 2011

CalPERS Announces New Asset Allocation for OPEB Funding

March 15, 2011 (PLANSPONSOR.com) - The Investment Committee of the California Public Employees’ Retirement System (CalPERS) has approved a new asset allocation model for the California Employers’ Retiree Benefit Trust (CERBT).
Reported by

Employers prefunding employee retiree health benefits and other post-employment benefits (OPEB) through CERBT will be able to choose from one of three approved portfolios to maximize expected returns depending on the employer’s risk profile. According to a press release, the new portfolios will now include inflation-linked bonds and commodities, along with global equities and real estate investment trusts. The underlying investment portfolios will be selected by CalPERS professional investment staff.  

The plan now goes before the CalPERS Benefits and Program Administration Committee, which must approve the new model before it can be implemented.  

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

The CERBT was created in 2007 by CalPERS to provide California public employers with a low-cost, high-value investment vehicle for prefunding future OPEB costs. The fund earned 13.4% on investments in 2010, and since its inception has consistently outperformed its benchmark, the announcement said.   

As of December 31, 2010, the CERBT had 279 participating public agencies and about $1.6 billion under management.  

Following the release of a new actuarial report that shows California faces a $59.9 billion shortfall in OPEB funding, California State Controller John Chiang urged state agencies to start pre-funding their obligations (see CA Controller Urges Pre-Funding of OPEB Obligations).
Benefits March 15, 2011

DC Group Calls for Auto Enroll Targets Increase

March 15, 2011 (PLANSPONSOR.com) – Defined contribution plans implementing automatic enrollment were able to increase plan participation rates by nearly 30%, according to a new study.
Reported by

A news release from the Defined Contribution Institutional Investment Association (DCIIA) said the majority of plan participants in its research viewed automatic enrollment as a distinct benefit. The Association says that by increasing their automatic default contribution rates and automatic contribution escalation policies, plan sponsors can measurably help their auto-enrolled participants meet their retirement income needs.

“The fact that many plans’ automatic features are not designed to drive contribution rates high enough to secure the retirement future of their participants suggests that this may be the next big item on the plan sponsor agenda,” said Catherine Peterson, DCIIA Research Committee member and Director of Retirement Insights at J.P. Morgan Asset Management, in the news release. “DCIIA findings support defaulting employees into the plan at the plan’s match rate and then escalating contribution rates annually 2% per year to reach a 10% or higher savings level as rapidly as possible.”

Get more!  Sign up for PLANSPONSOR newsletters.

Among the findings :

  • Plan sponsors believe participants should earmark at least 10% or more of their earnings for retirement savings.
  • Of the plan sponsors that have adopted automatic enrollment, more than half have opted for a default contribution savings rate of 3%.
  • Only about one-third of plan sponsors offering automatic enrollment combine it with automatic contribution escalation, with the vast majority (89%) increasing contribution rates at 1% per year.
  • The majority of plan sponsors (70%) that have adopted automatic enrollment believe participants hold favorable views of the feature.

The poll was conducted among 101 large plan sponsors during the third quarter of 2010. More information is at www.dciia.org.

«