calpers

By Michael B. Marois – Apr 15, 2013 9:00 PM PT

California taxpayers may see the municipal pension contributions they fund for the California Public Employees’ Retirement System rise as much as 50 percent under a plan to fill $87 billion in unfunded obligations.

Alan Milligan, the fund’s chief actuary, recommends that the biggest U.S. pension stop spreading out losses and gains over 15 years and instead set rates based on how much is needed to reach 100 percent funding within 30 years.

The Sacramento-based pension, known as Calpers, is about 26 percent short of meeting its long-term commitments. The state and cities contributed $7.8 billion in the last fiscal year, almost four times more than a decade earlier.

In a version of pay-me-now-or-pay-me-later, Milligan said the plan “will result in a lower probability of large increases in employer contribution rates” in the future, according to a report to a Calpers committee. If approved, the plan could be presented to the full board as soon as tomorrow.

Smoothing out gains and losses over 15 years, rather than accounting for them in one year, helps to ease potential spikes in the annual contribution rates. The rates are calculated as a percentage of the payroll of the state, cities and other local governments, financed by taxes.

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