CalPERS Announces New Asset Allocation for OPEB Funding

March 15, 2011 ( - 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).

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.  

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).