CalPERS Could Become Plan Provider

July 28, 2005 ( - CalPERS, the largest public pension fund in the US, may soon become a retirement plan provider for outside employers, fund officials said this week.

The CalPERS retirement products would be sold to government agencies in the same way that mutual fund firms currently market K plan products to companies, according to a Reuters news report.

CalPERS’ plans would be managed by its investment staff, whose reputation would be a selling point, fund officials said. CalPERS already manages pension benefits for 1.4 million California public employees and enjoyed a 12.7% return on its investments in the year ended in June.

If CalPERS takes the step, it would be following in the footsteps of TIAA-CREF, which started as an educators’ retirement system for teachers but now also offers its products to other markets, including the general public.

At the same time, CalPERS officials said they were bracing for a renewed political fight over whether its new members should be placed into such defined contribution retirement accounts instead of the defined benefit plans CalPERS currently manages for state employees.

While CalPERS has opposed efforts by California Gov. Arnold Schwarzenegger to place new state workers into 401(k)-like plans, CalPERS Chief Executive Fred Buenrostro said public pension funds will have to offer some form of defined contribution accounts so members may supplement their defined benefit plans.

If Schwarzenegger tries to advance a ballot measure to place new public employees in 401(k)-like accounts, CalPERS would oppose him, said Feckner. “We’ll be right there to have the debate,” Feckner told Reuters. “We still don’t feel that scrapping defined benefit plans for defined contribution plans makes good sense.”