CalPERS Keeps Discount Rate Steady

March 15, 2011 ( – The Benefits and Program Administration Committee of the California Public Employees’ Retirement System (CalPERS) Board of Administration has recommended the fund keep its discount rate at 7.75%.

A CalPERS news release said the full board is scheduled to consider the recommendation on Wednesday.

“According to our actuaries, maintaining our discount rate at its current level is prudent and reasonable,” said Rob Feckner, CalPERS Board President and Vice Chair of the Board’s Benefits and Program Administration Committee, in the news release. “Given the current economic environment, we believe keeping our discount rate unchanged is in the best interest of our members, employers, and taxpayers.”

According to the announcement, the committee made its decision following a comprehensive review and adjustment of the pension fund’s asset allocation and a detailed actuarial analysis.

As a part of its analysis, CalPERS staff generated 10,000 investment performance scenarios covering the next 60 years. The analysis concluded that expected returns will average 7.38% in the first 10 years and 8.50% in years 11 and beyond, which resulted in a 7.95% average annual return over 20 years or more.

Based on the historical performance of the different asset classes and sophisticated computer analysis, the updated asset allocation is expected to produce an average annual return of 7.95% over the next 20 years or more, with a 50-50 chance that returns will be either higher or lower, CalPERS said.