CalPERS Offers Pre-Funding Trust to State Public Employers

Public employers can choose how much to contribute towards other post-employment benefits (OPEB) costs and choose from two asset allocations.

To help state and public agencies within the state manage their other post-employment benefits (OPEB) costs, the California Public Employees Retirement System (CalPERS) has implemented a trust fund that allows them to pre-fund the costs.

Established by Senate Bill 1413, participation in the California Employers’ Pension Prefunding Trust (CEPPT), is voluntary and mirrors the functions of CalPERS’ California Employers’ Retiree Benefit Trust (CERBT) Fund by providing employers with the flexibility to determine the amount of their contribution, risk tolerance and time horizon.

The fund also allows employers two diversified strategic asset allocations with low and moderate risk levels that are expected to yield a net investment return of 4% and 5%. It charges a low annual investment fee of 25 basis points. Its overall goal is to improve retirement security for active employees and retirees.

“This new fund gives public agencies an opportunity to save and plan ahead,” says Marcie Frost, CEO of CalPERS. “Prefunding is a smart and efficient approach for employers to mitigate rate increases and temper contribution volatility. Benefits are only as secure as our employers’ ability to pay them.”

Any state and local public agency that offers a defined benefit (DB) plan to their employees can participate; they do not have to contract with CalPERS for their pension plan to participate in the program. OPEB includes health, vision and dental benefits, as well as life insurance.