The State Worker

Chronicling civil-service life for California state workers

March 10, 2011
How CalPERS' rate change would affect 'air time' purchases

The Bee's Dale Kasler has reports in this story that CalPERS Board of Administration will consider lowering its investment return expectations from the current 7.75 percent to 7.5 percent. As Dale notes, the change could have significant implications for what the state pays into the fund if the fund's Board of Administration adopts the new rate at its meeting next week.

But there's another impact -- this one for some individual CalPERS members -- in the staff report to the fund's Benefits and Program Administration Committee, which meets on Tuesday:

For service credit purchases under the "present value" method, the use of the new discount rate will apply to all applications postmarked on or after March 17, 2011.

So what does that mean? Higher "air time" costs for members. Here's what the staff analysis concludes:

Note that lowering the discount rate to 7.5% will result in an increase in cost for members to purchase service. The cost for service credit purchases under the present value method is expected to increase between 2% and 5%.

Click here to read the full CalPERS staff report.

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About The State Worker

Jon Ortiz The Author

Jon Ortiz launched The State Worker blog and a companion column in 2008 to cover state government from the perspective of California government employees. Every day he filters the news through a single question: "What does this mean for state workers?" Join Ortiz for updates and debate on state pay, benefits, pensions, contracts and jobs. Contact him at (916) 321-1043 and at jortiz@sacbee.com.

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