CalPERS chief actuary Alan Milligan, who is retiring, told top fund officials on Tuesday to consider lowering the fund’s discount rate to 7.25% by February.
CalPERS’ discount rate currently sits at 7.5%.
Milligan’s most recent report predicts a period of lower (6-ish percent) annual returns over the next ten years.
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Alan Milligan, who is stepping down as chief actuary of the California Public Employees Retirement System, told the agency’s directors that investment returns continue to come in lower than expected and the pension fund should recalibrate its long-term investment prediction — the “discount rate” — no later than February.
“If you were to adopt a lowering of the discount rate now, that would buffer the impact” on state and local government budgets, Milligan said at the meeting in Sacramento.
Milligan told the CalPERS directors that they should consider lowering the long-term discount rate to 7.25%, though his report on Tuesday projected the coming decade will only see an average return of 6.12%.
“The capital markets are simply not expecting to return as much in the next 10 years or so as they have historically,” Milligan said.