CalPERS incurs much higher administration costs than its peers, according to an analysis by CEM Benchmarking.
The firm measured CalPERS’ administrative costs against four other large, complex public pension plans. CalPERS paid almost double the expenses of its peers.
From the Sacramento Business Journal:
CalPERS had a pension administration cost of $215 per member — far above the peer average of $108, according to Cost Effective Measurement Benchmarking, a Canadian firm that compares public pension funds across the nation and globe.
The findings, first reported in Calpensions.com, also found that CalPERS has the highest “complexity” in the firm’s global database of 75 pensions, which can impact cost and service.
The CalPERS total service score, however, was 63, very close to the peer average of 66.
A primary reason for the higher complexity is customization. CalPERS has five cost-of-living adjustment options. Employers also can change contribution rates for new hires, allowing for an infinite number of possible plans.
The complex system requires more administrative staff, CEM representatives found, which can include legal advisers, auditors and accountants.
Those findings from two years ago are already thought to be somewhat outdated, however, because the fund has completed a computer system that was new at the time of the measurement. Pension reforms were also taking extra time and money at the time of the measurement. CalPERS expects its costs have decreased and continue to drop, and service scores to rise.
The other funds CalPERS was measured against:
– The California State Teachers’ Retirement System;
– The Florida Retirement System;
– The New York State and Local Employee Retirement System; and
– The Teachers Retirement System of Texas.
You can view the full CEM presentation here.