CalPERS is asking municipalities and other government employers to use any extra money available to boost their contributions to the pension system — a move that is tricky in the present moment for cash-strapped cities but that would yield long-term savings.
CalPERS is encouraging government employers to make extra payments to reduce their pension debt or “unfunded liability” if budgets allow, saying millions can be saved in the long run.
Annual CalPERS reports to 1,581 local government agencies this fall began showing estimates of future savings when extra payments, going beyond the required amount, are made to the pension fund.
The Newport Beach city council approved a plan for extra payments to CalPERS last month that is expected to save $47 million over 30 years, compared to the standard payment plan.
Huntington Beach approved extra payments to CalPERS last fiscal year based on an analysis by an independent actuary, Bartel Associates, showing each additional $1 million contributed to CalPERS saves $5 million over 25 years.
CalPERS estimates that about 60 employers made 111 extra payments to CalPERS last fiscal year. The new “alternate amortization schedules” in the annual reports to local governments are a response to requests from employers.
“The message we want to get out to employers is that if they have the ability, the financial means, to pay off some of this unfunded liability, it’s a smart business move and can really benefit them over the long run,” Anne Stausboll, CalPERS chief executive officer, said last week.
Read the entire report from CalPensions here.