CalPERS keeps discount rate unchanged after strong 2025 investment returns
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Summary
After an 11.6% investment return for fiscal 2025 triggered a funding‑risk review, CalPERS staff recommended no change to the discount rate; the Finance and Administration Committee voted to maintain the current assumption.
The Finance and Administration Committee voted on Sept. 16 to maintain CalPERS’ current discount rate and expected investment rate of return after staff presented a funding‑risk mitigation analysis triggered by investment returns that exceeded the discount rate by 2% (an 11.6% return for fiscal 2025).
Michelle Nix of CalPERS staff told the committee the funding risk mitigation policy requires Board action when actual investment returns exceed the discount rate by 2% or more. Staff recommended no change while the formal asset‑liability management (ALM) process is underway, citing other existing mechanisms by which the Board can alter assumptions — either via the ALM process or outside of it. The proposed operational change under discussion would have reduced the discount rate by 0.05 percentage point; staff advised the Board to defer that step until the ALM work completes.
Ramon Rubalcaba moved to adopt the staff recommendation to maintain the current discount rate; the motion was seconded and passed with a voice vote. Trustees said the decision would provide budget and contribution stability for employers while staff continues the ALM process and observes long‑term portfolio and economic dynamics.