Finance committee keeps CalPERS discount rate unchanged after 11.6% return; staff cites ALM process underway
Get AI-powered insights, summaries, and transcripts
Subscribe
Summary
After reporting a fiscal‑year investment return of 11.6% at June 30, 2025, CalPERS staff recommended maintaining the current discount rate (6.8%) and waiting for the formal asset‑liability (ALM) process rather than making a mid‑cycle cut. The committee voted to adopt the staff recommendation.
The Finance and Administration Committee voted on Sept. 16 to accept staff’s recommendation to leave CalPERS’ discount rate and assumed investment return unchanged following the system’s strong 11.6% investment performance for the 2025 fiscal year. Staff told the committee that the funding‑risk mitigation policy requires a board discussion when returns exceed the discount rate by 2% or more; this year’s results exceeded that threshold, but staff recommended no discount‑rate change while the formal asset‑liability management (ALM) review is underway.
Why it matters: The discount rate assumption (the long‑term expected investment return used to value liabilities) affects employer contribution projections and the system’s reported funded status. A change would have increased employer contribution projections; by holding the rate steady the committee favored rate stability while the ALM process continues.
Committee action: Trustee Ramon Rubalcaba moved to adopt staff’s recommendation to maintain the current discount rate; the motion was seconded and passed without objection. Trustees said they welcomed the stability for employers and acknowledged that the board can adjust the rate at any time, including after the ALM process and the periodic formal review.
Next steps: Staff reminded the committee that the ALM process (the comprehensive review) is the formal forum for considering long‑term assumption changes and that the board will have the opportunity to adjust the discount rate during that cycle or at another time if conditions warrant.