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CalPERS actuarial valuations show improved funded ratios; payroll growth lifts contribution dollars
Summary
06/30/2024 valuations for state plans and the schools pool showed funded statuses up from the prior year, but required employer contribution dollars rose because payroll grew faster than expected; trustees approved the recommended rates for FY2025–26.
CalPERS actuaries presented the June 30, 2024 annual valuations for the state plans and the schools pool at the Finance and Administration Committee on April 8. The valuations set employer and employee contribution rates for fiscal year 2025–26.
Actuarial staff reported a money‑weighted investment return of 9.5% for fiscal 2023–24 and aggregate funded ratios improved. For the five state plans combined (miscellaneous, industrial, safety, peace officers & firefighters, and CHP), the funded ratio rose to 75.3% from 72% in the prior valuation. The actuarial accrued liability for the state plans was reported at about $260 billion with market value of assets of roughly $195 billion, leaving an unfunded liability around $64 billion.
Despite improved funded ratios, required employer contributions for FY2025–26 were projected higher in dollars — approximately $9.3 billion, an increase of about $668 million — largely because payroll growth exceeded expectations. Actuaries explained that when payroll rises materially, the UAL rate (dollars divided by payroll) can fall even as the dollar contribution required to amortize the UAL increases.
For the schools pool, the funded ratio rose to 69.6% from 67.5%, with the pooled employer contribution rate proposed at 26.81% for FY2025–26 (down 24 basis points from the current year). The schools projection showed similar dynamics: payroll growth and membership shifts to PEPRA decreased the normal cost rate but overall dollar contributions increased because of larger payroll bases.
Actuaries noted deferred state contributions of $337 million that were paid after the valuation date; the Department of Finance opted to apply the budgetary savings to FY2026–27 rather than reduce FY2025–26 rates. Several trustees asked technical questions about demographic experience, payroll growth, and the projected schedule for ramping in the 2022 investment loss; the committee approved the recommended employer and employee rates for both the state plans and the schools pool.
