CalPERS committee approves midyear budget increase and adopts updated actuarial assumptions
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Summary
CalPERS’ Finance & Administration Committee approved a $237.6 million midyear budget increase and adopted new actuarial assumptions after a presentation showing strong 2024–25 returns but a small projected reduction in the funded ratio; staff outlined employer and member communication plans for contribution impacts.
CalPERS’ Finance & Administration Committee approved a proposed midyear budget revision on Nov. 18 that increases the 2025–26 spending plan by $237.6 million, or 8.7%, driven largely by higher external investment management fees and modest operating cost increases.
Will Schofzma, a CalPERS budget staff member, told trustees the midyear update assumes a $220.8 million rise in investment manager and third‑party fees — including $217.5 million in external management fees — and a $16.8 million increase in operating costs to cover compensation changes, board‑approved salary adjustments and an expanded LED lighting scope at Lincoln Plaza North.
The committee approved the midyear budget by voice vote after trustees asked staff to confirm that the fee increases reflect contract changes, asset growth and updated performance fee projections.
At the same meeting the board approved the 2024–25 basic financial statements. Janie Rajasthanse reported the Public Employees’ Retirement Fund’s net position stood at $563.0 billion as of June 30, 2025, and the money‑weighted rate of return for the year was 12.1%.
Trustees also considered the actuarial office’s quadrennial experience study and a set of recommended demographic and economic assumption changes. The actuarial team recommended keeping the discount rate unchanged at 6.8%, increasing inflation to 2.5% and wage inflation to 3.0%, and adopting modest updates to salary‑scale assumptions. Staff estimated the combined effect would lower the reported funded ratio by about 0.3 percentage points (from 79% to approximately 78.6% as of June 30, 2024) and could raise employer contribution rates by varying amounts across benefit formulas.
Actuarial staff explained potential impacts to PEPRA (Public Employees’ Pension Reform Act) members and said communications to employers and members are planned, including updates in Pension Outlook and web resources to show employer‑level impact. Trustees voted to adopt the recommended assumption changes; staff said the changes would go into effect for valuations beginning with the June 30, 2025 data and will inform 2026–27 contribution rates.
The committee’s actions today were procedural approvals of the midyear budget and financial reports and the formal adoption of new actuarial assumptions; trustees noted staff will continue outreach to employers and members about contribution impacts and timing.
