Atherton committee briefed on CalPERS— ALM review; discount rate recommendation remains 6.8%

Town finance staff briefed the committee on CalPERS— ongoing asset-liability management (ALM) review and its potential impacts on local pension costs.

Robert (town staff) summarized the ALM process and the CalPERS recommendation to adopt a total-portfolio (full-portfolio) governance model that would set a 75/25 reference mix and an active-risk limit (reported as 400 basis points). Staff said the ALM workstream proposes keeping the discount rate at 6.8% in the near term while giving managers more tactical latitude under the new approach.

Committee members pressed staff on the purpose and risk of the change. One member asked whether the new framework creates a "black box" of active decision-making; Robert said the goal is to manage total risk and that the policy is intended to balance employer-cost volatility with improved return prospects. Staff noted the ALM timeline: stakeholder meetings earlier in the year, a board decision anticipated in November, policy updates by March, and implementation effective the following July, with local budgetary impacts lagged into future evaluation cycles.

The committee also reviewed the town—s unfunded actuarial liability (UAL) metrics and recent one-time payments to reduce UAL ($5 million in 2021 and $3 million this year). Staff reported pool-wide funded status near 79% and explained how investment gains, losses, and assumption changes feed into employer costs and amortization schedules.

Members asked staff to continue monitoring CalPERS developments and to provide sensitivity analyses showing the budgetary effects of changes to the discount rate or assumption updates.