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Consultant urges formal pension volatility reserve as CalPERS costs remain volatile
Summary
A senior consultant told the Carmel-by-the-Sea City Council that CalPERS investment returns and actuarial assumptions drive much of the city’s pension costs and recommended a Section 115 ‘pension volatility reserve’ to buffer spikes in unfunded liability payments.
Dan Matusiewicz, a senior municipal finance consultant engaged for the meeting, told the council on Jan. 12 that the city’s defined‑benefit pension obligation depends heavily on CalPERS investment returns and actuarial assumptions and that volatility in returns can produce steep unfunded actuarial liability (UAL) invoices for local governments.
“Investment earnings really make up 50 to 60% of that promised benefit,” Matusiewicz said. He noted CalPERS’ assumed rate of return has declined over decades and is currently about 6.8 percent, and that in years when CalPERS falls…
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