Atherton finance committee hears CalPERS outlook; $3 million prepayment shortens full-funding timeline
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Summary
TrueComp consultant Ira Summer told the Atherton Finance Committee that recent strong CalPERS returns and the town's $3 million discretionary payment to the safety plan materially improve projected funded status and could accelerate 100% funding by roughly two to three years in modeled scenarios.
The Atherton Finance Committee received a detailed briefing on the town's CalPERS pension liabilities and modeling options during a presentation by Ira Summer of TrueComp. Summer told the committee the key budgeting metric is simple: ‘‘the money coming into CalPERS is supposed to be enough covered money going out of CalPERS.’’
Summer walked members through how benefit formulas differ for classic hires and PEPRA hires, how CalPERS calculates normal cost and amortizes unfunded liabilities, and why safety plans typically show different funded percentages than miscellaneous plans. He said Atherton's miscellaneous plan stood near the low 70s in comparable agencies while the safety plan was stronger; in the town's data the miscellaneous plan was roughly 69.9% funded and the safety plan roughly 82% funded as of the June 30, 2024 valuation that underpins FY 26-27 contributions.
Summer highlighted two recent developments that affect Atherton's projections: CalPERS' recent preliminary and final investment returns (preliminary 11.6% and final 12.1% for the year ending 6/30/2025 in his presentation) and a $3 million one-time discretionary contribution Atherton made to its safety plan in June 2025. Using the town's census and benefit data in TrueComp's modeling tool, Summer said the $3 million contribution reduces the unfunded actuarial liability immediately and, under his amortization assumptions, pushes the projected 100% funding date earlier by roughly two to three years compared with the baseline projection without the payment.
On assumptions, Summer described recent CalPERS technical changes: no change to the discount rate (6.8% in his presentation) but modest increases to long-run inflation and wage-growth assumptions and ongoing smoothing rules and five-year ramps that phase big gains and losses into contribution rates over time. He cautioned that while strong investment years reduce future employer demands, a steep market correction can quickly increase required contributions because of sequence-of-return risk and the way amortizations are structured.
Committee members pressed on alternatives to a large lump-sum CalPERS prepayment. Summer explained trade-offs between sending funds directly to CalPERS and holding reserves in a Section 115 pension trust: the trust gives the town more control and liquidity but generally achieves lower long-term returns and defers the formal reduction in CalPERS unfunded liability until money is moved into CalPERS. He recommended stress-testing budgets with a few downside scenarios and showed committee members how their data and hypothetical contribution strategies change the town's projected contributions and funded percentage in the software dashboard.
The presentation concluded with committee discussion about whether to continue periodic modeling and to bring Summer or the modeling tool back for an annual review to support budgeting and multi-year planning. Summer offered to run additional scenarios with staff as the committee develops budgets and evaluates reserve policy.
