CalPERS Summer Update: What’s Changing and What Public Agencies Should Be Thinking About Now

As CalPERS prepares to release a new round of actuarial reports and finalizes its latest

Experience Study, public agencies across California are facing a rare window of opportunity.

Strong investment performance is poised to ease employer contribution rates in the years

ahead—yet at the same time, looming assumption changes and legislative proposals could

add new layers of complexity and cost.

This Client Alert outlines the most important developments, what they could mean for your

agency, and what steps can be taken now to ensure long-term sustainability.

Actuarial Reports Reflect Positive Returns

The valuation for the fiscal year ending June 30, 2024, will reflect a 9.5% investment return.

These results will be reflected in valuation reports expected to appear in agency portals any

day now. Employer contribution rates are expected to ease beginning in FY 2026–27. As in

the past, the impact will be phased in over a 20-year period with a five-year ramp-up.

In addition, CalPERS just announced a preliminary return of 11.6% for FY 2024–25, which

will be factored into next year’s valuations and begin impacting contributions in FY

2027–28.

Together, these back-to-back gains offer agencies a chance to revisit their pension strategy

while the outlook is favorable.

Experience Study in Progress—Assumption Changes Expected

CalPERS is nearing completion of its four-year Experience Study. The result may be changes

to key actuarial assumptions, including inflation rates, mortality projections, retirement age

trends, and long-term investment return expectations.

Unlike investment gains or losses, assumption changes are not phased in (i.e., no ramping).

They are immediately and fully amortized over 20 years and can significantly increase both normal cost and the unfunded actuarial liability (UAL). For PEPRA members, higher

employer normal costs may also trigger increased employee contributions.

Legislative Changes Could Impact Safety Plans and PEPRA Cost Sharing

A pending legislative proposal could further complicate the landscape by weakening cost-

sharing protections under PEPRA and increasing employer costs, especially for safety

classifications. While the proposal is still in early stages, its potential impact on employer

costs warrants close attention.

Key Takeaways for Public Agencies

While recent investment gains are a positive development, they do not fully offset the

projected peak in costs still expected around FY 2028–29 due to the 2022 investment loss.

Agencies should take this opportunity to revisit and strengthen their long-term pension

strategy:

- Can recent gains be used to reduce future contribution spikes?

- Is your amortization schedule optimized to control long-term interest costs?

- Have you explored a Section 115 Trust or formal Pension Management Plan (PMP)?

- Are you prepared for potential cost increases from assumption changes or legislation?

A Structured Framework for Proactive Planning

At Weist Law, we’ve developed a Pension Cost Management Toolkit to help agencies

proactively manage CalPERS costs using a tiered framework of strategies:

Core Strategies

- Pension Management Plans and Pension Policies

- Section 115 Trust adoption (pension and/or OPEB)

- Annual monitoring and alignment with CalPERS schedules

Advanced Strategies

- CIP-to-UAL exchange mechanisms (reallocating project funds to reduce high-interest UAL)

- Targeted prepayments of the most expensive UAL bases

- Amortization base restructuring to reduce long-term costs and interest expense

Strategic Enhancements

- Rate stabilization reserves

- Dual-purpose 115 Trusts (pension + OPEB)

- Governance continuity planning for board and staff transitions

- Integration with labor agreements and long-term financial plans

Weist Law’s Role

We work with cities, counties, school districts, water and wastewater districts, fire districts,

and other local agencies to implement these strategies. Our support includes:

- Designing and adopting Pension Management Plans and Policies

- Launching and maintaining 115 Trusts

- Aligning contributions with CalPERS schedules and reserve targets

- Modeling funding scenarios and interest cost savings

- Coordinating long-term financial planning with pension goals

Let’s Continue the Conversation

If you’d like help interpreting your agency’s next valuation report—or if you’re ready to

take a more strategic approach to pension planning—please reach out. We’re happy to

schedule a consultation or policy review at your convenience.