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League and CalPERS Staff to Request One Month Delay on Changes to Risk Pools to Brief Cities and Request Feedback

April 11, 2014
In 2003 CalPERS implemented risk pooling to protect employers with less than 100 active members against large fluctuations in employer contribution rates caused by disabilities and other unexpected demographic events.
The passage of the pension reform law (PEPRA) by the 2012 legislature effectively closed the existing nine risk pools to new members which now contain only employers with plans for “classic” (pre-PEPRA) employees. In November 2012, the CalPERS Board approved adding two new risk pools for the two formulas created by PEPRA, effective Jan. 1, 2013, but the question remained whether to maintain multiple (i.e., nine) closed pools for employers with classic employees or whether to collapse them down to a smaller number.

On Monday, April 14, CalPERS Chief Actuary Alan Milligan, will be presenting recommendations to the CalPERS Finance and Administration Committee meeting on this subject. The meeting is scheduled to begin at 1:00 p.m. or upon adjournment or recess of the Investment Committee Closed Session, whichever is later. It will be held at the Robert Carlson Auditorium, Lincoln Plaza North, 400 P Street in Sacramento. Representatives from the League will be at the meeting.
The agenda and staff reports for the meeting and other items can be found online. The staff report for agenda item 8b contains most of the relevant background information. The analysis section of the staff report (starting on page 3) explains the multiple reasons to address this issue sooner rather than later to avoid increased rate volatility and growing inequity for all participants. 
League staff and members of the League’s CalPERS working group were invited to meet with CalPERS actuaries on both Tuesday and Wednesday of this week to be briefed on the report and pose questions. Those discussions suggested that additional time is needed to adequately brief the 350 cities that are in the current risk pools.
Milligan advised the League that CalPERS staff will be recommending a one month delay in final action on the staff risk pooling recommendations. During that time, CalPERS staff will cooperate with the League in hosting a webinar on this subject so city officials can better understand the impacts of the changes on their cities. The League anticipates following up the webinar with a survey of city leaders’ opinions on the proposed options.
The League would like to thank the CalPERS staff for consulting with League representatives and agreeing to solicit input from city leaders over the next month. This is another example of the partnership that the League and CalPERS have forged over the last year.
The League also expresses appreciation to the members of its CalPERS working group who sprang into action this week to help analyze the rate pooling proposal, including Ron Bates and Mike Matsumoto of Pico Rivera, and Mary Bradley (ret.).
Additional information on the proposal and projected rate impact will be provided in the near future.

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