Moody's Investors Service said it has upgraded the issuer ratings of California Public Employees Retirement System (CalPERS) and California State Teachers Retirement System (CalSTRS) to Aa2 from Aa3.
The issuers' long-term rating outlooks remain stable. Moody's has also affirmed CalPERS and CalSTRS short-term issuer ratings at P-1.
The upgrade of CalPERS and CalSTRS issuer ratings reflect the improved credit profile of the retirement plans' (Plans) main sponsor, the state of California, as well as the recent actions taken by both Plans to remediate their funding gaps over time.
The ratings are further supported by the high quality of the Plans' credit enhancement programs and the maintenance of excellent liquidity relative to total credit enhancement program commitments. The short-term nature of the credit enhancements compared to the long-term pension obligations drives the excellent liquidity coverage of outstanding credit enhancement commitments.
