The changes the California Public Employees Retirement System (CalPERS) made this week are prudent steps that will improve the system's funded ratio and the predictability of payments for employers over the long term. However, they will also add to already rising budgetary pressure for the state and participating local governments.

CalPERS modified its actuarial smoothing and amortization methods with the goal of improving long-term pension sustainability and reducing annual contribution volatility. We expect increased budget pressures to be greatest for participating governments that face high pension contributions relative to their budgets or that have limited flexibility to offset rising contribution requirements.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.