CalPERS, the largest public pension fund in the U.S., has reportedly spent the past few months working on a plan to invest a higher percentage of its assets into conservative investments such as bonds.
Additionally, the plan – which would be implemented gradually over many years – would require higher contributions from public employees hired after 2013.
The LA Times reports:
Under the proposal, CalPERS would begin slowly moving more money into safer investments such as bonds, which aren’t usually subject to the severe losses that stocks face.
Because the more conservative investments are expected to reduce CalPERS’ future financial returns, taxpayers would have to pick up even more of the cost of workers’ pensions.
Most public workers would be exempt from paying any more. Only those workers hired in 2013 or later would have to contribute more to their retirements under the plan.
The changes would begin moving CalPERS — which provides benefits to 1.7 million employees and retirees of the state, cities and other local governments — toward a strategy used by many corporate pension plans. For years, corporate plans have been reducing their risk by trimming the amount of stocks they hold.
The plan is the result of CalPERS’ recognition that — even with significantly more contributions from taxpayers — an aggressive investment strategy can’t sustain the level of pensions promised to public workers. Instead, it could make the bill significantly worse.
At an Aug. 18 meeting, CalPERS staff members laid out their plan for the fund’s board, saying the changes would be made slowly and incrementally over the next several decades.
CalPERS manages over $300 billion in assets for its 1.7 million members.
