CalPERS Funding Woes: Don't Blame the Stock Market
Posted: 29 Apr 2013
Date Written: April 29, 2013
Public-sector pension plans administered by CalPERS face scrutiny because of large unfunded liabilities. The current underfunding is usually blamed on investment losses that occurred during the recent economic downturn. This paper finds that the true culprit is inaccurate actuarial forecasting, not investment performance. The paper looks specifically at the history of the City of Sunnyvale's pension plans over the past seventeen years. It finds that the normal rate of contribution was too small to keep up with the growth in liabilities, even under the assumption that investments earn their anticipated return.
Keywords: CalPERS, pension, normal cost, unfunded liability, underfunding
JEL Classification: H55, H70, H72, H74, G18, E62
Suggested Citation: Suggested Citation