The CalPERS, Terminated Agency Pool lacks the ability to get more money from employers and taxpayers if investments expected to fund roughly 67% of pension costs fall short.
That coupled with the increased number of agencies exploring the idea of terminating their participation in CalPERS lead the Board of Directors to approve a sharp increase in the cost of terminating pension plans.
Currently the Terminated Agency Pool is responsible for the pensions of 4700 members of 118 terminated plans. Two years ago the terminated pool had assets of $144m, liabilities of $60m and annual pension payments of $54m.
A 3.8 percent bond-based earning rate will be assumed when calculating the money an employer must set aside to offset future obligations, down from the 7.75 percent used when forecasting earnings, drastically increasing the cost of termination.
The new 3.8 percent earning rate will increase the terminated pool’s liabilities from $60m to $92m.