The $186bn (€139bn) California Public Employees’ Retirement System (Calpers) has provisionally agreed to smooth employer contributions by viewing the changes in asset values over a 15-year period instead of three years.
Calpers would be able to spread the changes in asset gains and losses over 15 years and widen the limits for the actuarial view of an investment's market value from 90% to 110% to 80% to 120%.
The plan would change the calculation of the annual contribution amount by establishing a rolling 30-year period. The proposal was a response to a year-long consultation with employers unhappy with recent high contribution levies after the stockmarket falls since 2000. Calpers is also examining whether to set up a ‘rainy-day’ fund to aid employers in periods of investment losses.
The smoothting proposal was agreed by Calpers’ board of administration on Wednesday night and will now go for final approval at the full board next month.
The move goes against plans in Europe to ‘realistically’ report market value changes in investments and thereby cause more rapid swings in companies’ reports and accounts, which affects contribution rates. This mark-to-market is part of the International Financial Reporting Standards currently being implemented in Europe.
Separately, Calpers has appointed Charles Valdes as chair of its investment committee; a position he had held in 2001. George Diehr was elected vice-chairman.