What is the primary function of the California Public Employees' Retirement System (CalPERS)?

CalPERS is an agency within the California executive branch responsible for managing pension and health benefits for over 1.5 million public employees, retirees, and their families in California.

As of June 30, 2021, what was the total value of assets managed by CalPERS?

As of June 30, 2021, CalPERS managed over $469 billion in assets, making it the largest public pension fund in the United States.

In the fiscal year 2020-21, how much did CalPERS pay out in retirement and health benefits?

In fiscal year 2020-21, CalPERS paid out more than $27.4 billion in retirement benefits and over $9.74 billion in health benefits.

What is the 'CalPERS effect' mentioned in relation to the agency's investment practices?

The 'CalPERS effect' refers to the potential for stocks placed on CalPERS' 'Focus List' to perform better due to the agency's shareholder activism and influence as a major investor.

According to 2018 data, what was the approximate unfunded liability of CalPERS, and what percentage of liabilities were covered by assets?

As of 2018, CalPERS had approximately $360 billion in assets and was underfunded by an estimated $150 billion, with its assets covering less than 70% of its liabilities.

What action did the CalPERS board take in late 2016 to address its funding shortfall?

The board lowered its expected annual rate of return on investments from 7.5% to 7.0%, a decision that increased the costs for California cities contributing to worker pensions.

In 2018, what was the total pension payout by CalPERS, and how many beneficiaries received these payments?

In 2018, CalPERS paid a total of $22 billion in pension benefits to approximately 600,000 beneficiaries.

What was the average annual pension for a CalPERS retiree with 20 or more years of service in 2018?

In 2018, the average pension for a CalPERS retiree with 20 or more years of service was $50,333.

How did the average pension for police officers or firefighters with 20+ years of service compare to the overall average in 2018?

In 2018, the average pension for police or firefighters with 20 or more years of service was $78,104, which was significantly higher than the overall average pension.

What percentage of CalPERS retirees collected pensions exceeding $100,000 in 2018, and what portion of the total payout did they account for?

In 2018, 26,000 retirees, representing 4% of the total, collected pensions over $100,000, and this group accounted for 17% of the total amount CalPERS paid out.

When did discussions about providing retirement for California state employees begin, and when was the constitutional amendment approved?

Discussions about state employee retirement began in 1921, and California voters approved a constitutional amendment allowing pensions for state workers in 1930.

What was the initial name of the state worker retirement plan established in 1931, and when did it begin operations?

The plan was initially called the 'State Employees' Retirement System' (SERS), and it commenced operations in 1932.

In what year were local public agencies first permitted to participate in SERS?

Local public agencies were first permitted to participate in SERS in 1939, following the passage of a state legislative bill.

What investment restriction did SERS face initially, and when was it permitted to invest in real estate?

Initially, SERS was restricted to investing only in bonds. A new state law enacted in 1953 allowed SERS to invest in real estate.

When did CalPERS begin offering health insurance as a benefit, and what was the relevant legislation called?

CalPERS began offering health insurance in 1962, following the passage of the Meyer-Geddes Hospital and Medical Health Care Act.

In what year was the organization renamed from PERS to CalPERS?

The organization's name was changed to CalPERS in 1992 to avoid confusion with other state retirement systems.

What significant legislative change in 1992 aimed to protect the independence of the CalPERS board?

Proposition 162, also known as the 'California Pension Protection Act of 1992,' was passed, granting the PERS board the sole and exclusive fiduciary responsibility over the system's assets.

How did Governor Pete Wilson attempt to exert control over CalPERS in the early 1990s?

Governor Wilson sought to give his office control over PERS' actuarial projections and the appointment of a majority of its board members, partly in response to a $14.3 billion budget deficit.

What was the fund value of CalPERS in 1999, and what was the state tax dollar contribution that year?

In 1999, the fund value reached $159.1 billion, and the state tax dollar contribution was $159 million.

What benefit expansion did the CalPERS board propose in 1999, and what projected investment return was used to justify it?

The board proposed allowing public employees to retire at age 55 and receive more than half their highest salary for life, projecting an average annual return of 8.25% to cover the costs.

What was the impact of the dot-com bubble burst on CalPERS the year after the SB 400 benefits expansion?

The dot-com bubble burst, leading to stock market downturns in 2002, which caused CalPERS to lose value.

What was the CalPERS fund value in 2016, and what was the estimated unfunded liability for promised benefits at that time?

In 2016, the CalPERS fund value reached $295.1 billion, with promised benefits exceeding available funds by $241.3 billion.

What did Governor Jerry Brown sign into law in 2012 concerning state employees and pension spiking?

He signed legislation that reduced benefits for all new state employees and aimed to combat the practice of pension spiking.

What did Kevin de León introduce in 2015 regarding CalPERS investments?

He introduced legislation requiring CalPERS and CalSTRS to divest from companies involved in coal.

What legal authority grants the CalPERS retirement board 'plenary authority and fiduciary responsibility' over the system's assets?

Article XVI, Section 17 of the California Constitution, as amended by Proposition 162, grants this authority.

How many members serve on the CalPERS Board of Administration, and how are they selected?

The Board has 13 members, selected through a combination of six elected positions, three appointed positions, and four ex officio positions.

What controversy arose in 1999 involving Board Chairman Charles Valdes and Board member Phil Angelides?

Chairman Valdes made remarks questioning Angelides' motives based on his heritage, which Valdes later apologized for.

What lawsuit did Kathleen Connell, then State Controller, file against CalPERS in 2001?

She sued CalPERS to limit the pay of its investment managers, a suit CalPERS ultimately lost.

What criticism did State Controller John Chiang level against CalPERS in September 2014?

He criticized the fund's 'passive' approach to pension spiking and its failure to adequately review payroll data for potential abuse.

Who are listed as the current CEO, Board President, and Board Vice President of CalPERS?

As of the provided information, Marcie Frost is the CEO, Henry Jones is the Board President, and Theresa Taylor is the Board Vice President.

What was the trend of CalPERS' investment income between 1999 and 2003?

This period saw fluctuations, with five years of losses and five years of gains, resulting in a cumulative income of $16 billion over the five years.

How did the investment income perform between 2004 and 2007?

This four-year period showed stability, with a cumulative investment income of $108 billion, averaging $27 billion per year.

What were the significant investment income losses experienced by CalPERS during the 2008 financial crisis?

CalPERS experienced losses of $12 billion in 2008 and $55 billion in 2009 due to the financial crisis.

What did a 2014 study by Wilshire Associates find regarding companies engaged by CalPERS?

The study found that companies targeted by CalPERS' engagement efforts significantly outperformed the Russell 1000 index.

What is the 'CalPERS effect' as described by Stephen Nesbitt's 1994 study?

Nesbitt coined the term to describe the phenomenon where companies placed on CalPERS' Focus List subsequently outperformed the S&P 500.

What did Wahal's 1996 study find concerning the stock price reaction to pension fund activism?

The study indicated that only firms targeted by CalPERS experienced a positive stock price reaction among the funds analyzed.

What was the outcome of CalPERS' participation as lead plaintiff in the class-action lawsuit against UnitedHealth Group for options backdating?

The lawsuit resulted in UnitedHealth Group paying $895 million to settle, with former CEO William W. McGuire also paying $30 million.

What did CalPERS invest approximately $30 billion in as of 2021, and what criticism did this draw?

CalPERS invested about $30 billion in fossil fuels, which drew criticism from environmentalists.

According to a 2012 economic impact report, what was the return in economic activity for each taxpayer dollar contributed to CalPERS?

The report found that CalPERS benefits returned $10.85 in economic activity to California for each taxpayer dollar contributed to the system.

What did CalPERS do in 2002 regarding accounting and auditing standards following the Enron scandal?

CalPERS resolved to improve accounting and auditing standards among companies in its investment portfolio.

How are member contribution rates determined, and what is their effect on accrued benefits?

Member contribution rates are set by statute and can vary by category and benefit formula. Changes in these rates do not affect the member-accrued retirement benefits, which are guaranteed by law.

What did Governor Jerry Brown call CalPERS' reliance on new members in 2011?

He referred to it as a 'Ponzi scheme' during a legislative hearing.

What was the CalPERS system's funding status according to 2011 state figures?

The system was reported to be 78% funded, with $133 billion in unfunded future liabilities.

What are the main categories of benefits administered by CalPERS?

CalPERS administers retirement benefits (defined benefit plans), deferred compensation, disability retirement, death benefits, health benefits, and long-term care benefits.

How are CalPERS retirement benefits calculated?

Benefits are calculated using a member's years of service credit, age at retirement, and final compensation (average salary over a defined period).

What did the 2007-2008 studies commissioned by CalPERS find regarding the economic impact of its operations?

The studies found that CalPERS' benefit payments and investments generated significant economic activity and supported numerous jobs within California.

What criticism was made regarding the economic impact studies commissioned by CalPERS?

Critics argued that the studies did not prove the unique value of CalPERS, as similar economic activity would result from any spending of pension funds, and private management could yield similar impacts.

What did CalPERS do in 2005 regarding its headquarters, and what was the cost?

CalPERS expanded its headquarters with the 'Lincoln Plaza East & West' buildings, completed in November 2005 at a cost of $265 million.

What was the average annual growth rate of CalPERS premiums between 2003 and 2006-7, according to a GAO study?

The average annual growth rate was 14.2%, which was higher than that of the Federal Employees Health Benefits Program (FEHBP) and other surveyed employer-sponsored plans during the same period.

What is the distinction between 'disability retirement' and 'industrial disability retirement' offered by CalPERS?

Industrial disability retirement is granted when the disability is due to a job-related injury or illness, whereas disability retirement implies the disability was not necessarily caused by employment.

What major controversy affected CalPERS' disability retirement program concerning public safety personnel in the mid-1990s and mid-2000s?

Concerns included fraudulent claims, expanded eligibility making it easier to obtain benefits, and a growing list of conditions presumed job-related, alongside issues like dual benefits and lack of light-duty assignments.

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CalPERS: An Overview

Agency Mandate

The California Public Employees' Retirement System (CalPERS) is a vital agency within the California executive branch. Its primary mandate is to manage pension and health benefits for over 1.5 million public employees, retirees, and their families across California. In fiscal year 2020-21 alone, CalPERS disbursed over $27.4 billion in retirement benefits and $9.74 billion in health benefits, underscoring its significant role in the state's public sector.

Scale and Assets

As the largest public pension fund in the United States, CalPERS manages substantial assets. As of June 30, 2021, its assets under management exceeded $469 billion. This immense scale positions CalPERS as a major player not only in public finance but also in global investment markets.

Global Influence

CalPERS is recognized internationally for its influence and leadership in the investment industry. Its proactive approach to shareholder activism, particularly through its "Focus List" strategy, has earned it a reputation as one of America's most powerful shareholder bodies, capable of driving corporate governance changes.

Historical Trajectory

Foundational Years

The concept of retirement provisions for California state employees emerged in the early 20th century, with constitutional amendments and legislation in the early 1930s paving the way for the State Employees' Retirement System (SERS) in 1932. The California State Employees' Association, founded in 1931, established a foundational relationship with SERS that persists today.

Expansion and Evolution

By 1939, SERS expanded to include local public agencies. Investment capabilities evolved from solely bonds to include real estate in 1953, and crucially, stocks in 1966. The system's name changed to the Public Employees' Retirement System (PERS) in 1967 to reflect its broader reach. The adoption of health insurance benefits in the 1960s further broadened its scope.

Legislative Milestones

Significant legislative developments shaped CalPERS. Proposition 162 in 1992 enshrined the Board's fiduciary responsibility and independence. The name change to CalPERS in 1992 aimed to distinguish it from other state systems. Later reforms, such as those under Governor Jerry Brown in 2012, sought to address pension spiking and sustainability, though their impact on contribution increases was modest.

Governance Structure

Legal Framework

CalPERS operates under the legal authority of the California Constitution (Article XVI, Section 17), the California Government Code, and the California Code of Regulations. These frameworks grant the Board of Administration plenary authority and fiduciary responsibility for the system's assets and administration.

Board of Administration

Oversight is provided by a 13-member Board of Administration. This diverse body includes elected members representing various CalPERS constituencies, appointed members, and ex officio members such as the State Treasurer and State Controller. This structure ensures broad representation and accountability.

Executive Leadership

The day-to-day operations are directed by the Chief Executive Officer (CEO), supported by a team of executive officers responsible for key functions like customer services, health benefits, policy, operations, technology, external affairs, legal counsel, actuarial services, finance, and investments. This layered structure ensures specialized management across complex operations.

Operational Landscape

Investment Income

CalPERS derives significant income from its investments, which have historically fluctuated. While periods of substantial gains have occurred, market downturns, such as those in the early 2000s and the 2008 financial crisis, have resulted in notable losses. The fund's performance is closely monitored and impacts contribution requirements.

Shareholder Activism

Since the 1980s, CalPERS has been a prominent advocate for corporate governance reforms. Through its "Focus List" and direct engagement, it has influenced corporate practices, aiming to improve stock performance and accountability. This activism has positioned CalPERS as a leader among institutional investors.

Notable Investments

CalPERS has made significant investments across various sectors, including technology, biotechnology, and real estate. Its investment decisions, such as those in Enron and venture capital funds, have sometimes drawn scrutiny and highlighted the complexities and risks inherent in managing a large public fund.

Financial Health

Contributions

CalPERS funding relies on member contributions, employer contributions, and investment income. Member contribution rates are statutorily defined and vary by category, but do not affect accrued benefits. Employer contributions are adjusted based on investment performance, with a smoothing mechanism over several years to mitigate volatility.

Unfunded Liabilities

A significant challenge facing CalPERS is its unfunded liabilities, estimated to be in the hundreds of billions of dollars. These liabilities arise from the difference between projected assets and future benefit obligations. Factors such as lower-than-expected investment returns and benefit enhancements contribute to this shortfall, placing financial pressure on public entities.

Investment Performance Analysis

Studies analyzing the performance of companies targeted by CalPERS' shareholder activism, often termed the "CalPERS effect," have yielded mixed results. While some research indicates positive short-term stock price reactions following engagement, the long-term impact and the persistence of this effect remain subjects of academic debate.

Member Benefits

Retirement Benefits

CalPERS administers defined benefit retirement plans, calculating monthly allowances based on years of service, age at retirement, and final compensation. The specific formulas are determined by the member's employer, occupation, and contract provisions, ensuring a foundational level of retirement security.

Health and Long-Term Care

Beyond retirement income, CalPERS provides comprehensive health benefits, making it one of the largest public purchasers of healthcare in the nation. It also administers a Long-Term Care Program, offering support for nursing home care, assisted living, and home health services, funded by participant premiums and investments.

Supplemental Plans

CalPERS also manages deferred compensation plans (like the 457 plan) and other supplemental income programs. These plans offer additional avenues for members to save and supplement their primary retirement income, providing flexibility in financial planning for post-employment life.

Points of Contention

High Pension Payouts

A notable criticism centers on the number of retirees receiving substantial annual pensions, with a significant percentage of the total payout going to a small fraction of high-earning retirees. This concentration of benefits raises questions about equity and sustainability within the system.

Funding Shortfalls

The persistent issue of unfunded liabilities is a primary concern. Critics argue that optimistic investment return assumptions, coupled with benefit enhancements, have contributed to a structural deficit, potentially necessitating significant future increases in public contributions and straining municipal budgets.

Governance and Activism

CalPERS' shareholder activism, while intended to improve corporate governance, has sometimes drawn criticism for being overly political or interfering with business operations. Internal board conflicts and controversies regarding investment decisions have also periodically surfaced, prompting calls for greater transparency and accountability.

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References

Sidel, Robin. "Calpers effect" may give lift to underperforming stocks. Wall Street Journal, April 20, 2004.

Vellinga, Mary Lynne. CalPERS' new look - It opens a downtown headquarters that's light, airy and innovative. Sacramento Bee, November 12, 2005.

Chernoff, Joel. CalPERS sued for hiking pay of in-house managers. Pensions & Investments, Vol. 29, Issue 4, February 19, 2001, pages 3-4.

Geissinger, Steve. CalPERS head to run new firm - venture capital company is next task for Hanson. Daily News of Los Angeles, May 20, 1994.

Fernandez, Bob. An investor watchdog with bark - and bite. California's pension fund gets noticed when it thinks corporate practices are hurting shareholders' returns. Philadelphia Inquirer, October 8, 2000.

Kim, James. Speaking for shareholders. CEO of CalPERS wields clout. USA Today, February 23, 1993.

Reuters News Service. Largest pension fund adopts social responsibility standards. Houston Chronicle, November 15, 2000.

Gentile, Gary. CalPERS targets offshore companies. Los Angeles Times, November 19, 2002.

Hernandez, Greg. Disney splits top job in sharp Eisner rebuke - Pixar, Calpers and Comcast dramas trigger demotion action. Daily News of Los Angeles, March 4, 2004.

Phelps, David. Inside track - judge selects pension pit bull. Star Tribune (Minneapolis, MN), September 18, 2006.

Strother Clarke, Susan. CalPERS effect: making noise makes money. Orlando Sentinel, April 25, 2004.

Wahal, Sunil. Pension fund activism and firm performance. Journal of Financial and Quantitative Analysis, March 1996, vol. 31, no. 1, pages 1-23.

Kasler, Dale. Enron liability rises for CalPERS. The pension fund now pegs the loss around $142 million. Sacramento Bee, February 23, 2002.

Mendoza, Martha. CalPERS: Enron deals were a mistake - but fund still may have netted some money on its investments. Ventura County Star, July 21, 2002.

Benson, Mitchel. Questioning the books: Calpers vows to help prevent audit schemes. Wall Street Journal, February 22, 2002.

Lifsher, Marc. CalPERS clout carries overseas. Los Angeles Times, March 15, 2004. Retrieved December 26, 2008.

Chan, Gilbert. State pensions lift economy, study says - Retiree dollars mean annual $21 billion in state, analysis finds. Sacramento Bee, April 19, 2007.

Lifsher, Marc. Study touts CalPERS' benefit to economy. Los Angeles Times, September 19, 2007.

Chan, Gilbert. Fund's impact in state gauged - CalPERS investments are tied to 124,000 jobs in California. Sacramento Bee, September 19, 2007.

Benitez, Tina. Recognizing achievement. AllBusiness.com, September 1, 2002. Retrieved November 19, 2008.

Slater, Pam. Rock stars - one of business's most effective employee-reward programs is simple recognition. Sacramento Bee, August 30, 1999.

Osterman, Rachel. Motivator vehicles - consultants say old-style ways to reward good work aren't as effective as more-frequent pats on the back. Sacramento Bee, October 31, 2005.

Bill documents (AB 3252, 1996). Retrieved December 27, 2008.

Miller, Jim, and Jack Katzanek. Pension overhaul ditched. Governor gives in over issue of killed-or-injured benefits. Press-Enterprise (Riverside, CA), April 8, 2005.

Clifford, James O. CalPERS reviewing records for fraudulent disability cases. Daily News of Los Angeles, November 14, 1997.

Lee, Vic. More questions in CHP disability fraud probe. KGO TV, November 24, 2006.

Alvarado, Donna. CalPERS strikes blow for health care costs. San Jose Mercury News, February 10, 1994.

Rapaport, Lisa. HMO premiums ease for CalPERS. The public system touts its strategy as a panel OKs the smallest rate hike since 1999. Sacramento Bee, June 15, 2005.

Connolly, Ceci. Health-care costs jump at Calpers - big premium increase may signal trend. Washington Post, April 17, 2002.

Rapaport, Lisa. CalPERS squeezed on care - As agencies quit health program, concern mounts. Sacramento Bee, September 1, 2003.

Benfell, Carol. CalPERS health plan may be bellwether: employers statewide may follow california agency's emphasis on preventive medical care. Press Democrat (Santa Rosa, CA), June 21, 2007.

A full list of references for this article are available at the CalPERS Wikipedia page

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Disclaimer

Important Notice

This content has been generated by an AI and is intended for educational and informational purposes only. It is based on publicly available data from Wikipedia and may not reflect the most current information or all nuances of the subject matter.

This is not financial advice. The information provided on this website is not a substitute for professional financial consultation, investment advice, or actuarial analysis. Always consult with qualified financial professionals and refer to official CalPERS documentation for accurate and up-to-date information regarding pension and benefit management.

The creators of this page are not responsible for any errors or omissions, or for any actions taken based on the information provided herein.

The CalPERS Compass

💡 Dive in with Flashcard Learning! 💡

CalPERS: An Overview 🏛️

🏢 Agency Mandate

📈 Scale and Assets

🌍 Global Influence

Historical Trajectory 📜

📅 Foundational Years

🏛️ Expansion and Evolution

⚖️ Legislative Milestones

Governance Structure ⚖️

📜 Legal Framework

👥 Board of Administration

🧑‍💼 Executive Leadership

Operational Landscape ⚙️

💰 Investment Income

📣 Shareholder Activism

🎯 Notable Investments

Financial Health 📊

🧾 Contributions

📉 Unfunded Liabilities

📈 Investment Performance Analysis

Member Benefits 🎁

🌳 Retirement Benefits

🏥 Health and Long-Term Care

🤝 Supplemental Plans

Points of Contention ⚠️

💰 High Pension Payouts

📉 Funding Shortfalls

⚖️ Governance and Activism

Teacher's Corner 🧑‍🏫

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References

📜 References

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Disclaimer ⚠️

📜 Important Notice

Dive in with Flashcard Learning!

CalPERS: An Overview

Agency Mandate

Scale and Assets

Global Influence

Historical Trajectory

Foundational Years

Expansion and Evolution

Legislative Milestones

Governance Structure

Legal Framework

Board of Administration

Executive Leadership

Operational Landscape

Investment Income

Shareholder Activism

Notable Investments

Financial Health

Contributions

Unfunded Liabilities

Investment Performance Analysis

Member Benefits

Retirement Benefits

Health and Long-Term Care

Supplemental Plans

Points of Contention

High Pension Payouts

Funding Shortfalls

Governance and Activism

Teacher's Corner

True or False?

Test Your Knowledge!

Gamer's Corner

Discover other topics to study!

References

Feedback & Support

Disclaimer

Important Notice