Amortization Period for New Debt Shortened to 20 Years

As reported in the Sacramento Bee, last week the CalPERS Board unanimously voted to shorten the amortization period of future gains and losses from 30 years to 20 years. The new policy will become effective as of the June 30, 2019 actuarial valuations, with the first payments due in 2021.

Reducing the amortization period for new debt should increase CalPERS’ average funding ratio, which is currently approximately 71 percent. Furthermore, according to a November 2017 CalPERS presentation, accelerating the debt payments will save about $700,000 in interest on a million-dollar loss. However, the new method of calculation should also lead to increased contributions of public entities participating in CalPERS. CalPERS estimated that small cities and counties will have to pay several hundred thousand dollars more per year.

Categories: Public Pensions


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