Officers of the largest U.S. pension fund recommended yesterday that their investment targets drop to 7 percent because of a cash crunch and changing market conditions, a move that would set a more cautious tone for those who manage retirement assets around the country, the Wall Street Journal reported today. The proposal to abandon a long-held goal of 7.5 percent over three years came during a board committee meeting of the California Public Employees’ Retirement System (CalPERS) in Sacramento. The rate would drop to 7.375 percent in fiscal 2017-18, 7.25 percent in fiscal 2018-19, and 7 percent in fiscal 2019-20. A reduction by CalPERS would have real-life consequences for taxpayers and cities. It would likely trigger an increase in yearly pension bills for the towns, counties and school districts that participate in California’s state pension plan. Any loss in expected investment earnings must be made up with significantly-higher annual contributions from public employers as well as the state. A drop in CalPERS’s return assumptions could also put pressure on other pension funds to be more aggressive about their reductions and concede that investment gains alone won’t be enough to fund hundreds of billions in liabilities.
