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8.B. - Page 67 of 122
<br />yet implemented 26 — is unrealistically high. They claim that a more reasonable projection would
<br />be 6.0 - 6.5 percent.27 Wilshire Consulting, Ca1PERS' general consultant, has advised CaIPERS'
<br />board that it expects the CaIPERS' Return on Investment over the next ten years to be just 6.2
<br />percent.28 It should be noted, however, that Ca1PERS makes Discount Rate decisions based on
<br />projected Returns on Investments over 60 -year periods, not 10. Ca1PERS' projected 60 -year
<br />Returns on Investment are in line with its new 7 percent Discount Rate. 29
<br />As noted above, if Discount Rates and projected Returns on Investment are too high, then they
<br />understate the size of the Cities' Benefit payment obligations and Unfunded Liabilities.
<br />Importance of Amortization Periods.
<br />If a pension plan has Unfunded Liabilities, Ca1PERS requires the sponsoring Agency to pay off
<br />(amortize) that Unfunded Liability, together with interest accrued at a rate equal to Ca1PERS'
<br />projected Rate of Retum,30 through higher annual contribution payments over the Amortization
<br />Period. Historically, Ca1PERS' standard Amortization Period for investment gains and losses
<br />" League of California Cities, CaIPERS Stays the Course, Adopts a 7 Percent Assumed Rate of Return, December
<br />22, 2017, <https://www.cacities.org/Top/News/News-Articles/2017/December/CAIPERS-Stays-the-Course,-
<br />Adopts-a-7-Percent-Assum>.
<br />27 Nation, Pension Math 2011, p. 13. Lin, Retirement Debt. Munnell, Alicia, Appropriate discount rate for public
<br />plans is not simple, MarketWatch, October 5, 2015, <https://www.marketwatch.com/stoM/gppropriate-discount-
<br />rate-for-public-plans-is-not-simple-2016-10-05>.
<br />28 Rose -Smith, Imogen, How Low Can CaIPERS Go? Institutional Investor.com, November 30, 2016,
<br /><https://www.institutionalinvestor.com/article/bl4z9p7tw9pdz0/how-low-can-calpers-go>. Kasler, Dale, With
<br />investments soft, CalPERS eyes higher contribution rates. What does that mean for workers? Sacramento Bee,
<br />November 21, 2016, <www.sacbee.com/news/business/articleI 16331443.html>. Kasler, Dale, CaIPERS moves to
<br />slash investmentforecast. That means higherpension contributions are coming., Sacramento Bee, December 21,
<br />2016, <http://www.sacbee.com/news/business/articlel22088759.html>. League of California Cities, CaIPERS Stays
<br />the Course.
<br />" Diamond, Randy, CaIPERS considers 4 asset allocation options; local officials prefer avoiding major changes,
<br />November 14, 2017, p. 2, <http://www.pionline.com/article/20171114/ONLINE/171119918/calpers-considers-4-
<br />asset-allocation-options-local-officials-prefer-avoiding-major-chance. CNBC.com, CaIPERS's sees 5.8 percent
<br />return with new allocation; below 7 percent goal, February 8, 2017, <https://www.cnbc.com/2017/02/08/calperss-
<br />sees-58-percent-return-with-new-allocation-below-7-percent-goal.html>. See also, League of California Cities,
<br />League of California Cities Retirement System Sustainability Study and Findings, January 2018, p. 29,
<br /><https://www. cacitie s. org/Re sources-Documents/Policy-Advocacy-Section/Hot-Issues/Retirement-System-
<br />Sustainabilit. /gigue-Pension-Survey-(web)-FINAL.aspx>, in which the authors note that Ca1PERS' determines its
<br />Discount Rate based on expectations for returns on investment over a 60 year period.
<br />" Interviews by Grand Jury. Mendel, Ed, Old cause of pension debt gets new attention, Calpensions, July 10, 2017,
<br />p. 1, <https://calpensions.com/2017/07/10/old-cause-of-pension-debt-gets-new-attention/>. City of La Palma,
<br />CaIPERS Update and Additional Payment Discussion, February 20, 2018, slide 22,
<br /><https://www.cityoflapalma.org/ArchiveCenterNiewFile/Item/2374>. Eastman, Becky, Report on status of
<br />Belvedere's employee pension funds, May 13, 2013, p. 6,
<br /><bttp://www.cityofbelvedere.org/DocumentCenterNiew/1425>.
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