CalPERS derives its funding from a combination of sources. Primarily, it relies on contributions from its members, who are employees of the state of California and its public agencies. These contributions are matched by their respective employers. Additionally, CalPERS generates revenue through investment returns on its portfolio of assets, which include stocks, bonds, and real estate. The fund also receives contributions from the state of California in the form of general fund appropriations and other sources, such as fees and penalties.
Contributions from CalPERS Members
CalPERS receives regular contributions from employees and employers to fund its retirement benefits. These contributions are used to make investments that generate returns, which are then used to pay for pensions and other benefits.
Employee Contributions
- Employees contribute a portion of their salary to CalPERS.
- The contribution rate varies depending on the employee’s age, years of service, and choice of retirement plan.
- Employee contributions are invested in the CalPERS Retirement Fund, which is a diversified portfolio of stocks, bonds, and other investments.
Employer Contributions
- Employers are also required to contribute to CalPERS on behalf of their employees.
- The employer contribution rate is set by law and is based on the employee’s salary and years of service.
- Employer contributions are invested in the CalPERS Retirement Fund, which is a diversified portfolio of stocks, bonds, and other investments.
| Year | Employee Contributions | Employer Contributions | Total Contributions |
|---|---|---|---|
| 2020 | $10 billion | $15 billion | $25 billion |
| 2021 | $11 billion | $16 billion | $27 billion |
| 2022 | $12 billion | $17 billion | $29 billion |
Investment Earnings
CalPERS’s investment earnings are a major source of funding for the pension system. The investment portfolio is managed by CalPERS’s investment staff and is diversified across a variety of asset classes, including stocks, bonds, real estate, and private equity. The portfolio’s performance is regularly reviewed and adjusted to meet CalPERS’s risk and return objectives.
In recent years, CalPERS’s investment earnings have been strong, averaging around 7% per year. This has helped to grow the pension fund’s assets and ensure that CalPERS can meet its obligations to its members.
Here is a table showing CalPERS’s investment earnings over the past five years:
| Year | Investment Earnings |
|---|---|
| 2018 | $14.4 billion |
| 2019 | $17.2 billion |
| 2020 | $19.1 billion |
| 2021 | $21.2 billion |
| 2022 | $23.5 billion |
Employer Matching Contributions
Employer matching contributions are another major source of funding for CalPERS. Employers are required to contribute to CalPERS on behalf of their employees who are members of the system. The amount of the matching contribution is determined by the employer’s contract with CalPERS. Most employers contribute a percentage of each employee’s salary to CalPERS.
Employer matching contributions are important because they help to reduce the cost of retirement benefits for employees. Employers who make matching contributions can also deduct these contributions from their taxes.
- Reduces the cost of retirement benefits for employees.
- Employers who make matching contributions can deduct these contributions from their taxes.
Contributions
Contributions from employers and members are the primary source of funding for CalPERS. Employers are required to contribute a certain percentage of their payroll to the system, and members contribute a portion of their salaries.
Investment Returns
CalPERS invests contributions and other funds to generate income. The investment returns generated are used to pay benefits and cover the costs of administering the system.
Other Sources
- Settlement proceeds: CalPERS may receive settlement proceeds from legal actions, such as lawsuits against employers.
- Interest earnings: The system earns interest on its cash balances and other investments.
- Other income: CalPERS may receive other sources of income, such as fees for services rendered or rent from properties it owns.
Funding Sources by Category (2022)
| Source | Amount |
|---|---|
| Employer contributions | $26.9 billion |
| Member contributions | $13.5 billion |
| Investment returns | $47.3 billion |
| Other income | $1.4 billion |
| Total | $89.1 billion |
And there you have it, folks! CalPERS’ coffers are filled with a diverse blend of contributions. As one of the largest and most respected pension funds globally, CalPERS plays a pivotal role in securing the financial future of countless Californians. Thanks for sticking with us through this financial adventure. If you ever find yourself curious about the inner workings of CalPERS, be sure to swing by again. We’re always excited to share more insights and help you navigate the complex world of retirement planning. Until next time, keep exploring!