Calpers main fund posted 0.1 pct gain in fiscal 2011-12

SAN FRANCISCO Thu Jan 3, 2013 9:02pm EST

SAN FRANCISCO Jan 3 (Reuters) - The California Public Employees' Retirement System said on Thursday rates for its member agencies will increase after it posted a net investment return of 0.1 percent in its core fund for its fiscal year ended June 30, 2012, compared with a net return of 21.7 percent in the prior fiscal year.

Agencies using the retirement system to manage pension accounts have been expecting rate increases after it released a preliminary report in July on its disappointing 2011-2012 fiscal year performance.

That report said the system, best known as Calpers, posted a 1 percent gain for the year due to Europe's debt crisis and slowing global growth.

Calpers' board last March also put the system's member agencies on notice of rate increases by voting to lower its longstanding 7.75 percent assumed rate of return to 7.5 percent.

Calpers, the biggest U.S. public pension system, said on Thursday in its Comprehensive Annual Financial Report that net assets in its main fund, the Public Employees' Retirement Fund, totaled $237.0 billion at the end of its 2011-2012 fiscal year.

The value of Calpers' assets was $251.8 billion as of Wednesday, according to a spokesman for the retirement system.

Most contribution rates for state agency and school employers in the 2013-2014 fiscal year and for local government employers in the 2014-2015 fiscal year are not expected to increase by more than 2 percent of payroll, Calpers said in Thursday's report.

If Calpers earns its assumed 7.5 percent investment return in its 2012-2013 fiscal year, employer rates for state and school employers in its 2014-2015 fiscal year and for local agencies in its 2015-2016 fiscal year are expected to increase in most cases between 0.2 percent and 0.7 percent of payroll, the report said.

The rates could increase more if Calpers earns less than 7.5 percent, the report said.

Local governments using the Calpers system keep a close eye on the rates as pension costs have become a top financial concern in a time of tight public budgets across the most populous U.S. state.

San Bernardino, a city of 210,000 east of Los Angeles, has opted to withhold payments to Calpers while seeking bankruptcy court protection from its creditors.

A U.S. bankruptcy judge last month ruled against an attempt by Calpers to collect overdue payments from San Bernardino, the first city to halt payments to the fund and challenge its primacy as a creditor.

Stockton, California, also declared bankruptcy last year but has made payments in full to Calpers. Vallejo, California, also made its payments to Calpers during the course of its bankruptcy proceedings. Vallejo emerged from bankruptcy in 2011.