OPEB and Pension updates for public agencies in California

By Kateryna Pryor

 

At a recent presentation at Badawi & Associates Annual Training Seminar, I gave an overview of some major developments around fiscal year returns, inflation, and CalPERS reporting that could affect public agencies in California. The impact on your agency will depend on different factors—so it’s always a good idea to check in with your actuary for details specific to your agency.

Fiscal year return

Spring 2025 brought volatility to the stock market, with notable uncertainty and a significant—though temporary—decline. By the end of June, however, the market had recovered.

CalPERS reported a preliminary return of 11.6% on investments for fiscal year 2024/25 (July 1, 2024 through June 30, 2025). CERBT reported net returns of 12.27%, 10.54%, and 9.22% for strategies 1, 2, and 3, respectively.

  • For pensions, this will have a favorable impact on your agency’s net pension liability for the 2024/25 and 2025/26 fiscal years. The improvement to pension contributions will be phased in gradually, with most agencies not seeing the full effect until fiscal year 2031/32.
  • For OPEB, agencies with a CERBT trust will see an immediate improvement to the fiduciary net position (for most, this will be reflected in 2025/26 financial reporting). As with pensions, changes to actuarially determined contributions will likely be spread out over time.

Inflation

Higher inflation in recent years has led to larger COLAs for many employees, increasing PERSable pay. This results in higher future benefits for retirees and higher contributions for agencies.

For current retirees, while many agencies have a 2% COLA cap, the Purchasing Power Protection Allowance (PPPA) is triggered during higher inflationary periods for many, leading to higher retiree COLAs.

CalPERS reporting change for pooled plans

Beginning with the June 30, 2024 actuarial valuation, CalPERS will combine all rate plans by Miscellaneous, Police, and Fire groups. Most information—including UAL payments—will be presented on a combined basis.

More details are available in the CalPERS presentation here:
CalPERS Reporting Changes Video

PEMHCA OPEB premiums

Premiums increased significantly in calendar year 2025, particularly for Medicare plans with the following average increases:

  • Basic rates: up 9%
  • Medicare rates: up 22%

Please note, individual plan increases vary significantly from averages above. While 2026 premiums did not rise as sharply, it’s worth reviewing your agency’s OPEB benefits and monitoring retirees’ plan selections to fully understand the potential impact.

Have questions or want to learn more? Contact us.

 

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