Staff Report
City Council
Item No. 2.B
Meeting
Date:
October 14, 2026
From: Kevin Biersack, Financial Services Director
Title: CalPERS Update
RECOMMENDATION:
To receive a CalPERS Update and Overview, with no formal action required.
BACKGROUND:
The City of Cathedral City’s California Public Employees Retirement System (CalPERS) retirement plans have historically been comprised of eight (8) separate plans, including three (3) Fire plans, two (2) Police plans, and three (3) Miscellaneous plans covering Tier 1 (Classic), Tier 2 (45-day transition in 2012), and Tier 3 Public Employees’ Pension Reform Act (PEPRA, 2013 forward).
As a result of CalPERS consolidating rate plans in August 2024, the City of Cathedral City’s plans were consolidated into three plans comprised of one each for Fire, Police and Miscellaneous. Over the past several years, the City has taken steps to reduce its unfunded actuarial liability (UAL), including the issuance of a $26,750,000 Pension Obligation Bond in April 2022 to address the City’s previous liability along with continued annual payments to reduce the UAL for each of these three member groups.
DISCUSSION:
The improvement in the funded status of the City’s CalPERS plans is the result of several factors, including not only the Pension Obligation Bond, the City’s continued annual UAL payments, but also favorable CalPERS investment returns in four (4) of the past eight (8) fiscal years. To be considered a favorable investment return, CalPERS actuaries now plan for a minimum 6.8% return. When the annual return is above 6.8%, it is considered a favorable year. The table below identifies the investment returns from 2018 through 2025.
Year CalPERS Rate of Return
2024-2025 11.6%
2023-2024 9.3%
2022-2023 5.8%
2021-2022 -6.1%
2020-2021 21.3%
2019-2020 4.7%
2018-2019 6.7%
2017-2018 8.6%
The combination of these efforts have significantly reduced the City’s outstanding pension liability and improved the funded status for our three (3) respective CalPERS rate plans. For the fiscal year ended June 30, 2025, CalPERS average funded status was 79%. For the City of Cathedral City, the Fire, Police, and Miscellaneous plans are each funded at 95%+. The funding ratios for the City’s three plans shows the increased funding ratio from 2018 through 2025.
Valuation Date
Funded
Ratio
Police
Funded
Ratio
Fire
Funded
Ratio
Misc
6/30/2025 95.2% 95.4% 95.5%
6/30/2024 91.0% 91.2% 91.2%
6/30/2023 89.6% 89.9% 90.1%
6/30/2022 88.5% 88.4% 88.6%
6/30/2021 87.9% 90.6% 89.0%
6/30/2020 76.9% 78.9% 77.6%
6/30/2019 78.0% 79.4% 78.4%
6/30/2018 77.6% 78.9% 78.3%
As a result, the City is in a significantly stronger financial position with respect to its CalPERS obligations. With the Pension Obligation Bond, continued annual UAL payments, and favorable investment performance the City's pension funded position has increased and the City’s overall unfunded liability has decreased.
In addition to the improved funded status of the plans, the composition of the City’s CalPERS membership has also continued to shift to PEPRA (Tier 3) members. As of June 30, 2025, the City had 147 active PEPRA members (72% of active employees); whereas, the City had 58 active PEPRA members (34% of active employees) as of June 30, 2018:
Active PEPRA
Police Members
Active PEPRA
Fire Members
Active PEPRA
Miscellaneous
Members Valuation Date
6/30/2025 26 34 87
6/30/2024 22 28 79
6/30/2023 24 25 69
6/30/2022 19 19 53
6/30/2021 15 17 39
6/30/2020 16 19 37
6/30/2019 16 18 33
6/30/2018 14 13 31
The composition of the City’s CalPERS membership has also continued to shift away from Classic (Tier 1) members. As of June 30, 2025, the City had 58 active Classic members (28% of active employees); whereas, the City had 111 active Classic members as of June 30, 2018 (66% of active employees).
Active Classic
Police Members
Active Classic
Fire Members
Active Classic
Miscellaneous
Members Valuation Date
6/30/2025 25 10 23
6/30/2024 26 12 27
6/30/2023 28 13 35
6/30/2022 30 18 40
6/30/2021 32 19 40
6/30/2020 31 21 44
6/30/2019 34 22 48
6/30/2018 35 22 54
This continued transition toward active PEPRA members, along with the declining number of active Classic members, contributes to a more favorable long-term financial pension outlook. If the City continues at the pace/budget in funding the UAL payments and CalPERS is able to achieve the forecasted minimum 6.8% investment return, these three pension plans will be funded at 100%, which will result in no outstanding PERS liability.
FISCAL IMPACT:
None. This report is for informational and discussion purposes.
FIVE-YEAR STRATEGIC PLAN:
Goal C: Fiscal Stability and Sustainability
Objective: Cathedral City has economically prospered by facilitating the investment of private dollars in high-quality development which benefits the community. We remain financially solvent by instituting prudent fiscal policies and transparent financial practices.