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Moody's Changes Pension Solvency Assumptions from 7.5% to 5.5%
California Public Policy Center [Opinion] July 12, 2012 "Using these assumptions, at a rate of return of 7.5% per year, each employee must contribute an amount equivalent to 17.5% of their salary into their pension fund every year. At a rate of 5.5% per year, this contribution rate goes up to 30% of salary. Put another way, if you accept Moody's verdict that pension funds should not expect to earn more than 5.5% per year, and you want to keep pensions solvent, then every state and local employee in California just got a 12.5% raise. Or you might consider this: If there are 1.5 million state and local government workers in California who make, on average, $70,000 per year (again, these are conservative assumptions), then California's taxpayers will have to come up with another $13.1 billion per year." |
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