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This 2nd annual "State of the System" report gives me the opportunity to underscore another
year of important accomplishments by Cal PERS.
The past year of hard and determined work was defined by meaningful progress toward
our top strategic goals:
· Strengthening the long-term financial stability of CalPERS retirement and health benefits
· Delivering superior customer service that reflects our customer's needs
· And exercising our leadership on important topics that impact our members and employers.
Investment returns for both the fiscal and calendar years were strong.
Our Fund today is valued at $284-billion-dollars, far beyond the pre-recession high water mark
for CalPERS assets.
We had investment returns of 13.2 percent for the fiscal year, and 16.2 percent for
the calendar year, fueling a year of important financial progress.
We've made important decisions that will help us meet our pension obligations to current
and future members and set us on a path to a fully funded system.
And recently we adopted a set of Investment Beliefs that guide our decisions and articulate
the philosophy behind those decisions.
Our beliefs consider our liabilities, long-term investment horizon and risks and costs, and
are designed to engender trust and confidence in those we serve.
2013 also saw CalPERS successfully push back against the nation's growing health care costs.
We secured the lowest health benefit premium increase in 15 years, just 3 percent higher
than the previous year.
There was even better news for members who have a Medicare-coordinated PPO plan. Those
rates went down an average of nearly 9 percent.
The CalPERS value-based pricing program was expanded in 2013. It establishes reasonable
threshold prices for certain medical procedures, such as knee and hip replacements.
We've also expanded health choices for our members, giving them access to more health
plan options.
And, in January of this year, we reopened a revitalized CalPERS Long-Term Care program
to new applicants.
It's a program built on a solid footing. The latest financial report shows the long-term-care
trust fund is 123 percent funded.
For our customers, we are focused on an era of enhanced service through technology, access
and education.
Our Employer Response Team is a perfect example of our commitment. The team handles critical
issues and puts our employers in touch with the experts needed to resolve the matters.
We are also beginning to focus our attention on providing better benefit education to our
members throughout all stages of their life.
This will better position our members to achieve a secure retirement and health future.
There were a number of challenges that required our leadership during the year, but municipal
bankruptcies, by far, rose to the top.
We all saw the headlines emerge as municipal bankruptcies first became an issue in Stockton
and San Bernardino.
Then, the bankruptcy in Detroit raised the question of whether pension promises to employees
and retirees can be altered.
We responded with the voice of the largest defined benefit fund in America, and we continue
to maintain the unshakeable CalPERS position that we will fulfill our fiduciary responsibility
to protect pensions.
We also provided steady leadership on climate change, integrated health care and retirement
security.
The new year already promises to be marked with more achievements, milestones and difficult
decisions.
But we have positive momentum with us.
With our sleeves rolled up to take on another busy year, we are driven by a profound responsibility.
We are stewards of the CalPERS Fund.
Nothing less than our best effort must be made to grow and protect the Fund and, in
turn, the pension and health benefits of those who serve California.
And, ... a final note. All of us who knew and worked with him are
deeply saddened by the passing of Joe Dear, our Chief Investment Officer. Joe was a remarkable
man. His leadership, intellect and public persona drove CalPERS financial recovery from
the economic downturn to a record fund value.
But the sadness we feel at this time is for the loss of a true friend. We will miss him.