2019-20 Comprehensive Annual Financial Report Fiscal …

1 2019- 20 comprehensive annual financial report fiscal Year Ended June 30, 2020 Focused On Our Mission California Public Employees Retirement System A Component Unit of the State of California This page intentionally left blank. Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2020 Prepared through the joint efforts of calpers team members. Available online at California Public Employees Retirement System A Component Unit of the State of California This page intentionally left blank. 2019-20 IN NUMBERS Despite the unprecedented economic challenges due to COVID-19, we had many accomplishments this past Fiscal year and ended on a strong note.

2 Marcie Frost, calpers CEO Where We Stand $ billion Net position (PERF) Net rate of return (PERF) 2 million+ 2,890 members Contracted employers million Total covered lives (health) Funded as of June 30, 2019 (PERF) 732,000+ Retirees & beneficiaries Estimated Funded June 30, 2020 (PERF) $ billion $ billion Invested in California based Annual pension benefit payments (PERF) companies & projects This page intentionally left blank. Introductory 1 Professional 2 Chief Executive Officer s Letter of 3 About 7 Board of 10 Organizational Chart Executive 12 Consultant & Professional 13 Financial 15 Independent Auditor s 16 Management s Discussion & Analysis (MD&A).

3 19 Financial Section: Basic Financial 41 Statement of Fiduciary Net Position Fiduciary 42 Statement of Changes in Fiduciary Net Position Fiduciary 44 Statement of Net Position Proprietary 46 Statement of Revenues, Expenses, and Changes in Net Position Proprietary 47 Statement of Cash Flows Proprietary 48 Notes to the Basic Financial 49 Financial Section: Required Supplementary 77 Schedules of Changes in Net Pension Liability/(Asset) and Related 78 Schedules of Plan 87 Schedule of Investment 89 Schedule of Claims Development 90 Financial Section: Other Supplementary 91 Administrative Expenses All 92 Investment Expenses Investment Management 93 Investment Expenses Performance 96 Investment Expenses Other Investment 97 Consultant and Professional Services Expenses All 100 Investment 103 Chief Investment Officer s 104 Summary of Investments 105 Portfolio Comparisons 105 Asset Allocation 106 Portfolio of California Investments at Fair Value 106 Largest Stock & Bond Holdings at Fair Value 107 Schedule of Commissions & 108 Private Equity Management Fees & Profit Sharing PERF 110 Investment Performance 115 Investment Performance JRF 115 Investment Performance

4 116 Investment Performance 117 Investment Performance 118 Investment Performance 118 Actuarial 119 Actuarial 120 Actuarial Methods & 122 Summary of Funding 125 Exhibit A: Funding Progress Unfunded Liability & Funded 126 Exhibit B: Funding Progress Solvency 127 Exhibit C: Sample Pay Increase Assumptions for Individual Members 129 Exhibit D: Sample Non-Economic 130 Exhibit E: Single Life Retirement 139 Exhibit F: Schedule of Active Member Valuation 139 Exhibit G: Members in 140 Exhibit H: Schedule of Retirees & Beneficiaries Added to and Removed from 143 Exhibit I: Analysis of Financial 144 Statistical 149 150 Changes in Fiduciary Net Position Retirement 150 Changes in Fiduciary Net Position Pension Prefunding 153 Changes in Fiduciary Net Position OPEB 154 Changes in Fiduciary Net Position Custodial 155 Public Employees Retirement System Membership & Retirement 156 Public Employees Retirement Fund Program 158 Public Agency 167 Legislators Retirement System Membership & Retirement 185 Legislators Retirement System Program 186 Judges Retirement System Membership & Retirement 189 Judges Retirement System Program 190 Judges Retirement System II Membership & Retirement 193 Judges

5 Retirement System II Program 194 Statistical Section: Other 197 Health Care 198 Contingency Reserve 199 Long-Term Care 200 Health Benefits Program 201 Defined Contribution 209 Long-Term Care Program 210 Index of Tables, Charts & 211 Glossary of 218 Introductory 1 Professional 2 Chief Executive Officer s Letter of 3 About 7 Board of 10 Organizational Chart Executive 12 Consultant & Professional 13 Financial 15 Independent Auditor s 16 Management s Discussion & Analysis (MD&A).. 19 Financial Section: Basic Financial 41 Statement of Fiduciary Net Position Fiduciary 42 Statement of Changes in Fiduciary Net Position Fiduciary 44 Statement of Net Position Proprietary 46 Statement of Revenues, Expenses, and Changes in Net Position Proprietary 47 Statement of Cash Flows Proprietary 48 Notes to the Basic Financial 49 Financial Section: Required Supplementary 77 Schedules of Changes in Net Pension Liability/(Asset) and Related 78 Schedules of Plan 87 Schedule of Investment 89 Schedule of Claims Development 90 Financial Section.

6 Other Supplementary 91 Administrative Expenses All 92 Investment Expenses Investment Management 93 Investment Expenses Performance 96 Investment Expenses Other Investment 97 Consultant and Professional Services Expenses All 100 Investment 103 Chief Investment Officer s 104 Summary of Investments 105 Portfolio Comparisons 105 Asset Allocation 106 Portfolio of California Investments at Fair Value 106 Largest Stock & Bond Holdings at Fair Value 107 Schedule of Commissions & 108 Private Equity Management Fees & Profit Sharing PERF 110 Investment Performance 115 Investment Performance JRF 115 Investment Performance 116 Investment Performance 117 Investment Performance 118 Investment Performance 118 Actuarial 119 Actuarial 120 Actuarial Methods & 122 Summary of Funding 125 Exhibit A: Funding Progress Unfunded Liability & Funded 126 Exhibit B: Funding Progress Solvency 127 Exhibit C: Sample Pay Increase Assumptions for Individual Members 129 Exhibit D: Sample Non-Economic 130 Exhibit E: Single Life Retirement 139 Exhibit F: Schedule of Active Member Valuation 139 Exhibit G: Members in 140 Exhibit H: Schedule of Retirees & Beneficiaries Added to and Removed from 143 Exhibit I.

7 Analysis of Financial 144 Statistical 149 150 Changes in Fiduciary Net Position Retirement 150 Changes in Fiduciary Net Position Pension Prefunding 153 Changes in Fiduciary Net Position OPEB 154 Changes in Fiduciary Net Position Custodial 155 Public Employees Retirement System Membership & Retirement 156 Public Employees Retirement Fund Program 158 Public Agency 167 Legislators Retirement System Membership & Retirement 185 Legislators Retirement System Program 186 Judges Retirement System Membership & Retirement 189 Judges Retirement System Program 190 Judges Retirement System II Membership & Retirement 193 Judges Retirement System II Program 194 Statistical Section: Other 197 Health Care 198 Contingency Reserve 199 Long-Term Care 200 Health Benefits Program 201 Defined Contribution 209 Long-Term Care Program 210 Index of Tables, Charts & 211 Glossary of 218 Table of Contents This page intentionally left blank.

8 INTRODUCTORY SECTION 2 Professional Awards 3 Chief Executive Officer s Letter of Transmittal 7 About calpers 10 Board of Administration 12 Organizational Chart Executive Team 13 Consultant & Professional Services Leading into the Future Introductory Section PROFESSIONAL AWARDS CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN Financial REPORTING The Government Finance Officers Association of the United States and Canada awarded a Certificate of Achievement for Excellence in Financial Reporting to calpers for our Comprehensive Annual Financial Report for the Fiscal year ended June 30, 2019. This was the 24th year that calpers has achieved this prestigious award.

9 To be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized Comprehensive Annual Financial Report that satisfies both generally accepted accounting principles and applicable legal requirements. We believe our current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement Program s requirements. PUBLIC PENSION STANDARDS AWARD The Public Pension Coordinating Council awarded a Public Pension Standards Award for Funding and Administration to calpers for the Fiscal year ended June 30, 2020. This is the 18th consecutive year that calpers has achieved this prestigious award. In order to be awarded a Public Pension Standards Award, a public pension program must meet professional standards for plan design and administration as set forth in the Public Pension Standards.

10 A Public Pension Standards Award is valid for a period of one year. 2 | Introductory Section | calpers Comprehensive Annual Financial Report , Fiscal Year Ended June 30, 2020 Introductory Section (continued) CHIEF EXECUTIVE OFFICER S LETTER OF TRANSMITTAL Marcie Frost Chief Executive Officer November 20, 2020 Members of the calpers Board of Administration: I am pleased to present the California Public Employees Retirement System ( calpers or the System) Comprehensive Annual Financial Report (CAFR) for the Fiscal year ended June 30, 2020. While the first part of the Fiscal year showed signs of progress, the later part brought unprecedented challenges associated with the COVID-19 pandemic.