The country's two largest pension funds — both from California — reported preliminary results noting big annual gains thanks to real estate investments and rising stock prices.
This week, the California Public Retirement System announced an annual increase of 12.5 percent for the fiscal year ended June 30. The California Teachers State Retirement System reported annual gains of 13.8 percent.
CalPERS is the country's largest public pension fund, administering retirement benefits to 1.6 million current and retired employees of California state government, public schools, and local public agencies. CalSTRS is the second-largest pension fund in the U.S. and the nation's largest teacher fund, serving 860,000 public school employees and their families.
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CalPERS outperformed its benchmark by 1.5 percent with end-of-year assets totaling $257.8 billion. CalSTRS reported a market value of $165.8 billion.
These positive results follow disappointing returns for fiscal 2012: CalPERS earned only 1 percent last year and CalSTRS posted just a 1.8 percent increase.
Both funds exceeded the federally required discount rates, the long-term rate necessary to meet current and future obligation. Both CalPERS and CalSTRS have a 7.5 percent discount rate.
Despite these uplifting numbers, both pensions are still massively underfunded.
CalPERS has an estimated $100 billion funding gap, with CalSTRS reporting a $70 billion gap. And despite the positive news for fiscal 2013, CalSTRS' chief executive officer reiterated the need for a long-term funding plan.
"It's clear that the legislature and governor must implement a long-term funding plan that includes gradual, predictable and fair contribution increases for all parties involved," CEO Jack Ehnes said in news release. "Every day that goes by without a funding solution in place costs an additional $22 million."
CalPERS recently made headlines first with its announcement to post personal retiree information online and then with its swift decision to table that project in response to a public outcry from retirement groups.
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