Can Retirees Trust America’s Largest Pension Fund?

The CalPERS pension fund — the California Public Employees’ Retirement System — manages nearly $600 billion for 2.4 million current and former California public workers. It is the largest defined benefit public pension fund in the United States. It pays out $34.6 billion in retirement benefits every year to 714,696 retirees and their beneficiaries. For hundreds of thousands of teachers, firefighters, nurses, administrators, and state employees, it is the foundation of their retirement security.

In 2026, it is also at the center of a political and financial storm. A Congressional investigation launched in February 2026 is examining whether the fund’s investment decisions placed environmental and political priorities ahead of its legal obligation to retirees. A separate battle is playing out in the California Legislature over how much of the fund’s CalPERS private equity holdings must be disclosed publicly. And an ongoing debate about which companies CalPERS should invest in has pulled the fund into national politics in ways increasingly difficult to separate from its core mission: paying promised benefits.

For anyone following election updates in the US, CalPERS matters well beyond California. It is a window into how public pension funds operate, who controls them, and what happens when those decisions become politically contested. This article explains what CalPERS is, how it works, what the current controversies involve, and what they mean for the retirees who depend on it.

What CalPERS Is: The Basics

The CalPERS pension fund is a defined benefit pension system. Members earn a guaranteed monthly retirement benefit based on a formula that considers years of service, age at retirement, and final salary. Contributions come from three sources: the employee, the employer (a state or local government agency), and investment returns generated by the fund itself.

CalPERS’ own State of the System data, published January 2026, confirms the following figures as of the dates noted:

CalPERS is governed by a Board of Administration made up of elected member representatives, appointed officials, and ex-officio members including the State Controller and State Treasurer. The board sets investment policy, approves the assumed rate of return, and oversees fund management. Day-to-day operations are managed by a Chief Executive Officer and a professional investment team.

As confirmed by the State of California’s official department directory, CalPERS is headquartered in Sacramento and operates as an independent state agency. Public employees covered by CalPERS are typically exempt from Social Security contributions and instead rely on CalPERS as their primary source of retirement income.

How CalPERS Invests: The Portfolio Breakdown

CalPERS invests across multiple asset classes in pursuit of returns that meet or exceed its assumed rate of return, currently set at 6.8% annually by the Board of Administration. Every percentage point of sustained underperformance adds to the fund’s unfunded liability, which must eventually be covered through higher contributions.

For fiscal year 2024 to 2025, CalPERS reported a preliminary net investment return of 11.6%, well above the 6.8% target. The breakdown by asset class was as follows:

The CalPERS private equity portfolio has been a source of strong recent returns. CalPERS overhauled its private equity strategy in 2022 to include more co-investments, where the fund invests directly alongside private equity managers rather than through their funds. That shift cut management fees by approximately 10% and helped the private equity portfolio rank as the best-performing among its global peers for calendar year 2024.

However, a May 2026 CalMatters investigation found that a push to expand private equity investments further has alarmed some public employee advocates. The concern centers on transparency: private equity holdings carry far less public disclosure than publicly traded stocks and bonds, making it difficult for members, employers, and the public to independently assess the risks being taken with retirement assets.

The Congressional Investigation: What Happened and Why It Matters

In February 2026, three senior House Republicans opened a formal investigation into the CalPERS pension fund. The lawmakers were House Committee on Education and the Workforce Chair Tim Walberg (R-Michigan), Health, Employment, Labor and Pensions Subcommittee Chair Rick Allen (R-Georgia), and Kevin Kiley (R-California). They directed a formal letter to CalPERS Board of Administration President Theresa Taylor requesting detailed records.

The investigation focuses on the CalPERS Clean Energy and Technology Fund (CETF). CalPERS invested approximately $468 million in the CETF starting in 2007. As of March 31, 2025, that investment had declined to less than $138.1 million, a drop of roughly 71% and a loss of more than $330 million. CalPERS also paid more than $22 million in management fees to oversee this declining portfolio.

CalPERS has defended its overall investment strategy and climate-focused investments as part of a long-term diversification approach. Its fund-wide 11.6% return for fiscal year 2024 to 2025 significantly outperformed the 6.8% assumed rate. That overall performance does not directly address the specific CETF loss, which the committee frames as a discrete failure of investment judgment on a single fund over nearly two decades.

The investigation remained open as of May 2026. Whether it produces legislative action depends in part on the composition of Congress after the November midterms, connecting this directly to election updates in the US this cycle.

The Political Battle Over What CalPERS Should and Should Not Hold

CalMatters reported in May 2026 that CalPERS and its sister fund CalSTRS — the California State Teachers’ Retirement System — are facing organized campaigns over specific investment holdings. The boards of both funds are receiving pressure to:

• Divest from fossil fuels, including ExxonMobil and Chevron, on the grounds that long-term climate risk could threaten the value of those positions
• Exit positions in Tesla and Palantir due to their ties to the current federal administration and perceived reputational risk
• Pull money from companies that operate immigrant detention centers under federal contracts
• Reassess relationships with private equity firms that have anti-union labor records, including Apollo Global Management

Opponents of divestment argue that these campaigns subordinate financial returns to political preferences, potentially harming the workers the fund was created to serve. Richard Costigan, a Republican who served on the CalPERS board from 2011 to 2019, told CalMatters directly: “It’s politics. When you look at Palantir and Tesla, it’s driven by politics.”

Advocates for divestment counter that companies associated with controversial government enforcement programs carry reputational and legal risks capable of damaging long-term returns, and that a fund of CalPERS’ size has both the leverage and the obligation to manage systemic risk proactively.

Both sides agree on one underlying fact: with CalPERS and CalSTRS holding combined assets approaching $1 trillion, their investment decisions carry genuine market weight. That scale makes every holdings decision a potential political statement as well as a financial one.

The Transparency Problem: Private Equity Disclosure

One of the sharpest fault lines in 2026 is not about which companies CalPERS invests in. It is about how much the public and plan members can access about those investments.

CalPERS private equity holdings are structured differently from publicly traded stocks. Fee agreements, underlying fund performance data, portfolio company details, and co-investment terms are frequently shielded by confidentiality agreements with private equity managers. CalPERS has historically cited the need to protect competitive investment relationships when declining to release full private equity records.

In the California Legislature, efforts to require greater public pension fund transparency for private equity have run into resistance. CalMatters reported that one such disclosure bill was effectively blocked after CalPERS argued increased transparency would cost the fund billions in lost returns and force sharp employee contribution increases. Critics described this claim as speculative and impossible to independently verify without the very transparency the bill would have required.

The Global Pension Transparency Benchmark, an independent international assessment measuring pension fund disclosure practices across governance, cost reporting, responsible investment, and risk reporting, evaluates CalPERS alongside major funds from Australia, Canada, Europe, and Asia. It provides a comparative framework for assessing how CalPERS’ transparency standards measure up globally.

The core problem is structural: without full disclosure, members, employers, and lawmakers cannot independently verify whether investment decisions reflect sound financial judgment or other considerations. That is precisely the question at the center of the Congressional investigation.

Is CalPERS Financially Stable? Understanding the Funded Status

The most fundamental question for any pension fund is whether it holds enough assets to pay the benefits it has promised. This is measured by the CalPERS funded status, the ratio of current assets to total projected liabilities. A fund at 100% is fully funded; below that, a gap exists that must be closed over time through contributions and investment returns.

The funded status has moved significantly over the past two decades, as confirmed by CalPERS’ official published data:

• Pre-2008The funded status exceeded 100%. CalPERS was technically overfunded before the financial crisis.
• 2009 to 2012The Great Recession caused severe investment losses, dropping the funded status to approximately 61% at its lowest point.
• 2013California enacted the Public Employees’ Pension Reform Act (PEPRA), reducing benefits for newly hired public employees and requiring higher contributions from existing members.
• 2017 to 2023The state directed an additional $9 billion toward state pension obligations. CalPERS also lowered its discount rate from 7.5% to 6.8%, adopting more conservative return assumptions.
• 2021Strong post-pandemic market returns pushed the funded status back to 81.2%.
• 2023Market turbulence in 2022 pulled the funded status back down to 71.4%.
• 2024A 9.3% return for fiscal year 2023 to 2024 raised the funded status to an estimated 73.9% as of June 30, 2024.
• 2025An 11.6% return for fiscal year 2024 to 2025 raised the estimated funded status to 79% as of June 30, 2025, and further to 83.7% as of December 31, 2025.

An 83.7% funded status means that for every dollar of benefits CalPERS has promised, it currently holds approximately 83.7 cents. The remaining gap, called the unfunded actuarial liability (UAL), is addressed over time through employer and employee contributions and future investment returns.

What the CalPERS Debate Means for the 2026 Elections

The controversies surrounding the CalPERS pension fund in 2026 connect directly to questions shaping congressional and state elections across the country.

At the federal level, the Congressional investigation reflects a broader Republican policy effort to restrict how pension funds may consider ESG factors in investment decisions. Legislation that passed the House in this Congress would prohibit fiduciaries managing retirement assets under ERISA from considering nonpecuniary factors such as environmental or social impact, requiring them to focus solely on maximizing financial returns. Public pension funds like CalPERS are generally exempt from ERISA, but the effort signals the direction federal policy could take if Republicans maintain or expand their congressional majority after November 3.

At the state level, the composition of the California Legislature after the 2026 elections will determine whether bills requiring greater private equity disclosure advance, stall, or are weakened further. It will also shape the oversight environment for CalPERS over the next two years.

For the 2.4 million CalPERS members and the 714,696 retirees who receive monthly payments from the fund, the political battles of 2026 are not abstract. Decisions made in November about who controls Congress and the California Legislature will directly shape the regulatory environment, transparency requirements, and investment constraints governing the fund that backs their retirement.

What Retirees and Active Members Should Know

Several facts are worth keeping clearly in view, separate from the political debate surrounding the fund:

• CalPERS benefits are guaranteed by contract. California law and the California Constitution protect pension benefits already earned by public employees. Courts have consistently held that vested benefits cannot be reduced without adequate compensation.
• The fund’s overall FY2024-25 investment performance was strong. An 11.6% return significantly exceeded the 6.8% assumed rate. The CETF loss, while real and significant, represents a small fraction of the total fund and does not reflect the fund’s overall investment management results.
• The funded status is improving but not yet complete. At an estimated 83.7% as of December 31, 2025, CalPERS is better positioned than at the 2023 low point of 71.4%, but it is not fully funded. Sustained returns at or above the 6.8% assumed rate are required to close the remaining gap over time.
• Transparency questions are legitimate and structurally unresolved. Regardless of political framing, the inability of members and the public to fully audit CalPERS private equity holdings is a documented structural issue that independent governance assessors have noted at pension funds globally.
• The Congressional investigation has not concluded. As of May 2026, no formal findings have been released and no legislative action has been taken in direct response to the CalPERS probe. Members who want to follow developments can monitor the House Committee on Education and the Workforce.

The Bottom Line

The CalPERS pension fund is the largest public pension fund in the United States, a $599.5 billion institution that underpins the retirement security of 2.4 million Californians. In 2026, it is navigating strong investment returns, an improving CalPERS funded status, a Congressional investigation into a specific failed investment, a political battle over which companies it should hold, and an unresolved transparency dispute over private equity disclosure.

None of these issues exist in isolation. They reflect broader national debates about the role of public pension funds, the meaning of pension fund fiduciary duty, and the relationship between investment decisions and public accountability. As election updates in the US continue to track the issues shaping 2026, CalPERS stands as one of the clearest examples of how pension policy, electoral politics, and the financial futures of millions of working Americans are directly connected.

For retirees and active members, the most important takeaway is that their benefits remain legally protected. The long-term health of the fund, however, depends on decisions being made right now by people who will be accountable to voters in November.