Responding to pleas from cash-strapped state and local governments, the benefits committee decided Tuesday to continue using an assumed annual rate of return of 7.75% from the fund's investments.
In January, CalPERS said that its total investments grew 12.5% in 2010.
A CalPERS' actuary had recommended lowering the annual assumption to 7.5% but said the higher number was still "prudent."
Such a decrease in the assumed rate of return would cost "our retirement system overnight $2 million," a Huntington Beach city official told CalPERS.
"This is not the time, speaking for local governments, to put this kind of adverse change," said board member Tony Oliveira, a former Kings County supervisor. "I have not met one [local official] that thought we should drop the discount rate."
In the fiscal year ending June 30, the state is contributing $3.6 billion to the CalPERS fund, while school districts are adding $1 billion.
Critics, supported by a recent study by Stanford University, said that CalPERS uses overly optimistic assumptions on annual gains.
Investment income accounts for about three-quarters of the money CalPERS needs to meet its ongoing obligations to provide benefits to 1.3 million government employees, retirees and their families, the system said.