Canyon Lake is home to Calpers, the largest public pension fund in the US with US$256 billion in assets. Canyon Lake's city pension fund has served notice that it is quitting Calpers altogether.

This is a microcosm of the issues that many pension funds are facing as it does battle with Wall Street bondholders on the bankruptcycases of the California cities of San Bernardino and Stockton.

The city of Canyon Lake said it is prepared to pay a termination fee to the California Public Employees' Retirement System. One of the reasons for such termination is the increased employer contribution rate by 50% in the next few years. This raised figure was a decision made by the Calpers board last Wednesday.

Calpers, for its part, had received the notice from Canyon Lake and downplayed the termination saying other cities and counties have also opted out of their existing contracts with the fund. What is different with the Canyon Lake move is that it is quitting the plan altogether, something very new to Calpers. The fear now is if this is the exception or the trend to come.