In light of the PERA Board adopting changes in economic and demographic assumptions, the PERA Board of Trustees received updated information from their actuaries regarding the length of time it will take to become fully funded, and the impact of various options to reduce the risk to PERA members and the system. It is important to note that all major Divisions are stable, solvent, and able to pay all benefits in perpetuity, but the changing conditions have resulted in amortization periods that exceed the Board’s policy of 30 years.
Any benefit and contribution changes to Colorado PERA require a majority vote in both houses of the General Assembly and the Governor’s signature. While the Board has not made any decisions on recommendations for changes, the Board believes it is prudent to start looking at what options exist to shorten the amount of time it takes to become fully funded.
The PERA Board takes very seriously its fiduciary responsibility to all members and retirees, and will continue to provide factual information and data to inform conversations and decision-making. PERA will be leading stakeholders through a process to discuss its funded status and explore options related to contribution and benefit changes. This process will take place over the next year so there will be plenty of opportunities to get involved. The following presentation was delivered to the Board on January 20 and explores three scenario categories, each with multiple variables, and the expected change to the current amortization period if adopted. Categories include:
- Contribution changes
- Plan design
- Economic experience
The presentation may be viewed here.
Review The Impact of PERA’s Assumption Changes fact sheet.
We look forward to engaging all stakeholders in the coming year and welcome your comments below.
FiduciaryA person who manages money on someone else’s behalf and who has a sworn responsibility to manage those funds in the best interest of the client. AmortizationThe act of paying down debt or liabilities over time.
The implications are frightening for those of us already retired, particularly the reductions in annual increases. I am glad you looked at the “purchasing power” impacts, but still is very burdensome for retirees who had the impression that we could count on the COLAs. What ever happened to the state’s obligations to its retirees?
Over the years, I have been a critic of COPERA’s funded status and investment modeling but was answered paternalistically along the lines of, “everything’s alright, sonny boy, we know what we’re doing.” A quick glance through the Actuarial Impact Analysis shows that we’re one market “disaster” away from exhaustion. Newsflash: a 25.8% market drop is not a disaster but is standard periodic market behavior. The coming one year dog and pony show is really to demonstrate how all viewpoints from all constituents were heard. My prediction is that everyone will feel pain in the name of “fairness” and that employers/employees will pay more and that retirees will get less. This could get ugly for those retirees who have no other source of income.