In this story:
- The PERA Board approved and released the 2020 Comprehensive Annual Financial Report
- In 2020, the total fund’s investment portfolio returned 17.4%, net of fees
- The total fund was valued at $58.3 billion, up from $51.7 billion at the end of 2019.
- The Annual Report also announced that the automatic adjustment provision (AAP) will go into effect in 2022
- The primary drivers of the AAP going into effect were the updates to PERA’s actuarial assumptions and the impact of the pandemic on PERA’s membership
The Colorado PERA Board of Trustees approved the release of the 2020 Comprehensive Annual Financial Report (Annual Report) during its Board meeting on June 19.
The Annual Report is a detailed summary of PERA’s investment performance, funded status and membership information for the 2020 calendar year.
“This report reflects the ways in which we met the challenges faced in a highly unusual year,” said Ron Baker, PERA’s Executive Director. “Last year was a tough year for so many people, and at PERA our focus remained on members and retirees.”
Global equities fuel strong investment return
For the year ending Dec. 31, 2020, the total fund’s investment portfolio returned 17.4%, net of fees, significantly above its benchmark of 14.1%. The 10-year annualized return is 9.4%. PERA’s funded ratio at the end of 2020 was 62.8%. The total fund was valued at $58.3 billion, up from $51.7 billion at the end of 2019.
Returns by asset class are shown below alongside the benchmark for each asset class:
Automatic adjustment provision goes into effect in 2022
While the investment returns were positive last year, it is important to remember that investment performance is one of many factors used to calculate a plan’s funded status.
In 2020, the Board reviewed PERA’s actuarial assumptions through a process known as an Experience Study, which takes place every four years. That review resulted in changes to assumptions used to calculate PERA’s funded status. The changes reflect that members are living longer and the workforce is growing more slowly than previously expected.
These updates to PERA’s actuarial assumptions, in addition to the impact of the pandemic on the membership, increased PERA’s liabilities. These increases in liabilities mean the automatic adjustment provision will be triggered in 2022.
Beginning July 1, 2022, employer and member contributions will increase by 0.50 percentage points of salary. The annual increase will be reduced by 0.25 percentage points.
“We understand the changes we’re announcing today are difficult for our members and retirees,” Baker said. “However, the impact is clear: This change will help PERA stay on track to reach its goal of keeping PERA secure for its members now and in the future.”