Good governance practices don’t always draw headlines. But staying
out of the news may be a reflection of a retirement system that is running
smoothly and adhering to standards that protect the best interests of its members
and retirees as well as employers and taxpayers.
Conference on Public Employee Retirement Systems (NCPERS)
recently issued guidelines for governance best practice for public retirement
systems. The guidelines serve as a checklist, of sorts, for policies,
procedures, and practices of public retirement systems such as Colorado PERA
that help ensure stakeholder needs are effectively met.
According to NCPERS, there is a strong link between retirement
systems that follow best practices and their performance. Research shows that
effective governance may improve long-term investment returns by up to 2.4
percent, annually. And, along with effectively implementing best practices, the
need for retirement systems to communicate about how they work to benefit their
stakeholders has never been greater.
Best Governance Practices for Public Retirement Systems includes the
following categories of best practice, each of which PERA works to achieve.
According to NCPERS, “a fund should adopt a governance manual that serves as a central repository for the fund’s primary governance documents.” PERA’s Governance Manual, first developed in 2001 and updated on a regular basis as standards change, provides a framework and starting point for our oversight and governance functions, including:
- Summaries of statutes, regulations,
and Board practices;
- PERA’s Mission and Vision;
- Board policies, including the Board Performance
can have a proven impact on performance and risk oversight. The PERA Board of
Trustees engages in best practices to ensure strong oversight and plan
performance. A few practices are:
- Development of a strategic plan, updated for 2019-2023;
- Undertaking Board evaluations, as
referenced in the Governance Manual;
- Conducting actuarial valuations to inform the Board of the fund’s
future financial needs;
- Using asset allocation studies to
identify asset mixes for meeting future financial needs;
- Voting its proxies.
The PERA Board
has adopted several policies designed to guide the retirement system to its
stated goals, such as:
- Standards of conduct, ethics and conflict
of interest rules, such as those included in the Governance Manual;
- A Board Communications Policy that
facilitates effective communications and outlines standards and procedures for
trustees and executives, included in the Governance Manual;
- An Investment Policy that includes goals, monitoring
procedures, and Board risk tolerances.
management includes policies and assessments that provide accountability:
- Risk assessments (e.g. audits) that test controls and potential
outcomes of risk events;
- Early adoption of sensitivity analyses,
some of which is included in the CAFR;
- Key measures, such as signal light reporting, that assess risk exposure.
planning is a hallmark of successful organizations. PERA’s Strategic Plan, newly updated in 2019, includes several
components. A few examples consist of:
- Goals and performance measures for key
- Review of long-term investment goals,
investment risk tolerances, and diversification objectives;
- Succession and leadership development
plans and refreshed Board policy.
Reporting: Key Performance and Risk Measures
PERA issues a
number of performance and risk reports, many of which are compiled within the
A few highlights:
- The funded ratio as measured by the
ratio of fund assets to fund liabilities;
- Net annualized investment returns
relative to the return assumption and benchmarks;
- Future benefits owed to members as
measured by the actuarial accrued liability;
- Net assets available for benefits.
PERA also reports on the results of its effectiveness with members through the
annual CEM Benchmarking review of service and cost, incorporating:
- Timeliness and accuracy of
distributions paid to members and beneficiaries;
- Member satisfaction with fund services
as measured by surveys and correspondence.
- A mission
statement that describes
the fund’s purpose to members and the public;
- Surveys that measure participant
satisfaction, while providing a basis for improvements;
- Updates, letters, annual reports on fund operations and forms for
At PERA, we strive to exceed expectations and to provide
transparency into complex operations. These policies and practices establish a
foundation to ensure that PERA operates as an efficient, trustworthy partner in
providing retirement and other benefits to more than 600,000 current and former
Colorado public employees.
CafrPERA's Comprehensive Annual Financial Report, released annually in June, contains audited information about PERA's investment program and operationsDiversificationA strategy of reducing exposure to risk by combining a wide variety of investments within a portfolio.