A new analysis of reporting standards for public retirement systems was recently released by the Center for State and Local Government Excellence (SLGE) confirming that Colorado PERA is getting it right when it comes to communicating the financial status of the plan. The report, “Public Pension Reporting and Disclosure: The Current State of Practice and Examples of What Works Well,” developed by SLGE with input and assistance from the National Association of State Retirement Administrators, finds 72 of the 83 systems in the sample follow the Government Finance Officers Association (GFOA) reporting standards in producing their comprehensive annual financial reports (CAFR), with nearly half of the sample also developing a plain language or popular annual financial report.
Best practices include conducting an actuarial valuation once a year and an experience study every five years. PERA’s actuarial valuation is performed by an external consulting firm that reports to the PERA Board of Trustees. The actuarial valuation is posted on the PERA website along with the Comprehensive Annual Financial Report (CAFR) and the Summary Annual Financial Report (plain language or popular report), which is also mailed to all PERA members in July.
SLGE included the disclosure of investment fees in the CAFR and online as well as using benchmarks to compare investment performance among the ways to promote transparency. (Investment expenses paid by PERA are on page 29 of the 2015 CAFR and asset class benchmarks are provided on page 123.)
According to the SLGE report, “Certain themes surface with regard to systems that have developed robust communication and financial reporting initiatives: the importance of active, two-way communication between the system and all stakeholders; the identification of communication and reporting as a priority by system leadership; the engagement of all stakeholders, even critics, before, during, and after the implementation of policy, benefit, and programmatic changes; and the openness to using social media technologies and/or establishing formal structures (e.g., advisory committees) to garner detailed feedback from a range of stakeholders.”
The PERA Board of Trustees has as a priority the engagement of stakeholders and has a standing committee devoted to ensure a strong communications outreach effort is in place. SLGE noted that successful systems facilitate open communication “before, during, and after” the implementation of changes – a practice PERA is taking to the next level with the PERA Community Outreach Tour website, the PERA on the Issues and The Dime blogs, and telephone town hall meetings.
Actuarial valuationAn annual assessment of a pension plan’s finances and membership. This forms the backbone of the plan’s annual financial report.BenchmarkA tool used to measure performance. For example, an investor can use a stock index as a benchmark to measure his/her own investment performance compared to the market as a whole.Asset classA category of similar investments. Common asset classes include global equity (such as publicly traded stocks), real estate, and cash.
