In June, the Board of Trustees of Colorado PERA released the Comprehensive Annual Financial Report (CAFR). The CAFR disclosed the total PERA fund investment return from 2015, which was 1.5 percent.
“It was a very challenging year in terms of the investment markets,” noted PERA Executive Director Gregory W. Smith in the release of the CAFR. “We were able to achieve a positive return in an environment when a number of other public funds did not, which affirms PERA’s investment strategy and allows us to offer our retirees and the entire state a reliable source of economic stability,” Smith added.
Taking into account the 2015 investment return, the PERA trust fund is now 60 percent funded, meaning PERA’s current and future liabilities exceed its assets. For recent historical perspective, in 2010, PERA was threatened with insolvency and the General Assembly passed legislation to reduce benefits for members and retirees.
During the 2009 legislative session and as the significant decline in the financial markets associated with the Great Recession were recognized, the General Assembly directed the PERA Board to develop recommendations that would return the PERA trusts to long-term sustainability. Thus, the resulting 2010 legislation began as a recommendation from the Board after an extensive review and analysis process that included discussions with stakeholders throughout the state. The Board unanimously supported the reform measures of Senate Bill 10-001 – even those Board members who were directly impacted by the personal sacrifice shared by all PERA members.
The most important responsibility of PERA Trustees is to act as fiduciaries. Trustees are bound by a fiduciary obligation to act in the best interests of PERA members, retirees, and other beneficiaries, including survivors and those on disability. The changes that began in 2010 brought PERA back to solvency. Based on last year’s financial performance, it will take 44 years to reach 100 percent funding. While that is certainly a long time, PERA projections, along with independent projections performed for the Office of the State Auditor, show PERA will continue to be able to pay benefits now and into the future. Despite the continued solvency of PERA, the increased duration to reaching full funding is concerning.
The Board has just concluded two rigorous Request for Proposals (RFP) processes to select both an investment consultant and actuarial firm, making final selections in January and June, respectively. This positions the Board for in-depth analyses of the investment and actuarial assumptions that are used in assessing PERA’s financial health in the future.
The Board will share that information with members and a range of other stakeholders, including legislators who have the responsibility for setting PERA benefits and funding (the Board does not have that power). The PERA Board continues to remain open to all viable ideas that serve the members and their beneficiaries.
Learn more about the PERA Board of Trustees.
Trust fundA fund in which money and/or other assets are held and managed by trustees on behalf of plan participants. PERA maintains trust funds for each of its Defined Benefit Plan divisions (State, Local Government, School, Denver Public Schools, and Judicial).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. Actuarial assumptionData such as demographics, mortality rates, and investment returns that retirement plans use to calculate future assets and liabilities.
