On June 21, the Colorado PERA Board of Trustees released the 2018 Comprehensive Annual Financial Report (CAFR). The report includes 2018 information on PERA’s financials, including the funded status of the plan and the 2018 investment performance. The report, as well as an abbreviated interactive overview, is available on the PERA website.
For the year ending December 31, 2018, one of the major factors influencing the fund was passage of SB 18-200. This landmark legislation included major changes to the plan including provisions to help PERA stay on the path to reach full funding by 2047, even when there are departures from PERA’s core assumptions, including the investment return. When needed, these provisions will automatically trigger changes in contributions and annual increases.
For most investors, 2018 was a difficult year. For the year ending December 31, 2018, PERA’s investment portfolio returned a negative 3.5 percent, net of fees. Beyond economic conditions, changes in demographics also contributed to overall actuarial losses to the fund. The fund closed the year 2018 with a fiduciary net position of $45.2 billion, representing a $3.8 billion decrease compared with the year ending 2017. Over 30 years, the fund has increased the fiduciary net position by $37.2 billion.
The automatic adjustment is already working as intended: Last year’s investment losses coupled with demographic shifts mean that the automatic adjustment will be used in July 2020, adjusting member contributions, employer contributions, and the AI paid to retirees. Recall that SB 200 contained scheduled increases for members of 0.75 percent in July 2019 and 0.75 percent in July 2020. (Except for members in the Local Government Division.) In addition, the AI paid to retirees was suspended for the second year. Due to the automatic adjustment, member contributions will increase by an additional 0.5 percent in July 2020 and the AI paid to retirees will be set at a maximum of 1.25 percent. As such, starting in 2020, most members will contribute a total of 10 percent to PERA from each paycheck. The amount all employers contribute to PERA will also increase by one half of one percent in July 2020. Total employer contributions will range from 14.2 percent to 23.6 percent, depending on the Division, in addition to the $225 million direct distribution from the State of Colorado.
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