Retirement insights from a Colorado PERA perspective

Inside Colorado PERA

PERA Board Releases 2021 Annual Report at June Meeting

2021 Annual Comprehensive Financial Report cover

The Colorado PERA Board of Trustees met on Friday, June 17 for its third meeting of 2022.

The Board took action on a number of important items, including approving the release of PERA’s 2021 Annual Comprehensive Financial Report, and announcing results of the recent Board election.

2021 annual report released

Every June, PERA releases its annual report for the previous year. The 2021 Annual Comprehensive Financial Report (ACFR) is a detailed summary of PERA’s investment performance, funded status and membership information for the 2021 calendar year.

Financial performance

For the year that ended Dec. 31, 2021, PERA’s investment portfolio earned a return of 16.1% net of fees, surpassing its benchmark of 13.7%. Over the past 10 years, the fund has earned an annualized return of 10.9% versus its benchmark of 10.1%.

The value of the total fund increased to $65.6 billion in 2021, up from $58.3 billion at the end of 2020. PERA’s funded status at the end of the year was 67.8%.

“While 2021 was a strong year financially for PERA, investment performance is just one factor among many that determine how much progress we’re making toward our goal of full funding,” said PERA Executive Director Ron Baker. “It’s important that we keep our focus on that long-term goal, monitoring and reacting to any changes to keep PERA on track.”

Automatic Adjustment Provision

When the Colorado General Assembly passed the package of PERA reforms known as Senate Bill 200 in 2018, the Legislature mandated that PERA reach full funding within 30 years — by the end of 2047. Included in those reforms was the Automatic Adjustment Provision (AAP), which automatically adjusts member and employer contributions as well as the Annual Increase (AI) paid to eligible benefit recipients if PERA is off-track to meet that target.

The AAP calculation is made on an annual basis, to take effect the following year. Based on 2021’s financial results, adjustments will not be necessary in 2023.

For more information, read the full ACFR here or visit copera.org/snapshot to explore the report’s highlights in an interactive format.

Board election results

The Board held an election for open seats in the School and State divisions in May and announced the final results at its June meeting.

Members of the School Division elected Scott Smith to represent them on the Board. Smith, chief financial and operating officer at Cherry Creek School District 5, fills a seat currently held by Guillermo Barriga, who did not seek re-election.

The State Division elected Tracy Marie Rushing. Rushing, a supervisor in the Division of Vocational Rehabilitation at the Colorado Department of Labor and Employment, fills a seat currently held by Ashley Smith, who was appointed to the Board in 2021.

In addition to the above results, the Board appointed two new Trustees. The Board appointed Catherine “Trina” Ruhland to represent the Local Government Division. Ruhland is a deputy county attorney with the Boulder County Attorney’s Office. Ruhland fills a seat vacated by Cheryl Pattelli, who left the Board in November 2021.

The Board appointed JB Phillips to represent the School Division. Phillips is a middle school science teacher in Fruita and fills a seat vacated by Tina Mueh, who retired at the beginning of June.

Ruhland and Phillips, as appointees, will serve seats until the next Board election in 2023.

Click here for more information on the Colorado PERA Board of Trustees.

Automatic adjustment provisionAn automatic change to PERA contributions (employer, employee, state direct distribution) or the Annual Increase based on funding levels.

Comments

  1. Andrew Burns says:

    I have a question. The artsy as the “benchmark” is 13.7%

    What is the benchmark? I may be confusing that term with the expected rate of return that is about 7%? Can anyone help clarify? Thanks!

    • PERA On The Issues says:

      Hi Andrew, thanks for the question. The assumed rate of return (7.25%) is the rate PERA aims to achieve over the long term. The benchmark, on the other hand, is used to determine if PERA’s investments are earning more or less than the market as a whole in a given time period. For example, the benchmark PERA uses for its global equity asset class, which includes publicly traded stocks in companies based in the U.S. and abroad, is called the MSCI ACWI IMI with USA Gross (https://www.msci.com/documents/10199/42f6c769-59ec-4847-a334-24b549b72d9b#:~:text=The%20MSCI%20ACWI%20Investable%20Market,global%20investable%20equity%20opportunity%20set.). It is a commonly used benchmark for institutional investors like PERA and is designed to capture 99 percent of the global equity market.

      • Very skeptical says:

        Does this include member contributions or is it just investment gain? The member report you send me are very misleading because they include member contributions as part of the “gain”…

        • PERA On The Issues says:

          Thanks for the feedback. The 16.1% rate of return mentioned in the article refers only to investment gains. The total fund value of $65.6 billion takes into account additions such as member contributions and investment income, minus deductions such as benefits paid and administrative costs.

    • Paula says:

      Andrew… I hope you take the time to dissect the response you rec’d from your question.

      They are saying 7% is what is needed long term to keep up and pay obligations. But what they USE to decide on an increase is nearly TWICE what they need. So, using a much higher ‘benchmark’, the decision to reduce or eliminate any raise for us is much easier. Also notice, this years 16% revenue gain on investment, ( roughly 42% MORE than the long term target) is STILL resulting in a mere 1% increase for retirees, in the midst of highest inflation in decades.
      The 2010 taking of benefits earned continues to damage retirees who retired prior to 2010 with a 3.5% “ guaranteed annual increase” specified as a benefit, then retroactively stripped.

  2. Debbie B says:

    So, that sounds like good news but we only received a 1% increase. Doesn’t quite add up or keep up with the inflation rate soaring.

    • PERA On The Issues says:

      Hi Debbie, the amount of PERA’s Annual Increase (AI) is set in statute and can adjust up or down based on PERA’s funding progress, along with member and employer contributions. As set out in Senate Bill 200 in 2018, the AI can’t go any higher than 2 percent while PERA has unfunded liability. The only way that could change would be if the General Assembly decided to change state law. This document has more information on adjustments to the AI and contributions to keep PERA on track: https://www.copera.org/files/49c1c4307/AAP+Fact+Sheet-6-22_Final.pdf

  3. Deb says:

    I agree with Debbie B. 1% AI what ever happened to the 2 to 4% AI which was paid to retirees of less than 5 years ago?

    • E E G says:

      Did you know Social Security paid over 5% this year and is projecting more than 8% for next year? Maybe PERA should review a program that works.

  4. Alice Castro says:

    I’m just curious as to whether PERA retirees will be getting an increase this year. Sure would be nice if the interest rate could be better than 1% because of inflation.

  5. Mark Friedman says:

    What is PERA doing to help its retired members keep up with the high inflation?

    • PERA On The Issues says:

      We understand the challenges that inflation poses to our retirees and members. Our mission is to provide retirement security for our members while ensuring the sustainability of the fund. By doing so, current and future retirees can continue to count on PERA to provide a source of income in retirement that they can’t outlive.

  6. judith says:

    I’d like to know what steps PERA is taking to shore up our investments during the coming, predicted downturn. I am concerned about the recession, and it’s effects on us personally, but also on the nest egg for my future well being.

  7. Steve Howard says:

    To my fellow retirees. I know the background of PERA’s promises, 3.5% upward adjustment from the past; a contract with the retirees, buying extra years-of-service at “below replacement cost rate,” and more. But, that’s just it, it was in the past. PERA needs to meet certain criteria by 2047. While it is remarkable that PERA did well for 2021, 2022 looks (as of June, 2022) like it could be a down year. That could me a very skimpy .25% raise. We are living longer, we are more health conscious. The reality is PERA will not be able to keep up with inflation. If you have the ability to do some part time work (not all of us can), I would suggest you try this out. There are lots of reasons not to work (cost of transportation, clothes, gas prices), but a person will probably have a little money left over and, perhaps some new friendships. We are living longer, No professional could have seen this dramatic increase, despite actuarial tables and professionals. The state legislature will not, has not, been able to increase contributions to PERA to cover all of the increases. The principal is shared sacrifice, and that is today’s reality.

    • Carol Lopez says:

      Steve, thanks for a good overview of the big PERA picture. I’ve been a PERA member since the late 1970s. Although PERA has changed over time, because of changed state legislation and financial conditions, we were never promised that our pensions would keep up with inflation. Just as PERA needs to plan for the long term so should each of us in our personal financial planning.

    • Steve K says:

      Steve, Senate Bill 200 (2018), was intended, as you describe, a “shared sacrifice”. However it was proposed that the burden was to be 1/3, employers, 1/3 employees & 1/3 retirees. With inflation over 8% and COLAs at 1-2 %, Retirees will be doing most of the sacrifice.

    • Barry says:

      Please see above, where PERA made 65+ Billion AFTER all their payouts.
      Please note that every taxpayer in Colorado is getting a rebate of over 700 dollars. My 1% Annual “increase” is nowhere near that. I reject the opening reference to PERA’s “promises “. These were contracts accepted by retirees in good faith, upon which life decisions were based, not mere promises. PERA and legislature breached contract when they retroactively changed a pre contracted condition.
      If “fully funded” means anything at all, they should fund the contracts they made, and any up or down should have been instituted going FORWARD. PERA owes the Retirees who were already retired in 2010, 3.5% from 2010 to 2022, or they have defaulted and are already unfunded with respect to their contractual liabilities.

  8. Alberto Paredes says:

    I could, sadly, envision that the Social Security retirees will be moving to “under the bridge” B4 COPERA’s ones. However, at some point we will all be, like in any 3rd. world country, losing acquisitive power Vs. inflation. Now it is 8.5% Vs. 1%, which is better than having no retirement income at all. The motto is “There will be retirement for all, or for no one”. Sorry, Charlie, the principle is “hold your breath”.

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