On Thursday, July 7, PERA held two virtual town halls with Executive Director Ron Baker and Chief Investment Officer/Chief Operating Officer Amy C. McGarrity.
More than 3,400 PERA members and retirees joined the town halls live on the web, on the phone and on social media to ask questions. Topics of discussion included PERA’s recently released 2021 Annual Comprehensive Financial Report, as well as current economic conditions, PERA-related legislation, and other topics of interest to members and retirees.
Below are summaries and video clips of some of the topics covered during this year’s town halls. To view full recordings of each event, visit copera.org/townhall.
How did PERA do financially in 2021?
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%.
What is the impact of current market conditions on PERA’s investments?
PERA’s portfolio is strategically designed to perform over long periods of time — not just several years but several decades, McGarrity said. PERA is invested in public and private markets and so our portfolio is experiencing volatility in the short term. Downturns can and do happen in a given year, but the Board’s strategic diversification of the portfolio is meant to ensure the Fund continues to earn returns over the long term.
Why isn’t the annual increase paid to retirees keeping up with inflation?
The amount of PERA’s annual increase is set in statute and is not tied directly to inflation. It can adjust up or down based on PERA’s funding progress, along with member and employer contributions. PERA staff and the PERA Board cannot change the amount of the annual increase, Baker said, only the General Assembly can.
“In terms of what PERA can do as an organization, is trying to do, especially for our retired members, is we are working hard for those of you in PERACare to continue to reduce cost to the extent that we can, knowing that healthcare is a large component of retirees’ [financial] situation in retirement,” Baker said.
How did the 2022 legislative session affect PERA?
The Colorado General Assembly passed several PERA-related bills in 2022. One of those bills directed the state to make up the state’s missed 2020 direct distribution payment of $225 million to PERA. Under HB22-1029, PERA received $380 million from the state on July 1.
That amounts to a restoration of the missed $225 million direct distribution plus a prepayment of a portion of future direct distributions to PERA.
“I am excited about the fact that the bill was passed on a strong bipartisan basis,” Baker said. “Which means Republicans and Democrats felt it was important to backfill the promise to Colorado PERA.”
HB22-1057 temporarily waives working after retirement limits for qualified service retirees working as substitute teachers in any school district while there are critical substitute teacher shortages. HB22-1101 expands provisions that had been scheduled to repeal on July 1, 2023 that allow PERA service retirees to work full-time in certain roles, without a reduction in benefits, for a rural school district that has determined there is a critical shortage of qualified individuals for these positions.
What’s the latest on the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO)?
Several pieces of legislation have been introduced in Washington, DC to modify or repeal the WEP and GPO, which can reduce Social Security benefits for PERA benefit recipients. While similar legislation is introduced each session and PERA engages with Colorado’s congressional delegation to educate them on how the WEP and GPO affect PERA members, Congress has not taken any action, citing the cost.
“The federal government has not come up with a compromise as to where those additional dollars to pay for giving more of a Social Security benefit would come from,” Baker said.
Is PERA divesting from fossil fuels?
“The Board has a philosophy statement surrounding divestment that we will execute divestment as mandated by the state or federal governments, but otherwise choose not to divest,” McGarrity said. “The reason for that is we believe allowing the investors, either internal or external, the broadest possible universe from which to choose investments enables us to outperform for the long term.”
Learn more about the PERA Board’s stance on divestment here.
Is PERA still financially sound?
“Yes, PERA is financially sound,” Baker said. “We do need to keep monitoring the fact that we’re not 100% funded. We need to stay steady in the course of paying down that unfunded liability. Certainly there is not any alarm in which we would not be able to pay benefits in any given year based on current circumstances. This is something we always need to monitor…and ensure that the folks who are receiving benefits continue to receive those benefits.”
How will Colorado PERA change in the next few years and into the future?
“From the benefit plan perspective, I think the benefits we provide will stay the same; they’re set by the General Assembly,” Baker said. “Colorado PERA as an organization…we have been an institution since 1931 and we need to continue to move forward with the times. Do we have a mobile app? Can we allow people to transact in a way that meets them where they are? Are we providing content to people that is on-demand, where they need it to be? That is what I see PERA morphing into in terms of how we deliver services. We need to continue to move forward as an organization and ensure members who are part of this program receive absolutely top-quality customer service and have the same level of interaction with us that you would with any high-end financial institution.”
PERA’s annual town halls are an important opportunity to hear directly from members and retirees and we’re grateful to all who participated. Visit copera.org/townhall for more.
Unfunded liabilityThe difference between the projected amount of money needed to pay benefits earned to date and the amount of money currently available to pay those benefits.VolatilityVolatility of returns is the measurement used to define risk. It describes the variation of price of a financial instrument over time. The greater the volatility, the higher the risk.DiversificationA strategy of reducing exposure to risk by combining a wide variety of investments within a portfolio.