The Colorado PERA Board of Trustees is constantly monitoring the performance of the PERA fund and the long-term health and sustainability of each of PERA’s divisions (State, School, Local Government, Judicial, and DPS).
On August 14, 2018, PERA’s actuarial firm reported to the Colorado General Assembly’s Legislative Audit Committee that PERA’s divisions, after the effects of SB 200 are taken into account, now have green or dark green signal light indicators, meaning that all divisions are projected to be 100 percent funded by 2048.
One of the key aspects of performance that the Board considers is the risk profile for each division trust, essentially the likelihood that something negative could happen that would threaten any division’s sustainability and PERA’s ability to pay benefits over the long term.
To better communicate the fund’s risk profile in a straightforward way, the Colorado General Assembly’s Legislative Audit Committee in 2014 directed the Office of the State Auditor to contract with an actuarial firm to develop a methodology to simplify the understanding of PERA’s financial status. The result of this study was the creation of a signal light color framework to report on PERA’s financial status.
Using a signal light color framework, the tool indicates how long it will take each PERA division to reach full funding, where dark green status means that a division would be funded by 2041 (30 years from 2011) and dark red status means that a division would run out of money within 20 years, with additional categories in between to indicate a spectrum of risk.
Last year, most PERA divisions were in the orange category, meaning that the PERA Board should develop a corrective action plan to reduce the amount of time it will take PERA to be fully funded. The result was the Board’s recommendation to the Colorado General Assembly that ultimately became Senate Bill 18-200 (SB 200).
The two largest of PERA’s member divisions, State and School, are in the green category which means that these trusts are projected to be 100 percent funded by 2048 (30 years from 2018). The Local Government, Denver Public Schools, and Judicial Divisions are in the dark green signal light category and are projected to be fully funded by 2041 (less than 30 years from 2018).
Read the full Hybrid Defined Benefit Plan Signal Light Reporting Report as presented to the Legislative Audit Committee on August 14, 2018.
Defined benefitAlso known as a pension, this is a type of pooled retirement plan in which the plan promises to pay a lifetime benefit to the employee at retirement. The plan manages investments on behalf of members, and the retirement benefit is based on factors such as age at retirement, years of employment and salary history.
Perhaps our living cost raise could be reinstated?
Dear Ms. Schmidt,
Thank you for your question. The legislation enacted earlier this year contained a provision to adjust the annual increase if PERA is on track to being fully funded in 30 years. You can read more about the automatic adjustment feature here: https://www.peraontheissues.com/index.php/2018/06/13/senate-bill-200s-automatic-adjustment-keeps-pera-full-funding-on-track/
Are the automatic adjustments calculated for each division, or for the entire fund? In other words, could the Annual increase go up in the local government, Judicial, and DPS divisions since they are doing well (and are dark green) and not increase in the State and School divisions?
Dear Ms. DeBoer,
Thank you for your question. The automatic adjustments will be made based on the progress toward achieving the goal of full funding for the entire fund. The annual increase adjustments would be made for all benefit recipients, regardless from which division the member retired.