Month: March 2016

UPDATE: Congressional Hearing Announced on Equal Treatment of Social Security

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Don’t miss this opportunity to let elected officials know how the WEP and GPO have or will impact you.

Rep. Sam Johnson of Texas, chairman of the House Ways and Means Social Security Subcommittee, announced a hearing on Social Security and Public Servants: Ensuring Equal Treatment.

The hearing, scheduled for Tuesday, March 22, 2016, was to focus on two Social Security provisions – the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) – that affect the Social Security benefits paid to certain public employees (which includes many PERA members), as well as proposals to create a more equitable benefit calculation.

The WEP and GPO apply reductions to the Social Security benefits paid to public employees who also receive a government pension (like PERA). In addition, these federal benefit adjustments are not well understood, making it difficult for those affected to plan for retirement.

Ways and Means members are working to replace the current WEP formula with a proportional approach that allows Social Security benefits to be calculated in the same way for everyone, instead of using one benefit formula for some workers and a different formula for others.

Due to limited time, oral testimony at the hearing was limited to invited witnesses only. However, any individual or organization may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing.

The announcement from Chairman Johnson includes details on how to submit written comments. Those comments, submitted in accordance with the formatting required, must be received by the close of business on Tuesday, April 5, 2016.

Read more about how this proposed federal legislation could eliminate the Windfall Elimination Provision, or WEP, on PERA on the Issues. Or for more information about the Equal Treatment of Public Servants Act of 2015 (H.R. 711), visit the House Ways and Means Committee.

Retirement Roundup: This may be one of the best things about turning 50

Posted on by planeteria

A digest of timely information and insight about finance, investing, and retirement.

This may be one of the best things about turning 50 | MarketWatch

If you are age 50 or older, you can make extra “catch-up” contributions to certain types of tax-favored retirement accounts. There’s still time to make an extra catch-up contribution to your IRA for the 2015 tax year. The deadline is April 18.

Once you’ve reached age 50, you can make catch-up contributions to your traditional IRA or Roth IRA. And if you were 50 or older as of Dec. 31, 2015, you can still make a catch-up contribution for the 2015 tax year. If your employer allows them, you can also make extra salary-reduction contributions of up to $6,000 to your 401(k), 403(b), or 457 account.

Fewer of us save, more are confident of retirement. Are we crazy? | Bloomberg

The retirement confidence of Americans has come a long way since the recession. But it isn’t because of a surge in the number of people who are saving, according to the Retirement Confidence Survey released by the Employee Benefit Research Institute. The percentage of workers saying they or their spouse saved for retirement is 69 percent in 2016. And only 48 percent of workers have even tried to figure out how much money they’ll need to live on in retirement.

Workers with a retirement plan contributed the most to the higher overall confidence numbers. Many of the “very confident” have, or have a spouse who has, a defined contribution plan, an IRA or a defined benefit plan from a current or previous employer. Of workers with such savings plans, 26 percent were “very confident” about being able to afford retirement, compared with 10 percent of those who don’t have accounts.

Are you single? Social Security shows how your retirement could be at risk | The Motley Fool

Non-married people face a much tougher retirement than married people, according to data from the Social Security Administration. The median income for non-married seniors in 2013 was about one-third that of married seniors, with a typical single senior’s income clocking in at a mere $18,643 per year. While the road to a comfortable retirement is tougher for a single person than for a married couple, the more challenging path means that the sooner you get started, the better your chances of navigating it successfully.

Test your retirement IQ | Kiplinger

Ignorance may be the biggest threat to a comfortable retirement. Decisions leading up to retirement, including how much to save, how to allocate your investments, and how to anticipate retirement expenses can make a big difference. And the decisions don’t stop on Day One of post-career life. This quiz can help pinpoint how well-versed you are on this critical subject.

Stocks soar 13% in 5 weeks. Is the market too hot? | CNN Money

In just five weeks, the S&P 500 is up an incredible 13 percent from the February 11 lows. That rally has lifted the stock market into positive territory in 2016. Considering the market had its worst start to a year on record, it’s an impressive feat. But the speed of this rebound has some scratching their heads.

How to get people to delay retirement | The Wall Street Journal

The average American retires relatively early, at 64 for men and 62 for women. But with life expectancy rising by one to three moths with every year that passes, economists and policy experts say leaving the workforce at such ages is a luxury most people can no longer afford. Extending working lives is the most powerful lever we have to increase retirement security.

Proposed Legislation Would Confuse the Facts

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Proposed federal transparency legislation (PEPTA) would confuse the facts.

Rep. Devin Nunes of California has reintroduced legislation (H.R. 4822) requiring public pension funds such as Colorado PERA to produce a separate set of financial reports. This would be in addition to all of the financial reporting and compliance such pension funds already provide to local, state, and federal governments and agencies.

For any public pension fund that did not provide this second set of financial reports, the proposed legislation would disallow issuing tax-exempt bonds. Most of PERA’s 500 affiliated employers issue bonds as a way to finance necessary capital projects, so this provision in federal legislation could curtail important bond-financed projects like roads and school construction.

This legislation, known as PEPTA or the Public Employee Pension Transparency Act, has been introduced several times recently, including by Rep. Nunes in 2010 and again in 2013. Similar provisions were also included in the Puerto Rico Assistance Act of 2015, despite the fact that they were not germane to the underlying financial concerns in Puerto Rico. (See Puerto Rico and Pensions on PERA on the Issues, for more information.)

PERA opposes this legislation and we urge you to use our advocacy center to contact your members of Congress and ask them to say ‘no’ to PEPTA by declining to sign on as a co-sponsor.

More specifically, PEPTA would:

  • Burden state and local government pension plans, including Colorado PERA, by requiring an additional set of financial reports in addition to what is already required, such as standards set forth by the PERA Board of Trustees (Board) and the Government Accounting Standards Board (GASB). (Read more about how pension rules adopted by GASB have already enhanced pension disclosure.)
  • Require public pension plans to overstate their future liabilities by dictating that the second set of financials measure future liabilities using a rate of return linked to interest earned on Federal Treasury bonds. Such a low interest rate would make pension liabilities appear to be larger than even many of the most conservative actuarial forecasts. (Currently, the rate of return as dictated by the legislation is less than 3 percent, while the PERA Board, after considering information from investment and actuarial advisers, has set the current assumed rate of return at 7.5 percent.) Two sets of drastically different financial statements would also confuse the public, failing to provide any clarity or transparency with regard to public pension accounting.
  • Impose inappropriate, costly, and burdensome federal mandates while restricting state and local governments that cannot meet the requirements of the legislation from issuing federally tax-exempt bonds. This would divert taxpayer resources from other priorities, add red tape onto state and local governments, and overreach into the business functions of state and local pension plans that are neither funded nor operated by the federal government.

Over the last six years, PERA has taken significant steps to strengthen its long-term sustainability. Landmark legislation passed in 2010 (SB 1) required sacrifice from members, retirees, and employers in order to return PERA to long-term sustainability. The result? A $15 billion reduction of the unfunded liability to date. The proposed legislation would do nothing to improve the funded status of the plan, and would instead burden both taxpayers and pension plan administrators like PERA.

Already, PERA is subject to numerous comprehensive oversight and reporting requirements, including the significant pension disclosure standards recently required by GASB. Since January 2015, PERA has been the subject of three independent studies and in December 2015, PERA provided the Colorado General Assembly with a five-year report on the impacts of SB 1. Like many pension plans for public employees, PERA continues to be transparent and innovative, looking for ways to enhance what is already a strong and sustainable retirement plan for Colorado’s public workforce.

Contact your members of Congress now and ask them to oppose PEPTA legislation by choosing not to be a co-sponsor.

More information: PERA Letter to Congressional Delegation | State and Local Fiscal Facts: 2016

Retirement Roundup: What to Know About Taxes in Retirement

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A digest of timely information and insight about finance, investing, and retirement.

What to know about taxes in retirement | U.S. News & World Report

A growing number of financial professionals are advising clients on how to prepare for potentially significant tax hits, even after retirement. Retirees can mitigate their tax burdens in a number of ways, such as being strategic about IRA withdrawals, organizing assets into categories based on their tax implications, and considering the taxes associated with any Social Security benefits.

U.S. women far more likely than men to be poor in retirement, research shows | Reuters

Women in the United States are 80 percent more likely than men to fall into poverty once they retire because they earned less than men on the job, took time off for their families and tend to live longer, according to research from the Washington, D.C.-based National Institute on Retirement Security.

Baby boomers readying to retire have some work to do, study shows | The Motley Fool

Ameriprise Financial looked at how pre-retirees were planning to pay for their lifestyles once they gave up their paychecks, and how retirees were doing it. Ameriprise discovered that aside from a few similar concerns (health care expenses, fear of market volatility), the two sides were quite a distance apart in terms of retirement preparedness.

The graying of American debt | Liberty Street Economics

The U.S. population is aging and so are its debts. Debt balances of younger borrowers have declined modestly from 2003 to 2015. But debt held by borrowers between the ages of 50 and 80 increased by roughly 60 percent over the same time period.

The retirement revolution that failed: Why the 401(k) isn’t working | The Fiscal Times

Across the political spectrum, analysts warn that the growing population of retirees will overwhelm the Social Security program, and that something must be done to shore up its finances. We’re now in an era where 401(k)-style defined-contribution plans have become dominant, replacing defined-benefit pensions. And a new study shows that this change leaves Americans woefully unprepared for their non-working years, with resources too meager to uphold their standard of living.

Why you need friends in retirement | PlanSponsor

New research from the Stanford Center on Longevity says that social engagement promotes physical and mental health, while social isolation costs people both personal and medical problems. The study analyzes two main areas: meaningful relationships and social engagement. And while social engagement has gone down marginally in American since 1995, it has decreased significantly for baby boomers between 55 and 64 years old.

Health Care Trends

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PERA on the Issues is launching a new health care category. We’ve brought more experts onto our team to help provide the latest information and resources about health care trends and how those impact retirees and public employee retirement plans.

We learned from our recent survey that readers want to learn more about health care and retirement-related health care topics. We’ve also heard requests from members and retirees for objective information about health care policy and how policies affect them.

We plan to cover a range of health care topics:

  • Health care coverage options for pre-Medicare and Medicare-eligible retirees.
  • Potential changes to health care coverage for public employees and retirees.
  • Advances and innovation in health care options for PERA members or retirees, such as PERACare Select.
  • Proposed policy changes that could impact health care options or health care coverage, such as the “Cadillac tax” on high-cost health plans.
  • Health care cost predictions that could impact retirees or public employee retirement plans like PERA.

You can also expect us to look into emerging – and transforming – health care trends:

And framing this entire topic is some interesting research that many factors – not just health care – can help make communities healthier places to live, learn, work, and play:

Health care policy issues are complex and we expect some of our coverage of those issues will be too. We will continue to provide an objective perspective, keeping in mind some of the unique circumstances and challenges that public employees and their retirement systems face.

Stay tuned!

Colorado PERA Named Best Public Pension Plan

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Colorado PERA has been named Best Public Pension Plan by the 2016 Markets Choice Awards, hosted by Markets Media.

PERA was recognized for its innovation and leadership among public pension funds, drawing accolades from market experts for being ahead of most of its public pension peers in trading, technology, and market structure savvy.

The Markets Choice Awards recognize excellence among the firms and individuals that are the lifeblood of financial markets, including exchanges, sell-side desks, institutional buy-side investors, hedge funds, and technology providers. Winners were selected through a digital voting process at marketsmedia.com, interviews with senior market participants, and consultation with Markets Media’s Advisory Board.

“As fiduciaries for public employees whose investment horizons can span many decades, we are truly long-term investors,” said PERA Executive Director Gregory W. Smith.  “Our results over the past five and ten years are evidence of our ability to manage for long-term performance. We appreciate that our strategic approach and consistent returns are being recognized by market leaders,” he added.

“We consider opportunity and innovation in the context of what we think is going to be valuable in the long term, not just what is popular today,” added PERA Chief Investment Officer Jennifer Paquette. Read the profile of Ms. Paquette in the July 2014 issue of MarketsMedia.

PERA currently invests in five primary asset classes of global equity, fixed income, private equity, real estate, and an opportunity fund that is comprised of investments that do not fit into the other asset classes.