Month: May 2016

The Results are In: $500,000 Savings for PERACare Select Hip and Knee Replacement Surgery

Posted on by planeteria
  • Thinking about having a hip or knee replaced?
  • Are you under age 65?

Investigate PERACare Select.

In 2015, PERA partnered with skilled orthopedic surgeons at three metro-Denver area hospitals: North Suburban Medical Center, Rose Medical Center, and Swedish Medical Center, (all HealthOne medical centers) to provide PERA retirees under age 65 with fixed-cost hip or knee replacement surgeries.

This benefit waives the deductible (excluding members in the HDHP plan because federal law forbids PERA from waiving the deductible) and coinsurance for members who have their joint replacement at one of these hospitals.

Since April 1, 2015, when the program was launched, there have been 40 PERA members who have had either a hip or knee replaced, with ZERO out-of-pocket expense.

The PERACare Plan’s average cost for these procedures decreased by 40 percent over the prior year’s cost. This was an average savings of over $13,000 per procedure, saving PERA more than $500,000 and each participating member thousands of dollars, as well.

Donna Johnson, a PERA retiree, had both hips replaced as part of PERACare Select. “I had a very positive experience,” Donna said. “My doctor was very good and the hospital was excellent as well. Any questions I had were resolved quickly and courteously.”

If you and your doctor have talked about your need for a hip or knee replacement, you can get more information on our PERACare Select program by calling Anthem at 877-737-2258 or visit healthonecares.com/PERA.

Learn more about PERACare Select.

Read more about PERACare Select on PERA on the Issues.

Why isn’t PERACare Select available for Medicare participants?

The federal government negotiates pricing for procedures for Medicare-eligible retirees. In PERA’s self-funded Pre-Medicare plans, PERA has the ability to negotiate a fixed-price for hip or knee replacements.

Colorado PERA Board Election Reminder

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Colorado PERA members will be receiving ballots for the 2016 Board Election in May. This year, members of the State, School, Local Government, and Judicial Divisions will be casting their votes for Trustee candidates. The State Division and School Division seats are for four-year terms. The Local Government position is a two-year term and the Judicial Division position is a three-year term. There will not be an election for either of the two Retiree seats on the Board this year, and because there was only one candidate for the Denver Public Schools (DPS) Division, current Trustee Amy Grant was appointed in March by the Board to a four-year term filling the DPS seat when her term expires on June 30.

The following Trustees will be leaving the Board when their terms expire on June 30:

  • Rich Delk of the State Division who has served on the Board since 2008
  • Amy L. Nichols of the School Division who has served on the Board since 2000
  • Brian T. Campbell of the Judicial Division who decided not to run in 2016 after filling a vacancy created in 2015 when the Honorable Richard Gabriel was appointed to the Colorado Supreme Court

Bob Lamb, the current Local Government Division Trustee, was appointed to a Board vacancy in 2015 and is seeking to complete the remainder of the two-year term.

This year, voters will be able to vote using the Internet, by phone, or by mailing in their ballot. The voting deadline is May 31, 2016.

Ballots will contain biographical information on the candidates running in each division. Candidates also provided responses to a series of questions about PERA. These responses may be viewed here.

As a reminder, all Trustees serve as fiduciaries. This means that they must act in the best interests of all plan members and benefit recipients. Trustees are not compensated for their service on the Board, but are reimbursed for necessary expenses.

For more details on the PERA Board of Trustees, please see this PERA on the Issues article.

See information on current Trustees.

Retirement Roundup: You’re not Warren Buffet, but you can take his advice

Posted on by planeteria

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

You’re not Warren Buffet, but you can take his advice | MarketWatch

You can’t be Warren Buffett. You won’t be Warren Buffet. But you can invest in exactly the way that Warren Buffett advises. In fact, Warren Buffett tries to remind his children that they are not Warren Buffett, and he advises them to invest his fortune in index funds rather than try to emulate what he did. But the financial industrial complex has no vested interest whatsoever in telling that what they do is simple.

The $94,000 retirement mistake the average family makes | The Motley Fool

One-size-fits-all advice about retirement is just about impossible to come by, but there’s one nugget of truth that everyone should consider. When you decide to raid your 401(k) or Individual Retirement Account for any reason that’s not directly related to providing income in retirement (known as leakage), the effects can be significant. Researchers at Boston College’s Center for Retirement Research predicted that retirement savers with average leakage rates of 1.5 percent per year would end up with retirement accounts 20 percent smaller than those who left all their savings in their accounts until retirement.

6 ways to deal with fear and uncertainty in retirement | Forbes

Retirement can be a source of great anxiety and uncertainty. Going from the accumulation to the dispersion phase of your life can be emotionally challenging and the “what if’s” can become debilitating if you let them. Like learning any new skill, it takes willingness, a little patience and the real desire to get through the bumps to enjoy a more satisfying and meaningful life. A few tips can help reset your thinking.

Thriving at age 70 and beyond | The New York Times

Authors of a recently published book for women in their 70s and beyond looked at important issues facing women as they age and how society might help ease their way into the future. And with a quarter of American women age 65 expected to live into their 90s, there could be quite a lot to think about. The authors explore topics including ageism, adjusting to loss and death, social connections, grandparenting, work and retirement, reporting that “women seemed to fear retirement before the deed was done, and then to relish their newfound opportunities afterward.”

The high fees you don’t see can hurt you | The New York Times

High fees, often hidden from view, are still enriching many advisers and financial services companies at the expense of ordinary people who are struggling to salt away savings. A new analysis of mutual fund data confirms its severity.

That’s why the Labor Department announcement early this month is so important. (Read more about the new fiduciary rule from the Department of Labor). For the first time, all financial advisers dealing with retirement accounts will be required to act in their clients’ best interests. The announcement is long overdue and a big step forward. But don’t rejoice just yet: It is only a step.

Retirees’ average nest egg is a mere $119K | PlanSponsor

Transamerica Center for Retirement Studies has released a report laying out the top concerns of retirees and how they are faring after the Great Recession of 2008. More than half (55 percent) report lingering consequences of the recession, including those who say they have only somewhat recovered (35 percent), have not begun to recover (8 percent) or don’t expect to ever recover (12 percent). Conversely, 45 percent said they either have fully recovered or were not impacted. The report indicates that retirees’ first priority is just covering basic living expenses, cited by 42 percent. This is followed by health care expenses (37 percent), paying down credit card debt (25 percent), paying off mortgages (21 percent) and continuing to save for retirement (20 percent).

Retirement Roundup: Retiree health care costs could top $375K

Posted on by planeteria

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

Retiree health care costs could top $375K | PlanSponsor

Even those who have met their 80 percent income replacement goal will need more to cover all health care expenses, according to HealthView Services’ new 2016 Retirement Health Care Costs Data Report. The average healthy 65-year-old couple retiring this year is projected to spend $288,400 in today’s dollars on lifetime Medicare Parts B, D and supplemental insurance (Plan F) premiums. And when dental, hearing, vision and all other out-of-pocket expenses are included, the total retirement health care bill rises o $377,412, the study shows.

48% of Americans saving for retirement are pretty sure they have no idea what they’re doing | BusinessInsider

The Federal Reserve’s 2015 report on US household economic well-being asked respondents with either a defined contribution plan or self-directed retirement plan about their confidence in making decisions for retirement savings. Not quite half, 48 percent, said they were either “not confident” or “just slightly confident” in their ability to make the right investment decisions in these accounts.

Work a little, play a little: A new retirement strategy | The New York Times

Even after stepping away from a full-time job, for many “retirees,” work is still their primary identity. And there are many signs that traditional retirement no longer satisfies as many older people as it once did. A recent study from the Employee Benefit Research Institute found that fewer older Americans say they’re having a great time during retirement.

New concept of retirement needs new solutions | PlanSponsor

The very concept of a retirement in which people stop working altogether could soon become a thing of the past, according to a new report from the Aegon Center for Longevity and Retirement. “A Retirement Wake-Up Call: The Aegon Retirement Readiness Survey 2016” shows that people expect to live for 20 years in full retirement, but the reality is that retirement may often be much longer. For some, retirement may involve shifting from full-time to part-time work. For others, it may involve working in a different capacity or pursuing an encore career.

Does your mindset affect how you make retirement income decisions? | Forbes

The fields of behavioral finance and behavioral economics have uncovered various biases humans have which are great for day-to-day survival, but somewhat maladaptive for long-term investing. So it’s important to dig beyond the marquee numbers jumping out of the marketing literature and reflect on what is truly happening when all variables and levers are combined into a cohesive whole. [Read more about behavioral finance from PERA on the Issues.]

Using a free online retirement calculator? Be cautious | CNBC

Planning for retirement can be a very daunting task, even for people who are skilled at working with numbers. There are many unknowns that will affect how much you need to save and how long your money will last when you finally start your golden years.

PERA Policies Ensure Transparency for Public Pension Fund

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Colorado PERA, the State’s public employee retirement plan, has faced criticism for not releasing information about retirement benefits for specific individuals who are plan members. PERA takes its responsibility to protect the privacy of its members very seriously.

As a retirement system created by the Colorado General Assembly in 1931, PERA has to balance that responsibility as outlined in State law, with its desire to keep the public informed and to act as a steward of the resources of its over 500,000 members and retirees. But it is also committed to being open and transparent as a financial organization to its own members, the media, and to Colorado taxpayers. Many of PERA’s policies specifically address the goal of making information about its finances widely available.

PERA actively engages with the public and is transparent

PERA welcomes and encourages active involvement from the public, members, and retirees. In fact, PERA works to be easily accessible to all its members and interested people in the public through regular open meetings, active outreach around the State, and a thorough website that has a wealth of information about how the State’s public employee retirement fund is managed. The PERA Board of Trustees oversees the investment of retirement funds and management of PERA by law. Twelve trustees, including a non-voting representative from the Denver Public Schools (DPS) Division, are elected by the membership to serve four-year terms. Three Trustees are appointed by the Governor and confirmed by the Senate. The State Treasurer serves as an ex officio Trustee.

All PERA Board meetings, including Committee meetings, are scheduled in advance and open to the public – anyone can attend. There is an opportunity for public comment at each Board meeting. PERA also posts minutes from all Board meetings and agendas for Committee meetings on its website.

PERA provides thorough and accurate accounting of its finances and investments

In keeping with its goal of providing thorough, open, and transparent financial information to its members and the public, PERA makes an exhaustive amount of information about its financial investments and portfolio performance available online. This starts with the Comprehensive Annual Financial Report (CAFR). This is a comprehensive, 231-page report detailing legislative, financial, and management changes at PERA over the last year, as well as the audited financial statements on the funds’ fiscal status and an independent auditors’ report. The CAFR follows State law and Generally Accepted Accounting Principles. The CAFR has received the Government Finance Officers’ Association of the United States and Canada Certificate of Achievement for Excellence in Financial Reporting for the past 30 years. The Certificate is presented to government units and public employee retirement systems whose CAFR achieves the highest standards in government accounting and financial reporting.

Other financial disclosures of the funds’ status include a Summary Annual Financial Report (a shorter version of the CAFR) and Annual Report for the PERAPlus 401(k)/457 and PERA DC Plans.

PERA follows its own publicly available Statement of Investment Policy, which sets the policies by which investments are managed. The Board’s asset allocation, or the targets and ranges for each type of investment (such as global equity, fixed income), are listed online. PERA’s Private Equity portfolio and quarterly investment performance are also available online. Securities and Exchange Commission filings filed each quarter by PERA are available on the SEC’s website.

PERA promotes access to transparent information

PERA is always looking for new ways to provide information to interested persons, whether they are current members, retirees, public officials, the media, or the general public. Of course it is also a priority to protect the privacy of individuals with accounts at PERA. In fact, Colorado State statutes require that information contained in all individual PERA member and benefit recipient records be kept confidential. Actuarial consultants review each member and retiree record with PERA every year. They report the results of their overall analysis to the PERA Board of Trustees and to the Colorado General Assembly’s Legislative Audit Committee. In order to further access transparent information about benefits, PERA created a fact sheet that includes the number of retirees by different ranges of annual benefits such as the number of retirees earning benefits between $10,000–$24,999, $25,000–$49,999, and so on. Data from the fact sheet has been included in the 2014 CAFR on pages 204 and 205.

PERA also reports to the House and Senate Finance Committee and Joint Budget Committee of the Colorado General Assembly each year.

Conclusion

PERA will continue to make available information about its investments and management. This includes providing materials for the general public and its members. PERA also has staff resources available to help anyone who is interested to navigate and understand the wealth of materials that are available. This is true for members who have questions about their own retirement circumstances as well as members of the public who want to know more about how PERA manages the assets of more than 500,000 members and retirees.

2016 Legislative Session Wrap-Up

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“Colorado lawmakers finish session with little progress on top issues.” – The Denver Post

“The 2016 Colorado legislative session may go down in history as the year of little change.” – Colorado Springs Gazette

“Divided Colorado Legislature wraps year of scant agreement.” – Fort Collins Coloradoan

The Second Regular Session of the Seventieth Colorado General Assembly has concluded, and as reported around the state, this session may be known more for what wasn’t passed, than what it accomplished.

Two bills on investment mandates

There were two bills introduced that affect PERA:

  • HB 16-1207: PERA Investments in Renewable Energy Companies – would have required PERA to invest at least one percent of new moneys each year in renewable energy companies.
    • PERA opposed
    • Bill defeated (11-0 in House Finance Committee)
    • Notable: Rep. Van Winkle (R-Highlands Ranch) stated in committee meeting that the bill “misses the mark in confusing whose money it is; it doesn’t belong to us to pursue a social agenda, it belongs to PERA members.”
  • HB 16-1284: Concerning Divestment by PERA From Companies That Have Economic Prohibitions Against the State of Israel – requires PERA to divest from all companies that have economic prohibitions against Israel.
    • PERA opposed
    • Bill passed (54-10-1 in House; 25-9 in Senate; signed by Governor)
    • Notable: While the PERA Board voted to oppose this legislation, there was strong support behind it and political headwinds were too strong to stop it. Given the inevitability of this bill’s passage, PERA worked with the sponsors to ensure the bill’s requirements would be manageable to implement.

What we learned this session

The need for education remains; only a handful of legislators who voted on SB 1 in 2010 will still be in office when the next session begins in January 2017. And there are still audiences we haven’t reached with our messages of positive economic impact and the independent studies validating that PERA is more efficient and uses dollars more effectively than any other type of retirement plan.

What’s coming next

  • The 2015 CAFR is scheduled to be released by the PERA Board of Trustees on June 21.
  • We will continue to monitor proposed federal legislation and Colorado ballot initiatives of interest to our membership. (If you aren’t receiving the biweekly PERA on the Issues newsletter, please subscribe here.)
  • PERA staff will once again travel the state this summer and meet with business and community groups, legislators, and Ambassadors. (Learn how you can become an Ambassador advocate for PERA here.)

Thank you

Your involvement and willingness to speak up on behalf of Colorado PERA is an essential part of our effort to protect the retirement security of Colorado’s largest workforce and to remain one of Colorado’s best investments.

2016 Legislation Impacting Colorado PERA

Part Super-Hero, Part Fortune-Teller, 100 Percent Actuary

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CareerCast.com ranked the actuarial profession first in their annual best jobs report for 2015 and in the top 10 for 2016. Actuaries have been high on the list for the last several years with other math-intensive professions like statistician, mathematician, and data scientist. The ranking is based on factors like income potential, hiring outlook, work environment, and stressfulness of the occupation. But just what does an actuary do?

Actuaries are highly skilled mathematicians who help pension plans, insurance companies, and other financial organizations plan for the future based on historical and anticipated demographic, trend, and financial data. The Society of Actuaries describes an actuary as “a business professional who analyzes the financial consequences of risk.” Actuaries use a plethora of mathematical tools from probability and statistics to financial theory in order to calculate various risks that an organization such as a pension plan could encounter in its business operations.

An actuary usually has a bachelor’s degree in actuarial science, mathematics, statistics, finance, or economics, and is trained in probability, compound interest, business, and finance. Beyond education, the actuary designation requires passage of a series of exams that usually takes six to 10 years to complete, and practicing actuaries are typically affiliated with professional organizations that hold the actuary and the profession to high standards of practice.

Actuaries work in any industry where risk must be analyzed, including insurance, investment management, corporate finance and banking, as well as for colleges and universities, public accounting firms, labor unions, rating bureaus, and pension plans.

What does an actuary do for a retirement system?

A retirement system could not function without actuaries. Actuaries develop the underlying actuarial assumptions that determine everything from funding status and contribution requirements to expectations surrounding membership and benefit payouts. Additionally they assess risk, cost, and the likelihood of various future scenarios based on changes to membership demographics, investments, plan structure, and legislative or policy changes. Actuarial assumptions are the heart of pension administration.

What is an actuarial assumption?

An actuarial assumption is an estimate of the value of a variable in a financial model. Pension plan assumptions fall into two categories: demographic assumptions and economic assumptions. Demographic assumptions attempt to accurately anticipate events that occur over the lifetime of plan participants and influence the amount and timing of benefits. For instance:

  • Life expectancy (how long will plan participants live?)
  • Rates of retirement (when will plan participants retire?)
  • Mortality before retirement/mortality after retirement (how many participants will die before/after receiving a benefit?)
  • Rates of salary increase (how quickly and by how much will salaries change for different groups of employees?)

Economic assumptions attempt to anticipate financial aspects, which may impact the cost of future benefits and the rate at which they are funded, such as:

  • Price inflation (what will be the rate of consumer inflation in the future?)
  • Investment rate of return (how much will a particular fund or asset base return in the financial market place?)
  • Wage inflation (how will wages rise compared to rising prices?)

Mortality assumptions and the investment assumption rate are two critical actuarial assumptions for any pension plan. The first are based on life expectancies for various demographic groups, a necessary tool to predict how long benefits need to be paid out after a person retires. The investment assumption rate is another critical piece for pension planning. This assumption looks at the asset allocation of a plan’s investments (stocks, bonds, real estate, private equity, commodities, cash), and through detailed modelling and historical analysis, predicts the rate of return that the plan’s assets should expect to make over a very long time horizon. View the Funding of Colorado PERA webpage for more information. For Colorado PERA, that horizon is 30 to 60 years. This prediction is important because between 60 and 80 percent of a plan’s assets come from investment returns (versus employer and employee contributions), so in order to calculate the correct contribution rate to fund the plan’s liabilities, actuaries must be able to predict how much money will come from returns on the investments. Over the last 25 years, approximately 64 percent of the total dollars in the PERA trusts came from investment income, with the remaining 36 percent coming from employers and employees (18 percent each).

When discussing actuarial assumptions, it is important to understand who “owns” the responsibility of those assumptions. The actuary typically is a consultant who makes recommendations to the plan’s governing body. Per Colorado statute, all actuarial assumptions recommended by the actuary are subject to approval by the Colorado PERA Board of Trustees. Actuaries make recommendations to the Board, and the Board adopts them or requests further analysis and revised recommendations to be considered later. In addition, on a regular basis, the Board hires outside actuaries to audit the retained actuary’s work.

Annual Actuarial Valuations

Actuaries conduct comprehensive studies known as annual actuarial valuations to evaluate funding progress and the impact of year-to-year changes on a pension plan’s funding progress. A valuation provides a summary of the plan’s funded status, funding period and recommended contribution rates, and often includes accounting information as required under the Governmental Accounting Standards Board (GASB) statements for public pension plans. In order to perform the valuation and provide this information, the actuary takes into consideration contributions, investment returns, demographic changes, retirements, withdrawals, economic factors, deaths, hires, and other system data.

Any pension plan strives to achieve a long-term equilibrium where the money coming in (contributions and investment returns) equals the money going out (benefits and expenses). It’s a simple formula based on the underlying “actuarial balance” of a plan:

Benefits Paid + Expenses = Contributions + Investment Returns

The annual actuarial valuation is a key factor in monitoring and planning for changes to preserve that equilibrium; in addition it is the backbone of the Comprehensive Annual Financial Report (CAFR), a pension plan’s required public report of financial health.

Experience Analysis

The experience study is an investigation of the economic and demographic experience over a certain length of time; its purpose is to assess the reasonability of actuarial assumptions that support the administration of the pension plan. It compares the actual experience of the plan to the predictions made by the plan assumptions, including rates of death, retirement, separation from service, disability and salary increases. The comparison of actual results to predicted results demonstrates to actuaries which assumptions need to be revised to more accurately reflect true demographic and economic conditions. The experience analysis is the foundation for the annual actuarial valuation in that it determines the appropriate assumptions to be applied within the annual actuarial valuation.

Special Studies

In addition to the pension plan’s annual actuarial valuation and periodic experience analyses, an actuary also performs special studies as needed and/or required by law. For instance, if proposed state legislation will be making changes to benefit provisions, an actuarial analysis of the proposed change would be necessary to determine the financial effect of the change. Numerous special studies were conducted during the creation and adoption of Senate Bill 10-001 in 2010, which made changes to many of Colorado PERA’s benefit provisions. These special studies gave trustees and legislators the cost saving predictions for the proposed changes.

According to the Web site BeAnActuary.org, actuaries are “part super-hero, part fortune-teller, part trusted advisor.” Maybe that’s why their profession is consistently ranked so highly.

Retirement: More fun than you’ve heard

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

Retirement: More fun than you’ve heard | Forbes

Though experts often sound warnings about how hard the adjustment to retirement will be, a new report from Merrill Lynch/Age Wave, Leisure in Retirement: Beyond the Bucket List, found that retirees are enthusiastically enjoying their newfound freedom.

Disproving beliefs about the economy and aging | The New York Times

Two major culprits get the most attention from economists for explaining why the economy is stuck in low gear. The first is anemic productivity growth; the second is the demographics of an aging population. But it is long past time to shed three pernicious myths about the United States economy and aging.

Why financial literacy will not save America’s finances | The Atlantic

From taking out loans to pay for higher education to investing for retirement, Americans are shouldering enormous levels of personal financial responsibility – more so than ever before. At the same time, financial products have both proliferated and become much more complex. While Americans are not expected to manage their own legal cases or medical conditions, they are expected to manage their own finances. But is it reasonable in such a system to expect people to succeed? Economists examining financial literacy would say no.

‘I’ll never retire’: Americans break record for working past 65 | Bloomberg

Almost 20 percent of Americans 65 and older are now working, according to the latest data from the U.S. Bureau of Labor Statistics – the largest number of older workers in the U.S. ever. And according to a 2015 Federal Reserve study, 27 percent of Americans said they will “keep working as long as possible,” while another 12 percent said they don’t plan to retire at all.

Fewer retirees have employer-sponsored health coverage | PlanSponsor

Traditionally, employer- and union-sponsored retiree health benefits have served as an important source of supplemental coverage for people on Medicare. But those days are gone.

The Kaiser Family Foundation has documented a significant drop in large employers offering retiree health coverage, from 66 percent in 1988 to 23 percent in 2015. [Read about how Colorado funds public employee health care retirement benefits.]

Colorado is great for growing old | KUSA

A new study by Caring.com ranked Colorado as the sixth best state to grow old in. The study looked at a variety of financial, healthcare and quality-of-life categories. Colorado’s ranking was held down slightly by its relatively high senior care rates.