Month: September 2019

How PERA Stays Informed and Engaged in Health Care Policy

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Colorado PERA is involved in a number of organizations that play a role in developing health care policy at the state and federal level. In doing so, PERA is contributing to the triple aim of health care: better health, better care at lower prices.

PERA was a founding member of the Colorado Business Group on Health (CBGH), a nonprofit coalition led by employers that purchase health care. CBGH works toward finding market-based solutions to lowering health care costs for employers and employees. CBGH also aims to improve the quality of health care for participants in health plans like PERACare.

PERA continues to help support CBGH’s mission to improve the cost, quality, and patient experience of health care in Colorado. As a member of CBGH, PERA is not only sharing knowledge about health care plans with other entities in Colorado, but also learning from them. PERA also has a larger voice by speaking to health insurance plans and health care providers as part of a coalition of employers rather than alone.

Some of the activities that CBGH supports include:

  • Leapfrog Hospital Safety Grade. CBGH is the regional leader for the Leapfrog hospital safety grade – the only hospital rating focused exclusively on hospital safety. Its A, B, C, D or F letter grades are a quick way for consumers to choose the safest hospital to seek care.  
  • Monthly Strategy Sessions.  Each month, CBGH members convene to hear from regional and national leaders and engage in discussions on strategic issues for improving health care value.  
  • Market Overviews for Leadership.  Each year, CBGH provides members with an overview of the health care market within which employers purchase health care.  

PERA also participates in the Public Sector Healthcare Roundtable, a nonprofit, nonpartisan coalition of public-sector health care purchasers from across the United States, including states, counties and municipalities. The Roundtable works to bring a voice to the tens of millions of public-sector employees and retirees they serve in conversations about the design, development and implementation of national health care policy. The Roundtable is committed to maintaining programs that enable public workers, retirees and their families to obtain high-quality health benefits at an affordable and sustainable cost.

Efforts of the Roundtable include issuing letters to elected officials and other policymakers informing them of the impact of proposed legislation or policy; tracking health care policy and keeping members informed about policy changes and their implications; and facilitating discussions with health policy leaders as the need arises.

Additionally, PERA participates in the State and Local Government Benefits Association (SALGBA), a national organization that provides its members – public sector organizations that offer benefits such as health care – with educational and collaborative support by hosting national and regional conferences. State and local governments and other public sector organizations can share information, ask questions, and learn about best practices from experts and each other.

By actively participating in these state and national organizations, PERA is directly involved in learning about and shaping the future of health care policy that affects PERA’s members and retirees.

Retirement Roundup: Here’s what could take a big bite out of your nest egg

Posted on by planeteria

A digest of news from publications around the nation about finance, investing, and retirement

Here’s what could take a big bite out of your retirement nest egg — and how you can control it | CNBC

Your income may be fixed in retirement, yet how much you spend could fluctuate dramatically. The amount of money that goes out each month could have a big impact on how well you live, but research from J.P. Morgan Asset Management found that people tend to spend more at the beginning of retirement. And those behaviors could upend traditional measures for how much money to have saved.

Public sector employees shouldering more risk in retirement plans | PlanSponsor

Many people in the private sector may not realize that for the vast majority of employees of state and local governments, both participation in a public pension plan and contributing toward the cost of the pension are mandatory terms of employment. In a recent report, Employee Contributions to Public Pension Plans, the National Association of State Retirement Administrators (NASRA), says since 2009, more than 35 states increased required employee contribution rates. As a result of these changes, the median contribution rate paid by employees has increased to 6 percent of pay for employees who also participate in Social Security, and has remained steady at 8 percent for those who do not participate in Social Security.

This podcast exposes what Americans get wrong about retirement saving — and what they can do to make it right | MarketWatch

Many Americans are unprepared for retirement, and they may think it’s their fault they haven’t saved enough. A new podcast, “Reset Retirement,” from Teresa Ghilarducci, a labor economist and director of The New School’s Schwartz Center for Economic Policy Analysis and the Retirement Equity Lab, begs to differ. The burden of having enough stashed away for retirement shouldn’t just fall on the shoulders of Americans, says Ghilarducci. The retirement system as a whole – shared by individuals, the financial services industry and the government – is broken, and it’s hurting Americans’ future security.

79% of Future Retirees Share This Major Concern | The Motley Fool

Earlier this year, Fidelity estimated that the average 65-year-old couple retiring in 2019 would spend $285,000 on medical care throughout their golden years. Meanwhile, cost-projection software provider HealthViewServices puts that number at $387,644. These figures account for expenses like Medicare premiums, deductibles, coinsurance, co-pays, and services not covered by Medicare. It’s no wonder, then, that 79 percent of future retirees cite healthcare costs as their top financial concern, according to a new survey by Nationwide. If you’re worried about paying for healthcare in retirement, the good news is that there are several savings vehicles that can make it easier to sock away funds for this expense. And the sooner you start taking advantage of them, the better.

Funds fail to repeat success in 2018 | Pensions & Investments

The world’s largest retirement funds saw their assets dip 0.4 percent in 2018, to $18 trillion. That compares with an increase of 15.1 percent the prior year, according to the latest survey by Pensions & Investments and the Thinking Ahead Institute of the world’s 300 largest retirement plans. For the 20 largest retirement funds, assets fell 1.6 percent to $7.3 trillion, vs. a nearly 17 percent rise in 2017.

Investment Stewardship: Advocating for Stronger Markets

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Over the summer, Colorado PERA released its 2019 Investment Stewardship Report, which demonstrates how PERA’s commitment to cost-conscious investment strategies and investment decisions that consider a range of factors preserves the value of contributions to the plan for the longterm and protects the plan’s financial sustainability for generations to come.

Given its size and reputation, PERA knows it can have a meaningful impact in creating financial markets that are designed for the benefit of all investors. PERA’s advocacy is rooted in three principles:

  • Fairness – markets should treat all investors in a fair and equitable manner.
  • Alignment – company success in the long run depends on aligned interests of companies and investors.
  • Disclosure – investors deserve robust, accurate information about financial and operational results of the firms in which they are owners and creditors.

Fair and equitable markets are in the best interest of PERA members. Staff and PERA Board members participate in advisory and advocacy groups in order to develop, share, and promote best practices for improving global capital markets for all investors. In fact, PERA holds seats on 223 different advisory boards to promote ethical and professional practices in the industry and on the majority of its private investment funds.

PERA Executive Director Ron Baker serves on theBoard of Directors of the Council of Institutional Investors (CII) and, in 2018, PERA collaborated to create and co-sign letters regarding shareholder rights.

Other advisory groups in which PERA is involved, such as the Sustainable Accounting Standards Board (SASB), the Harvard Law School Institutional Investor Forum (HIIF), and the University ofColorado Burridge Center for Finance promote stronger investment practices and more efficient markets. SASB, for example, develops standardized metrics that help investors analyze a company’s ability to operate sustainably, which PERA believes will have considerable impact on how the investment industry thinks about the financially material aspects of sustainability in the future.

Ideally, company interests are aligned with investors’ interests through sound corporate governance. However, there is an-ever present temptation for management to act in ways that benefit themselves over their investors, harming the returns of their investments and impacting shareholder value. To keep companies’ interests aligned with those of PERA and other investors, staff directly engage with corporate management and look for partners with a track record of strong corporate governance.

Staff also review external managers, analyze management track records, and vote by proxy as the shareholder of investments made on behalf of PERA members and retirees.

As an institutional investor, PERA depends on accurate and timely information from companies in order to assess and project the overall performance of its investments. Yet, there are clear gaps in the availability and quality of financially material disclosures. This is why PERA supports developing and promoting transparent, accurate disclosures of companies’ operations and financial positions.

Calculating the financial impact of environmental sustainability is an example of intangible asset value that is hard to measure. That’s why PERA supports SASB’s efforts to develop standardized metrics to help investors analyze a company’s sustainability.

Advocating for strong corporate governance and fair, equitable markets is another critical component of PERA’s investment stewardship philosophy. More on PERA’s four-part stewardship approach is available here.

Solving pension challenges has not been easy in other states

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States that close pension plans face increased costs, retirement insecurity

A new series of case studies released from the National Institute on Retirement Security (NIRS) shows that taxpayers’ costs increased when four states closed their pension plans in favor of alternative plan designs. As the states shifted new employees from their defined-benefit pension plans to defined-contribution or cash-balance plans, they did not experience major improvements in the funding of their existing pensions.

Key conclusions from the research, Enduring Challenges: Examining the Experiences of States that Closed Pension Plans, include:

  • Switching from a defined benefit pension plan to a defined contribution or cash balance plan did not address existing pension underfunding, despite claims that such changes would improve funding levels or slow growing liabilities of the retirement plans. Instead, costs for the states reviewed (Alaska, Kentucky, Michigan and West Virginia) increased after closing their pension plans.
  • Changing benefits for new hires does not solve existing funding shortfalls, as the experience of these states shows. Managing legacy costs is key to responsible funding of pension plans.
  • Greater retirement insecurity for employees has been a challenge due to changes in plan design, leading West Virginia to reopen its closed pension plan.
  • Other workforce challenges, such as difficulty recruiting and retaining public employees, are emerging as a result of the changes to retirement benefits. In Alaska, the Department of Public Safety lists the ability to offer a pension as a “critical need” for the department.

Download the NIRS case studies here.

Retirement Roundup: Your 401(k) is just one piece of the retirement puzzle

Posted on by planeteria

A digest of news from publications around the nation about finance, investing, and retirement

Your 401(k) is just one piece of the retirement puzzle. Here’s the right place for it |Money

There’s no shortage of advice about how to invest your 401(k). But if you have not just a 401(k) but also other savings vehicles — like an IRA, brokerage account, investment property, or even a pension — those rules might not apply. Particularly in a volatile economic climate like the one investors face today, a big-picture strategy with a focus on diversification can help you maximize your investment earnings and even save on taxes.

9 ways California’s new retirement plan changes the retirement savings landscape |MarketWatch

On July 1, private-sector employers in California gained access to an innovative new program that enables them to facilitate retirement savings for employees. In a state where half of all private-sector workers do not have a retirement savings account or participate in a pension, CalSavers stands to make a significant difference in the lives of everyday workers.

And this landmark program won’t just benefit Californians; it changes the retirement landscape in important ways nationwide: When the largest state enacts innovative new policies, lawmakers and the financial services industry sit up and take notice.

[Read more from PERA on the Issues about Colorado’s efforts to study private sector retirement savings plans here.]

Here’s how much more money you’d have if you delayed retirement until 70, according to Stanford researchers |CNBC

A report from the Stanford Center on Longevity and Society of Actuaries suggests that the typical American would benefit from a later retirement age. After analyzing 292 different retirement income strategies, the research team identified the best way for most people to withdraw their money in retirement: It’s called the “spend safely in retirement strategy” (SSiRS) and involves delaying Social Security payments until age 70, which could mean working longer.

To show just how powerful it can be, the research team gave one example of a hypothetical, 62-year-old middle-income couple earning a combined $100,000 with $350,000 in retirement savings. If the couple retired at 62, their annual income, including Social Security benefits and the amount they draw down from their retirement savings, would be $37,585. If they worked full-time until age 70, their annual income would be nearly double: $70,755.

Kentucky pension official says worst-funded state plan may have finally turned around |Courier-Journal

The trend that has seen Kentucky’s worst-funded pension plan getting deeper in debt each year may have come to an end, according to Rich Robben, executive director of the Office for Investments at Kentucky Retirement Systems (KRS). The KRS plan that provides retirement benefits for state workers in nonhazardous jobs has $13.6 billion in unfunded liabilities and is considered to be the worst-funded public pension plan in America. A huge increase in the amount employers are required to pay to the plan beginning in 2018-19 produced a positive cash flow of $237.7 million for the plan in the fiscal year that ended June 30.

3 signs you’re ready to retire |The Motley Fool

Retirement is something many workers dream about for decades. And for some it can’t come soon enough – half of American adults say they would like to retire by age 60, a survey from the Harris Poll and TD Ameritrade found. However, not everyone is ready to retire, no matter how prepared they think they are.

Retirement takes a lot of planning, and choosing when to retire is a decision that shouldn’t be made lightly. Before you leave your job for good, make sure you’ve considered three factors to ensure you’re really ready to retire: you have a withdrawal plan; you’ve thought about how you’ll cover health care costs; and you’ve decided when you’re going to claim benefits.

Board-Directed Asset/Liability Study Informs PERA’s Investment Strategy

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Asset allocation is the primary determinant of any portfolio’s risk, or volatility, and return potential, including PERA’s.  Asset allocation simply refers to the portion of PERA’s total portfolio that is invested in the five asset classes. The PERA Board of Trustees regularly revisits the strategic asset allocation to determine whether the fund needs to be differently proportioned. A critical part of that work is called an Asset/Liability Study, which evaluates the relationship of the plan’s assets and liabilities, as well as the plan’s risk tolerance.

The Board’s investment consultants, Aon, began the latest Asset/Liability Study in late 2018 and recently provided its findings at the Board Planning Session earlier in September.

The key objective of the Asset/Liability Study is to identify the appropriate risk posture for the portfolio in the context of the liabilities of the portfolio, or the right level of risk for the overall portfolio of assets. Making this determination requires three key decisions: the overall mix between return-seeking and risk-reducing assets; the composition of the return-seeking portfolio; and the composition of the risk-reducing portfolio.

The Board is expected to use the results of the Asset/Liability Study, the timing of projected cash outflows, and overall risk tolerance of the fund in order to determine a strategic asset allocation later this fall.

[PERA’s current asset allocation policy can be seen here.]

Reevaluating its strategic asset allocation every three to five years, as PERA does, is a best practice for institutional investors and a cornerstone of prudent governance of a pension plan. The updated asset allocation policy will provide guidance on the most appropriate mix of assets to be held in the PERA Trust Funds in order to meet the future financial needs of the plan for the sole benefit of its members and retirees.

Also included in the Asset/Liability Study is information about key assumptions and possible alternative portfolio compositions:

  • Long-term capital market expectations for a variety of asset classes are used to model different asset allocations based on Aon’s expectations. Since PERA is a long-term investor, it relies on long-term assumptions about how the capital markets will perform and economic environments will shift.
  • Risk and performance expectations with different asset allocations. Aon’s analysis looked at a range of combinations of different asset classes in a variety of weights, including global equity, fixed income, private equity, real estate, private debt as well as asset mixes designed to mitigate risk. Aon generally favors careful diversification into a broad set of asset classes with attractive risk and return properties to improve portfolio efficiency, and its specific analysis for PERA has been customized to reflect PERA’s particular needs and circumstances.

Additional information from the presentation of Aon to the Board at its September Planning Session can be found here.

As the Board continues the process of refining the analysis of the Asset/Liability Study and developing its updated strategic asset allocation, PERA on the Issues will continue to provide new information on the Board’s conclusions.