What’s the different between single-payer, Medicare for All,
and a public option? Especially during this presidential election year, health
care terms flood the airwaves. The large field of Democratic contenders makes keeping
track of the various policy ideas that much more challenging, even for those
who closely follow political or health care news. This article summarizes some
of the most common terms you’re hearing.
Money in, money out. Understanding what retirement looks
like requires thinking about both income and spending. Doing so can illustrate,
for example, why states with low costs of living can still have high
percentages of retirees with low standards of living. A new study by the
University of Massachusetts’ Gerontology Institute in Boston uses these factors
to identify retirees who live in the “gap”—above the poverty line but still
saddled with economic insecurity.
A study released in January examined health care policy and
outcomes at the state level for all 50 states and Washington, D.C. In
particular, the study tracked state policies that:
Extend health care coverage to all residents and
policies
Make out-of-pocket costs more affordable for
consumers
Reduce low-value care
Address excess prices
Overall, Colorado ranked eleventh among all states.
The Consumer Financial Protection Bureau has a ten-question
survey to see how your financial well-being compares to your peers, and to the
population as a whole. After you’ve finished the short quiz, you’ll find useful
resources for more information on debt, home ownership, retirement planning, and
other common financial topics.
Colorado PERA’s Board of Trustees met on January 17,
considering presentations on PERA investments, a briefing on legislative
issues, an update to PERA’s Signal Light Reporting, and more.
Investment update
2018 was a difficult year for global public asset classes.
The preliminary results for 2019 are more positive, although the returns have
yet to be finalized and audited.
Amy C. McGarrity, PERA’s Chief Investment Officer, recapped 2019 achievements and listed projects her division will undertake in 2020:
PERA’s Board sets asset allocation guidelines for PERA’s investment division. A new asset allocation was approved at the November 2019 Board meeting, and McGarrity presented the resulting 2020 policy benchmark weights.
In 2020, PERA’s Board will evaluate their existing Proxy Voting Policy and consider whether to implement enhancements beginning in 2021.
In late 2019, PERA’s Board selected Callan as the investment consultant for PERA’s Defined Contribution Plan. With their assistance, PERA will undergo an evaluation of current and proposed options in this plan.
In January 2020, PERA liquidated its BlackRock Fixed Income passive account and brought management of those assets in-house, a move expected to result in improved performance at a lower cost.
Expecting a relatively
quiet year at the Capitol
Colorado’s Legislative Session began January 8. Lawmakers
are already considering a few bills that affect PERA. As currently written, these
bills are narrow in scope, affecting only a small number of PERA members in
specific positions. Bills introduced so far include:
SB 20-057, which would make firefighters who work in the Department of Public Safety in the Division of Fire Prevention and Control eligible for the same PERA benefits as Safety Officers.
HB 20-1127, which would modify working-after-retirement rules for retirees who work in specific, hard-to-fill positions for boards of cooperative services (BOCES) that serve rural areas of the state.
You can track developments on these bills, and all PERA-related legislation, here.
A new rubric to gauge
PERA’s funded status
PERA’s funded status is a closely watched metric. Calculating this number is a complex process that requires projecting investment returns, demographic information, changes in employment and salary information, and other factors decades into the future. Interpreting these calculations can also be a challenge. Even with careful consideration and planning, a single outcome is not guaranteed. Instead, these models show a range of possible outcomes.
In 2014, the Legislative Audit Committee directed the Office of the State Auditor to develop a way to make PERA’s financial status easier to understand. The result of this directive was Signal Light Reporting, which translates risk into green, yellow, and red levels.
During the Board meeting, Segal Consulting previewed an enhanced version of this tool, called Signal Light 2.0.
Signal Light 2.0 measures plan risk in a more robust way,
and it is intended to more effectively communicate funding probabilities,
incorporating a variety of assumptions used in calculating PERA’s funding
status.
One significant improvement in Signal Light 2.0 is the use of stochastic modeling. The first version of Signal Light Reporting modeled possible outcomes if PERA’s investment returns achieved its assumed rate of return (7.25 percent) year after year. The assumed rate of return is the target over time, but stochastic modeling recognizes that one year might significantly underperform that rate while other years might significantly outperform. The sequence of these over- or underperforming returns can affect account balances over time—even if the average investment return is the same.
Signal Light 2.0 calculates 5,000 different possible scenarios,
considering PERA’s asset allocation, expected returns, risk levels, and more. The
analysis shows how many of these 5,000 different scenarios meet specified outcomes,
such as reaching fully funded status in 30, 40, and 50 years. In the end, this analysis
is distilled into a signal light color.
The next iteration of Signal Light 2.0 may look at
additional assumptions, such as demographic assumptions, or payroll growth.
Varying these assumptions using stochastic modeling should result in a more
complete picture of the probabilities associated with PERA’s funding.
This calculation is, by definition, an ongoing process. Each
signal light report is a snapshot of the outlook on a specific day in time. It
helps tell a story about funding risk, but that story changes every day. PERA
will continue to use this methodology to help capture the overall outlook amid
constantly changing circumstances.
At 10 a.m. on January 8, the sudden bang of a gavel striking its sounding block will pierce the morning air in Colorado’s State Capitol. This will happen twice—once in the green chambers of the House of Representatives and once in the Senate’s red chambers. As the lawmakers bring their conversations to a close and come to order, Colorado’s 2020 legislative session will be underway.
The gavel might as well be a checkered flag. Until early May, Colorado’s 100 lawmakers will discuss, debate, and eventually decide upon policies that will shape the future. Colorado has grown in size and complexity in nearly every measurable way since those Frontier days of 1876. But legislators today, as then, have only 120 days to keep state law in step with changes that occur on all 365. The result is a jam-packed, fast-paced schedule, filled with hundreds of bills that cover an array of subjects. On the most controversial topics, debate can last into the early morning.
Michael Steppat is Colorado PERA’s Public & Government Affairs Manager. He is tasked with navigating and deciphering the subtleties of the legislative process. He tracks legislation, maintains relationships with legislators, oversees lobbying, and more.
Michael Steppat, Colorado PERA’s Public & Government Affairs Manager
Below, he shares more about his
role at PERA, the ways in which PERA governance is unique, issues related to
oversight and transparency, and what to expect in the upcoming legislative
session.
What’s your role at PERA?
I represent PERA at the Capitol. I monitor and report on legislative activity, builds and maintains relationships with legislators and other stakeholders, and oversee lobbying efforts. I also serve as the liaison for legislative committee staff.
Can you describe the similarities and differences between PERA and
state agencies?
PERA is probably often viewed by the average citizen as a state agency. But it’s not. State law actually says “The association is an instrumentality of the state.”
I think one of the key differences is governance. We report to a Board of Trustees. State departments and agencies don’t. They have heads appointed by the governor. Also, PERA’s budget is not set by the legislature.
Despite those differences, there
are also some similarities. For example, PERA still reports to the General
Assembly through multiple oversight committees.
So PERA has a Board of Trustees, but state legislators also govern
PERA. Can you explain the different responsibilities each group has?
The Board, which includes trustees elected directly by our members as well as trustees appointed by the governor, oversees the investment program and administration of benefits. They do not set contribution rates or benefit levels—only the legislature can. The Board appoints PERA’s Executive Director to implement its policies. PERA is also independently audited by a third-party through the Office of the State Auditor every year.
A few different committees at the State Capitol deal with PERA
matters. What do these committees do, and why are there more than one?
Each committee has a different focus.
The Legislative Audit Committee goes through PERA’s annual financial and compliance audit. They ensure the financial statements are accurate.
The Joint Budget Committee (JBC) reviews budgetary and personnel matters. PERA’s annual report to the Joint Finance Committee is similar to the JBC.
The Joint Finance Committee reviews certain departments, including PERA, annually pursuant to the SMART Government Act. One of the intended goals is to get committees of reference more involved in the state budgeting process.
The Pension Review Commission has the responsibility to study and develop proposed legislation relating to FPPA and PERA, covering a number of subjects.
The Pension Review Subcommittee focuses on the financial health of the organization. Unlike the other committees, this committee includes members of the public, based on subject matter expertise.
Does PERA lobby elected officials? What does lobbying look like?
PERA does contract with lobbyists.
Lobbying is essentially advocacy of a point of view, however most don’t realize ninety percent of communication with lawmakers is education. Legislators come from varying walks of life. There are more than five hundred bills introduced every session on a variety of topics. Lobbyists are experts in their specific areas and help legislators understand the nuances of a subject.
It’s important that PERA is represented and can provide education to legislators, especially given legislator turnover at the State Capitol because of term limits.
Does PERA take positions on bills?
The Board may take positions on bills that directly impact PERA. Even if the Trustees don’t take a position, we may need to testify or provide information. We must ensure that the facts are out there so lawmakers can make informed decisions.
If PERA members want to know more about the legislative process or
become more involved, where would they start?
PERA On The Issues is a good place to start. The General Assembly website is a great tool. The Colorado Channel on YouTube has live and archived video of the House and Senate floor. You can listen to committee meetings, view calendars, and review the status of a bill online. You can even sign up to testify at committee meetings. Colorado is a pretty transparent state.
Most importantly, legislators need to hear from constituents in their districts. That often ends up being influential.
Do you anticipate seeing any proposed legislation related to PERA
this year?
We expect to see something dealing with Working After Retirement rules as well as changes to the types of jobs that are eligible to be on the Safety Officer table, which currently includes positions like State Troopers. Divestment issues are a possibility, too. PERA will also deliver a calculation concerning the funding of the Denver Public Schools trust fund.
It’s important to remember that PERA,
or any other stakeholders, don’t introduce bills. Legislation is solely the
responsibility of legislators.
After languishing in the Senate, the SECURE Act made it
across the legislative finish line at the end of 2019. The SECURE Act is not a
radical departure from existing retirement rules. Instead, its 29 provisions contain
incremental changes, with many providing increased financial flexibility. For
example, the age at which a person is required to take required minimum
distributions was raised from 70.5 to 72. The age limit to make contributions
to an IRA was removed. Exceptions were added to early withdrawal rules.
Some experts say the odds of legislation passing in an election year is low, despite the bright spotlight on health costs these days. But, with health care issues affecting so many, these issues just might decide some races in November. So expect ideas on big issues such as drug pricing and surprise billing to take center stage.
Forecasts are prone to surprises. But that doesn’t stop us
from trying. Kiplinger reporters and editors talked to experts in academia, the
private sector, and government to see what 2020 might have in store. Top on the
list: Will 2019’s market highs continue, or should we expect a reversal?
The majority of people in a recent survey said they have
financial regrets when looking back at 2019. While 16 percent said they wished
they invested more aggressively and 12 percent wished they invested more
conservatively, the most common regret was not saving enough. By a long shot.
Thirty-five percent of respondents listed this as their greatest regret.
New research from Aon shows that one in three workers is on
track to have enough money to retire comfortably by 67. The median employee
won’t have enough until age 70. That means half of people will work beyond
that. A number of factors, including low savings rates and rising health care
costs, contribute to these statistics.
PERA’s Board of Trustees oversees the administration of all benefits and programs at PERA. These individuals do everything from setting PERA’s investment asset allocation to monitoring the PERACare program.
Julie Friedemann is a Trustee and a PERA retiree. She taught upper-level math for Jefferson County Public High Schools. “I was very active during the 37 years I taught,” she said. “I was involved in the teacher’s union, I was on the CEA board of directors—I advocated for just about everything related to teachers.” In retirement, that dedication to educators has continued as a PERA Trustee, a role she’s held since 2017. “I’m a retired person representing retired school employees, and I take that very seriously.”
PERA Trustee Julie Friedemann
Friedemann is one of multiple member-elected Trustees on PERA’s Board. The composition of boards is unique for each defined benefit plan across the country. Colorado PERA members and retirees directly elect 12 of the 16 Trustees. The governor also appoints three (with approval by the Senate), and the State Treasurer serves as an ex officio member.
Election details
In 2020, PERA will hold an election for four board seats. Any active member of the School Division, State Division, or Local Government Division is eligible to run. Any active or retired member of the Denver Public Schools Division also may run.
Candidates can pick up necessary paperwork between January 2 and February 28. Candidates must submit paperwork by March 2. Find a full list of details and requirements here.
In early May, every PERA member whose division has
an open seat will receive a ballot in the mail. If only a single candidate runs
in a division, no election is held, and no ballots will be mailed.
PERA will announce the four new Trustees in June.
The Board met seven times in 2019, though that number can vary. Meeting agendas and minutes are available on PERA’s website.
Becoming a PERA Trustee
Friedemann said the application process is not difficult. Those interested in running must gather 100 signatures from members of their division. “If I was giving advice to anyone who was thinking of running, it would be to make sure you talk about why it’s something you wish to do,” she said. “Make contacts with your respective networks so that people know you’re running. Talk about what you might be able to bring to the board.”
Trustees play a vital role in the administration of PERA. As fiduciaries, they are obligated to work in the best interest of PERA’s more than 600,000 members. Trustees do not receive any additional benefits as PERA members for serving.
Keeping members central is built into the DNA of
PERA’s Board as the majority are PERA members themselves, voted into office by
fellow PERA members.
