Month: November 2020

News You Should Know: Medicare Costs in 2021

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What Will Medicare Cost You in 2021? | Medicare

Medicare costs will change slightly in 2021. Find out what that looks like for you in this high-level overview. A reminder: If you are on a PERACare plan in retirement, you owe Medicare premiums for Part B coverage, but the Part A costs you see in this overview are replaced by the PERACare plan you have.

When Only One Spouse Retires | Kiplinger

If you live with a partner, odds are you won’t retire on the same day. The gap between your retirement date and your partner’s could be months, or even years. That period can bring imbalance to your relationship as your day-to-day experiences diverge. But it doesn’t have to be that way. From practical matters to emotional considerations, this article walks you through how to prepare for this transitional time. And preparing isn’t just about avoiding pitfalls. If you do it right, this time can be full of opportunity.

Does Late-career Nontraditional Work Improve Retirement Security? | Center for Retirement Research at Boston College

Nontraditional jobs (defined as jobs that don’t offer health or retirement benefits) get a lot of attention these days. On the one hand, they can provide much needed flexibility and independence. On the other, the lack of traditional workplace benefits can leave some financially exposed. This paper looks at what effects these jobs have on retirement security for older workers. Those who are underprepared for retirement are more likely to switch to nontraditional work, which isn’t great news given the lack of retirement benefits. But the news isn’t all bad. Those who are more prepared can take advantage of the increased flexibility and explore the idea of a part-time retirement. As the study states, “extended careers are financially beneficial, even in jobs without health and retirement benefits.”

Millennials, Gen Z Fear Long-Lasting Negative Financial Impact from Pandemic | 401K Specialist

One in four Millennials say the pandemic is putting them farther behind, financially. From putting off paying down debt to foregoing saving for retirement, the financial consequences of 2020 could be felt for years. Only one in four has an employer-sponsored retirement account and most lack a “strong role model for building retirement savings.”

PERA Board Meeting Recap: Trustees Elect New Chairman

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Colorado PERA’s Board of Trustees met virtually on Friday, November 20. The Board elected a new Chairman and Vice-Chairman and voted to maintain the 3% interest rate for member accounts, among other agenda items.

PERA Board Officer Elections

Colorado PERA’s Board of Trustees elected Marcus Pennell to be the Board’s next Chairman. Pennell, a physics teacher in Jefferson County Public Schools, is currently the Board’s Vice Chairman.

The outgoing Chairman, Timothy M. O’Brien, has been a PERA Board member since 2011. O’Brien has been the Denver City Auditor since 2015 and was the Colorado State Auditor from 1984 to 1995.

The Board elected David Hall Vice Chairman, filling the seat vacated by Pennell. Hall is a Sergeant with the Colorado State Patrol.

Pennell and Hall assume their new leadership roles in January 2021.

Member Interest Rate

For many PERA retirees, account balances don’t play a significant role in their retirements. For example, account balances do not determine the amount of most PERA monthly benefits. In fact, most retirees receive the balance of their account through benefit payments about five years into retirement.

But account balances do play a more important role for some PERA members. For these members, the interest added to their account increases the value of being a PERA member. At the meeting, the Board voted to maintain the 3% interest rate that member accounts earn.

The following scenarios show how the interest rate on member accounts can affect PERA members:

  • Refunds | Some PERA members choose to refund their account when they leave employment in lieu of a monthly benefit in retirement. Members who refund their account receive their contributions plus interest. In some cases, they also receive a match.
  • Retiring with less than 5 years of service | PERA members who do not have five years of service credit are still eligible to receive a monthly benefit in retirement. However, this benefit is not calculated using the familiar formula that includes service credit, age, and highest average salary. Instead, the money purchase calculation determines the amount. This calculation does use a member’s account balance along with life expectancy at the time of retirement.
  • Moving to a job outside of PERA | Not every PERA member remains in public employment for their entire career. Those who leave before retirement age can leave their account at PERA and still receive a monthly benefit when they become eligible later in life. One potential downside: the purchasing power of a static highest average salary decreases over time—the result of inflation. To help offset this phenomenon, PERA calculates what the benefit is using the money purchase calculation, described above. The retiree receives the larger of the two calculations.
  • Survivor benefits | Survivor benefits provide income for qualified survivors if a PERA member dies before retirement. If a member dies but does not have any qualified survivors, the account balance goes to the named beneficiaries the member chose.

Other Agenda Items

During the meeting, the Board adopted new mission and vision statements, which are covered in another PERA On The Issues story. They also reviewed and adopted updated actuarial assumptions, which will be covered in a future PERA On The Issues newsletter.

Board Refreshes PERA’s Mission, Vision

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How well do you remember 2002?

  • The Winter Olympics took place in Salt Lake City. Mitt Romney, who would go on to become a Massachusetts governor, presidential candidate, and Utah senator, led the organizing committee.
  • President George W. Bush signed a bill creating the Department of Homeland Security
  • The word “Googled” appears for the first time in pop culture, on an episode of Buffy the Vampire Slayer
  • For the first time, US consumers could buy a cell phone with a built-in camera (thanks, Sanyo!)

2002 was also the year in which PERA last adopted mission and vision statements it used until the Board adopted updated versions at its November meeting.

Mission, Vision, and the Board’s Strategic Plan

Colorado PERA’s Board of Trustees adopts strategic plans that guide the organization’s work. The most recent plan, adopted by the Board in 2019, will guide PERA through 2023. One objective in the current strategic plan is refreshing the organization’s mission and vision statements.

“A mission and vision statement helps an organization articulate who they are, and who they want to be,” said Laura Morsch-Babu, PERA’s director of communications. “PERA has evolved significantly since our mission and vision were created, and so has our industry. It was the right time to reflect on our mission, who we are today, and how we will serve our membership in the future.”

Creating a New Mission and Vision Statement

Despite the brevity of the statements, a lot of work goes into ensuring they represent PERA’s wide array of stakeholders. PERA staff conducted dozens of interviews and distilled the feedback into key themes that were then woven into the new statements.

Earlier this year, PERA staff presented the Board with a number of different approaches. The Board whittled down the options to just a few choices and asked staff to incorporate additional feedback. At the November Board meeting, the Board approved a new set of statements.

“The Board’s final mission and vision reflects PERA’s commitment to providing retirement security in a sustainable way for our members, but it also closely aligns with the board’s strategic plan to evolve and modernize the way we do business,” said Morsch-Babu. “These new statements will guide every aspect of our work and become part of the PERA culture.”

News You Should Know: Biden’s Health Care Agenda

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What Biden’s Election Means For U.S. Health Care And Public Health | NPR

Health care issues were a prominent theme during the 2020 campaign for candidates up and down the ballot. President-elect Biden made health care issues, ranging from the future of the Affordable Care Act to government responses to COVID-19, central to his campaign. This story outlines his policy initiatives on multiple health care topics. His ability to pass legislation on these issues, however, likely rests on the outcome of runoff elections in Georgia, which will determine the party that controls the Senate.

One spouse’s view of aging may sway the other’s health | Futurity

Do you have a negative outlook about getting older? It’s not just your mental health that could be at risk. A study of nearly 6,000 people over 50 showed that, for people with a partner, that negative outlook had a detrimental effect on their spouse’s health. Want to sidestep this self-fulfilling prophecy? Being open to sharing concerns with your spouse and seeking outside help when needed are simple steps to address negative feelings.

Does Your Credit Score Matter in Retirement? | Money

You don’t plan to buy another house. Your car is paid off. Kids are out of college. It’s easy to assume watching your credit score is a younger person’s game when the expenses listed above are out of the way. Don’t be fooled. You might want to refinance a mortgage. Some long-term care facilities run credit checks. These are just two reasons to keep an eye on your credit score in retirement.

Are Your Retirement Savings Ahead of the Curve? | US News

Let’s be honest. Thinking about your personal finances often leads to wondering what friends and neighbors are doing with theirs. To that end, it’s easy to find articles that show what average 401(k) balances are based on age. This article adds an additional component that’s just as important—average savings rate by age bracket. While most financial advisers would probably say the only person you should be concerned about is you, some people might find this type of comparison to be just the motivation they need to start saving—or to save even more.

News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.

Polis Budget Plan Includes PERA Direct Distribution

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Gov. Jared Polis included PERA’s direct distribution in his 2021 state budget proposal.

The state legislature passed a bill in 2020 suspending the $225 million payment for one year due to historic revenue shortfalls and consequential budget cuts. PERA On The Issues has covered the 2020 suspension in depth in previous articles.

It’s up to the state legislature to ultimately create and pass a budget, but the governor’s budget proposal helps get the budget conversation underway.

Direct Distribution – a Summary

The landmark SB 18-200 included a number of changes that work in concert to bring PERA to full funding. The direct distribution was one of these changes. In short, it is a $225 million annual payment from the state. Every dollar goes toward paying off PERA’s unfunded liability.

This payment was more than a commitment of budget writers in 2018. The direct distribution was written into statute, to occur every year until all unfunded actuarial accrued liabilities from all divisions of PERA are eliminated.

2020 Crisis

The global pandemic led to a precipitous drop in state revenue. Billions of dollars of expected income vanished. The Joint Budget Committee (JBC), the bipartisan group of senators and representatives who write the state budget, faced an unenviable task: reducing or eliminating a large number of previously budgeted items in order to balance the budget. The direct distribution was one of many emergency cuts.

2021 Budget Process

We won’t know what next year’s budget will look like for a while. Typically, the JBC releases their budget in late March or early April. However the process of creating the budget takes months.

The governor’s budget plan is one of the first waypoints of this process. While the governor does not write the budget, he can signal priorities via this plan. Restoring the direct distribution is a key part of his proposal, which he released on November 2.

Next Steps

The status of the direct distribution won’t be official until the state legislature passes a budget next year. However, learning about the priorities of everyone involved in the budget process, like the governor, can bring some focus to an otherwise hazy picture.

Another opportunity to gain clarity is when the state releases its revenue forecasts periodically. Revenue forecasts supply JBC members with crucial information about how much money they can expect to work with.

Remember, these forecasts are estimates and can change over time. But they are important in setting expectations as the JBC does their work.

“The September revenue forecast painted a slightly less grim picture of the state’s revenue situation as the economy continues to rebound,” said Michael Steppat, PERA’s Public and Government Relations Manager. “But all eyes will be on the upcoming December forecast as state and local leaders ponder the best response to currently surging COVID cases across the state.”

PERA On The Issues will continue following the budgeting process and post updates as they occur.

Editor’s note: this story was updated on 11/11 for clarity.

What Election Results Mean for PERA Members

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In Colorado, the 2020 election season is over. PERA-related issues were not on the ballot, but ballot issues can have a downstream effect on PERA.

PERA’s Public and Government Relations Manager, Michael Steppat, joined PERA On The Issues to talk about the election’s outcomes.

Welcome back, Michael. This was a busy election season, and Colorado voters had many issues to consider. What stood out to you?

It was a rollercoaster ride and I’m glad it is over. But seriously, I think something that “stood out” would be Coloradans’ desire to be engaged in the political process. Voter turnout in Colorado was higher than any previous election in the state’s history.

Many of the ballot issues Coloradans voted on will determine fiscal policy in the years ahead. Collectively, what implications will these changes have on the state budget?

Well, there’s obviously a lot of moving parts here, but the impacts to the state budget are huge.

The approval of Amendment B to repeal the Gallagher Amendment is a big deal in terms of how the state manages fiscal policy moving forward, but also prevents budget cuts that would have gone through in the next fiscal year had it not passed.

The voters also approved a tax cut, but the repeal of Gallagher and a tobacco tax increase are expected to bring in enough revenue to more than offset the income tax rate cut.

At the federal level, talks for another fiscal stimulus bill have been stalled for months. Now that the election is over, will negotiations quicken, or shouldn’t we expect so see anything materialize until 2021?

TBD. It’s difficult to predict what happens in Congress even under normal circumstances. Hopefully there will be some movement in the lame duck session to pass another stimulus bill, because it is desperately needed across the country. 

Using federal stimulus dollars for state and local budgets has been one of the biggest issues of disagreements thus far. How would these dollars be used? If they were included in a future stimulus act, would they increase the likelihood that PERA receives a direct distribution in 2021?

That is the million-dollar question. Would these dollars come with strings attached or will state/local governments have some flexibility? Most will again be focused on the state’s budget situation entering the next legislative session.

We hope to meet up with you again in early January when we publish our annual legislative preview. Until then, what will you be watching as next year’s legislation session begins to take shape?

Lawmakers will again be focused on policy responses to COVID-19. However, the extent to which other priorities can be addressed will largely depend on what happens these next few months from a public health standpoint.