At the end of 2020, the No Surprises Act made it out of Congress and was signed into law. While the law doesn’t go into effect until 2022, it contains changes that could help curb high costs that stem from emergency services and complex billing practices.
The research arm of the U.S. Congress released this updated brief on how the WEP works, why it exists, recent legislative history, and common arguments for and against eliminating. The Congressional Research Service also updated a shorter summary, which includes an overview of the Government Pension Offset.
Making sense of your 401(k) balance can be tricky. Maybe you’ve saved a few thousand dollars. By the end of your career, you might have several times your annual salary. But here’s the thing: you probably won’t spend it all at once. So how can you translate that total dollar amount into an amount that you can feel confident about spending on a monthly or annual basis?
A new rule under development at the Labor Department would require plan sponsors to include retirement income projections along with account balances. This article lays out the strengths and shortcomings of such an addition.
It’s no secret: health care isn’t cheap, especially for retirees. While stories about health care costs often focus on policy changes that could address high prices, this story is about steps individuals can take to prepare for them.
News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.
The last week of February is America Saves Week, and now more than ever, it’s vital to have a plan for saving money.
The events of the past year made clear the importance of having money set aside. The COVID-19 pandemic and the resulting shutdowns and layoffs threw a wrench in the finances of families across the country.
Despite the turmoil, surveys have shown that many Americans are actually saving more money and paying down debt during the pandemic. In an informal poll on PERA’s Facebook and Twitter pages, more than 200 people weighed in and nearly 60 percent of them said they, too, have been saving more.
Increasingly, PERA members know the value of participating in the voluntary PERAPlus 401(k) and 457 plans to boost their retirement savings.
In 2019, the average PERA benefit was $3,153 a month, or $37,836 a year. Reliable lifetime income is a financial cornerstone for many PERA members, but many also plan to have additional income in retirement. To do this, they participate in voluntary retirement savings plans. In 2019, more than 87,000 PERA members contributed to a PERAPlus 401(k) or 457 plan, up several hundred from the year before.
The nonprofit Consumer Federation of America organizes America Saves Week every year to encourage even more people to take up good money habits and start saving for the future. Each weekday has its own theme to get people thinking about different aspects of saving.
They are:
Save Automatically
One of the easiest ways to save money is to do it automatically. The PERAPlus 401(k) and 457 retirement plans allow members to make automatic contributions every time they get paid. Those in the plans also have the option to contribute a percentage of each paycheck, rather than a simply flat dollar amount. This makes increasing retirement savings automatic, too, as the amount of savings increases any time pay increases.
Another option for automatic saving is rounding up debit card purchases and putting that extra change into a savings account. A growing number of banks and mobile banking apps offer this hands-off saving feature.
Save for the Unexpected
Many experts recommend having three to six months’ worth of living expenses stashed away, but that’s easier said than done. Starting small and aiming for an emergency fund of $500 can make a big difference, as research has shown that even before the pandemic, many Americans couldn’t afford an unexpected $500 expense. Setting aside about $1.37 a day (roughly $42 a month) will result in savings of $500 in one year’s time.
Save to Retire
Members of PERA are already on the path to saving for retirement, as workers and their employers both automatically contribute to the employee’s PERA account each month. PERA invests these funds on behalf of its members in the Defined Benefit (DB) plan in order to provide a monthly benefit that retirees cannot outlive. PERA members in the Defined Contribution (DC) plan have the flexibility to choose their investments to meet their retirement goals.
The voluntary PERAPlus 401(k) and 457 plans, available to those in both the DB and DC plans, offer even more flexibility with the option to set up additional retirement savings and invest that money to plan for a more secure future.
Save by Reducing Debt
Accrued debt like student loans and credit cards can be a big obstacle to saving more money. That’s why it’s important to make a plan to reduce debt wherever possible – a good rule of thumb is to focus on high-interest debt like credit cards first. This results in saving money on interest charges long-term.
Save as a Family
It’s never too early to learn about saving money! Parents should think about setting aside some time to talk to their children about money and the importance of saving. This could even be a great opportunity to set a young child up with a piggy bank, if they don’t already have one.
Have a helpful savings tip to share? Leave a comment below!
Researchers at the Center for Retirement Research at Boston College released a 2021 update to their National Retirement Risk Index. This index, which is updated every three years, compares the replacement income future retirees are building compared to their projected needs. The study paints a grim picture: half of all those in the study are at risk “of being unable to maintain their pre-retirement standard of living in retirement.”
The study states: “The bottom line is that half of today’s households will not have enough retirement income to maintain their pre-retirement standard of living, even if they work to age 65 and annuitize all their financial assets, including the receipts from a reverse mortgage on their homes.”
“Make an estate plan” is good advice for almost every adult (yes, even if you’re decades away from retirement). But what about the other side of estate planning: the person who settles the estate of someone else, like a parent or spouse? That’s what this article is all about. Understanding the steps you should take in executing an estate – or how to manage the estate of someone without a will or plan – might bring clarity to your own plan, too.
One of President Biden’s most-talked-about retirement-related legislative ideas is to change the way tax savings work in 401(k) plans. Currently, you reduce your taxable income by an amount equal to your annual 401(k) contributions. However, the benefits of this method are distributed unequally, according to Biden’s rationale. In short, people with higher income stand to benefit more than others. If you are in the highest tax bracket, your deductions are “worth” more compared to those in lower tax brackets who contribute the same amount. Biden’s proposal would replace the deduction with a tax credit.
The average woman lives about five years longer than the average man. This, despite retiring about two years sooner. Pile on top of that the effects of the wage gap, which accumulate over a lifetime, and women face a particular set of challenges when thinking about retirement. This article includes some ways to approach planning. (Not included: the fact that a PERA retiree has a source of income that can’t be outlived.)
News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.
Colorado PERA’s Board of Trustees met on January 15. The meeting’s agenda consisted primarily of updates on operations from PERA staff, summarized below. It was also the first meeting run by the Board’s new leaders, Marcus Pennell and David Hall.
Legislative update
Executive Director Ron Baker and Public and Government Affairs Manager Michael Steppat presented an outlook on the 2021 legislative session.
The presentation largely mirrored the legislative preview published in PERA On The Issues in early January. The legislative session is on pause until mid-February at the soonest. When legislators return, addressing the COVID-19 pandemic will dominate debate.
Communications update
PERA Senior Director of Communications Patrick von Keyserling shared projects currently underway in the department. Changes members can expect in 2021 include:
The creation of a new dashboard that displays helpful information after logging in to a member account
Ron Baker shared some high level statistics with the Board, including:
PERA paid out $4.7 billion in benefits from January through November
PERA’s total membership was 636,159. These numbers are broken down by division below.
Investments update
PERA’s investment staff provided an update on each asset class to the Board, as well as a Market and Portfolio Update. These presentations are summarized below.
Global equities: Overall, PERA is overweight global equities, which means the amount currently in PERA’s portfolio is above the benchmark. As of November 2020, the most recent date for which information is available, global equities made up 59.2% of PERA’s portfolio — higher than the 56.0% policy benchmark weight, but still within the Board-established allowable range of 48%-60%.
Fixed income: The current environment is volatile, and Treasury yields are near historic lows. Fixed income is a core asset class for PERA, providing long term income and stability, and is an anchor to offset some of the potentially more volatile components of the total investment portfolio. It made up 20.3% of PERA’s portfolio at the end of 2020.
Private equity: Tim Moore, PERA’s Director of Private Equity, described the private equity environment as being “measured and cautious.” He said that private equity managers in general are still assessing the impact of COVID-19’s effect on the economic environment and that PERA is poised to take advantage of opportunities when the market normalizes. Private equity made up 7.8% of PERA’s portfolio.
Real estate: Real estate is undergoing a challenging time as retail, hotels, and office buildings all face difficulties stemming from the pandemic. PERA’s real estate portfolio is overweight toward industrial and multi-family properties and does not own any hotels or leisure properties directly. PERA’s real estate team is taking a long-term view by working with tenants in an effort to preserve rent collection. Real estate made up 8.2% of PERA’s portfolio.
Alternatives: New investments, including private global infrastructure, royalties, and agriculture, have helped diversify PERA’s portfolio. Alternatives made up 3.8% of PERA’s total portfolio.
A complete, audited report of PERA’s 2020 investment results will be available in the Comprehensive Annual Financial Report, released in June (read more about the CAFR here). Why the wait? While the value of some asset classes, like global equities, are updated on a daily basis, other asset classes, like private equity, are valued on a less frequent basis.
Editor’s note: Since publishing, Coloradans who are 65 or older and educators have gained eligibility for the COVID-19 vaccine. Check here for the latest information from the state of Colorado.
Key points from this story:
Colorado is taking a phased approach to vaccinating residents
Coloradans who are 65 years old or older can receive the vaccine now
PERA is not a health care provider and does not have vaccines to distribute
Check here for the latest information from the state of Colorado
Efforts are underway to inoculate Americans against COVID-19, but only the most at-risk residents are currently eligible to receive their vaccinations.
Determining who can receive a COVID-19 vaccine and when involves a number of factors, including vaccine supplies and availability, location, occupation, and age. Jessica Linart, director of insurance at Colorado PERA, said the unprecedented nature of the coronavirus pandemic and the accelerated vaccine rollout have led to a process that isn’t as straightforward as many might expect.
“It’s different from a flu vaccine where it’s widely available and you can go to the pharmacy or to your doctor’s office,” because vaccine supplies are so limited, Linart said. “Eventually this will look more like a normal vaccine process…but it’s not there yet.”
Here are answers to some questions PERA has received from members, as well as links to more information.
Is PERA providing vaccines for retirees?
PERA itself is not part of the COVID-19 vaccine distribution process. Federal and state authorities are working with local health authorities and medical providers to vaccinate residents, Linart said, so your state or county health department should be the first place you look to for information.
The providers that PERACare enrollees use might be involved in that process, however.
Kaiser Permanente – one of the insurance carriers that provides coverage under PERACare – is also a medical provider and is providing COVID-19 vaccines to eligible residents. Click here for more information.
PERACare’s other carrier, Anthem, is solely an insurance carrier and is not administering vaccines. Those who are enrolled in Anthem’s PERACare plans can still get vaccinated—they can use the resources listed below to find a location.
How do I know if I’m eligible for the vaccine?
Colorado’s vaccine distribution plan is split into multiple phases, with the highest-risk groups in the first phase and the lowest-risk groups in the last phase. The state is currently in Phase 1, which contains several subgroups.
The groups Colorado currently is vaccinating include:
Phase 1A
Health care workers with direct contact with COVID-19 patients
Staff and residents of long-term care facilities
Phase 1B.1
Coloradans who are 70+
Health care workers with less direct contact with COVID-19 patients
First responders
Correctional workers
Funeral service workers
Beginning Feb. 8, Coloradans in Phase 1B.2 will be eligible for the vaccine. That includes:
Coloradans who are 65-69 years old
Educators (teachers and school staff)
Workers in licensed child care programs
Members of Judicial/Executive branches of state government
How do I know when and where I can be vaccinated?
This depends on the facility. Some allow you to reserve a spot while others ask you to wait to be contacted when it’s your turn.
To find a vaccine provider near you, head to Colorado’s website. There you’ll find a map of vaccine locations as well as a list of providers by county. If you’re outside Colorado, visit the CDC’s vaccine website and choose your state/territory under “How do I get a vaccine?”
Do I have to pay for the vaccine?
No. The vaccine is available free of charge, with no copay, regardless of your insurance plan. A vaccine provider cannot turn someone away because they don’t have insurance.
Beware of scammers who are using the COVID-19 pandemic to take advantage of people. Don’t give out any personal information online or over the phone, beware of any advertisements that offer to move you ahead your place in line for a fee, and only use official providers listed on the state’s COVID-19 vaccine website. Click here for more information from the Colorado Bureau of Investigation.
I have more questions about the vaccine; who can I ask?
Check Colorado’s website or your county health department for the most up-to-date information.
More information is also available over the phone by:
Calling the state’s 24-hour hotline at 1-877-CO-VAX-CO (1-877-268-2926)
Calling 211 or 866-760-6489 (available from 8 a.m. to 5 p.m. Monday through Friday)
A bill introduced in the U.S. House of Representatives on January 4 would repeal the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) provisions.
Since these became law more than three decades ago, there have been numerous bills introduced to repeal them. None have passed.
This is a topic of concern for many PERA members. Why? The WEP and GPO can affect retirement planning in a serious way. During their working years, a PERA member might receive a benefit estimate from Social Security with one number on it, but when they claim their benefit years later, the amount is often less. Sometimes a lot less.
“Why are PERA members penalized?” “Are folks in other states affected?” “Who has the power to change this?” “Will this this bill likely pass?” “What is PERA doing about it?” These are some examples of questions PERA often receives from its members.
In light of this new legislation, PERA On The Issues asked these questions to PERA’s legal and government affairs staff.
An Overview of the WEP/GPO
The internet is filled with articles about this topic, including on Social Security’s website. Through the years, PERA On The Issues has also covered this topic:
The articles above contain in-depth explanations. Here’s a high-level overview:
Most PERA employers do not participate in Social Security. This means employees do not pay the 6.2% Social Security tax. Instead, they contribute to PERA. This is why PERA is considered a Social Security replacement. It is important to point out that PERA benefits are never reduced by Social Security or any other retirement plan.
However, many people who participate in PERA pay Social Security taxes while at other jobs at other points in their career or are married to someone who qualifies for a Social Security benefit. That’s where the WEP/GPO come in. While a person can earn both benefits, Social Security can reduce the Social Security benefit people receive on account of the years they did not pay Social Security taxes. These reductions apply if a person has less than 30 years of substantial earnings while paying Social Security taxes.
There are other details covered in the articles above, including how the WEP differs from the GPO, how these benefits are calculated, how paying Social Security taxes for at least 20 years can lower the reduction, and more.
PERA Staff Answer Questions about Legislation
Michael Steppat, PERA’s Public and Government Affairs Manager and Jennifer Schreck, PERA Senior Staff Attorney and Manager of Legal Services, answered questions about WEP/GPO legislation.
Can the Colorado legislature or PERA change anything to get around the WEP/GPO?
Jennifer Schreck: No. While PERA members are affected by these laws, they are affected because of the years they don’t participate in Social Security—not because they are PERA members. Social Security is administered at the federal level. These laws exists at the federal level, so any changes to how Social Security works would need to take place at the federal level.
Who is affected by the WEP/GPO? Would this bill change it for everyone?
Jennifer Schreck: Anyone who works for an employer that doesn’t participate in Social Security is currently affected by WEP/GPO laws. This includes approximately a quarter of state and local government employees across the country. If this bill passed as currently written, it would eliminate the WEP/GPO for everyone.
If this legislation passes, would my PERA benefit be affected?
Jennifer Schreck: No. Your PERA benefit is determined by state law—not federal law. The WEP/GPO do not affect your PERA benefit now, and if the WEP/GPO were repealed your PERA benefit would remain unaffected.
Does this bill have political support?
Michael Steppat: The introduced bill does have bipartisan support—members from both parties have signed on as sponsors of the bill. President Biden has stated his support for eliminating the WEP/GPO. However, previous attempts to repeal the WEP/GPO have had bipartisan support as well.
Who would be against eliminating the WEP/GPO and why?
Michael Steppat: Opponents of past WEP/GPO legislation often cite fiscal constraints. Paying higher benefits to the people affected by the WEP/GPO would cost money. Opponents of the bill say it’s not fair to those who paid Social Security taxes for their entire career. There are plenty of lawmakers with this opinion, especially considering the majority of public employees, not to mention those in the private sector, do pay Social Security taxes.
What is the likelihood that this bill passes?
Michael Steppat: It’s hard to see what has changed since prior bills have been introduced and failed.
Where do Colorado’s lawmakers stand, and what is PERA doing about this issue?
Michael Steppat: Of the current 52 co-sponsors of the bill, none is from Colorado. However Colorado Senator Bennett and Representatives Crow, Neguse, Perlmutter, and Tipton did sign on to the last iteration of legislation repealing WEP/GPO and may do so again with this new bill if they choose.
While PERA continues to educate our Congressional delegation on this issue of great importance to members, the most effective advocacy is for constituents to contact their member of Congress and share what impact these laws have on them.
