Month: January 2022

Study: Defined Benefit Pensions Continue to Be More Cost-Effective Than 401(k)s

Posted on by planeteria

A recent study from the National Institute on Retirement Security found that defined benefit (DB) pensions like Colorado PERA’s continue to offer substantial cost savings over defined contribution (DC) accounts like 401(k)s.

The research affirms NIRS’s findings from 2008 and 2014 that DB plans can provide retirement benefits at about half the cost (49 percent) of the typical DC plan.

The cost savings come from key differences in how DB and DC plans work, the authors state. In particular, they highlight the following three advantages of DB plans:

  • Longevity risk-pooling: Defined benefit plans cover a large number of people, with each person’s benefits coming from the same trust fund. For that reason, DB plans only have to accumulate enough money to fund benefits for the average life expectancy of the group. An individual in a defined contribution plan, on the other hand, has to accumulate enough funds to cover their expenses for the rest of their life, including the possibility of living longer than their life expectancy. That means a DC account needs to have a higher balance at retirement in order to provide the same level of benefits as the DB plan.
  • Maintenance of portfolio diversification: Individuals in DC plans are typically encouraged to shift their portfolio to a more conservative, or lower-risk, mix of investments as they get older to protect their balance from drops in the stock market. A DB plan, with its shared trust fund, can maintain a well-balanced portfolio over the long term and weather short-term risks in the stock market, ultimately earning higher returns.
  • Lower fees and professional management: Because of the pooled nature of DB plans, the fees for managing investments are shared by the group and are lower than the typical DC plan, in which each individual pays fees on their account. In addition, DB plan investment managers have a fiduciary duty — they must make decisions to ensure the longevity of the fund — while individual investors in DC plans may not have the expertise to make the right decisions.

Simply put, a person saving for retirement in a DC plan needs to save more money than the typical DB plan. Overall, the authors conclude that it is about twice as expensive to save for retirement under a DC plan like a 401(k) than it is with a DB pension plan.

Both DB and DC plans have their advantages, and Colorado PERA offers both, with some members having the ability to choose whichever plans works best for them. PERA offers all of its members a hybrid defined benefit plan that gives members increased flexibility and additional options, whether through a monthly lifetime benefit or complete portability to another retirement plan. PERA members can also supplement their retirement savings with a 401(k) or 457 plan.

It’s a powerful retirement tool that adapts to the many different paths people take in public service: whether working part-time or full-time, whether planning on a long tenure or a short one, and whether near retirement or far from it. Learn more about PERA’s defined benefit plan.

2022 Proposed Legislation Status

Posted on by planeteria

Below you’ll find summaries of proposed legislation affecting Colorado PERA. The status of each bill will be updated regularly.

Last updated: June 8, 2022

HB22-1029

Compensatory Direct Distribution to Public Employees’ Retirement Association

Bill summary: Lawmakers enacted legislation in 2020 to forego the annual $225 million payment to PERA during the height of the COVID-19 pandemic, when the General Assembly cut billions of dollars from the state budget. The state resumed payments in July 2021 but did not make up 2020’s payment. HB22-1029 calls for the state to make a payment of $380 million, which includes the $225 million plus prepayment of future direct distributions to PERA.

Sponsors: Rep. Shannon Bird, Rep. Shane Sandridge, Sen. Chris Kolker, Sen. Kevin Priola

Bill status: Signed into law.

Position: As fiduciaries, the PERA Board supports restoring the missed direct distribution.

HB22-1057

Public Employees’ Retirement Association Employment After Teacher Retirement

Bill summary: Under current law, PERA retirees are limited in how many days they can work after retirement without reducing their benefit. This bill would temporarily waive those limits for qualified service retirees working as substitute teachers in any school district while there are critical substitute teacher shortages.

Sponsors: Rep. Mary Bradfield, Rep. Barbara McLachlan, Sen. Rob Woodward

Bill status: Signed into law.

Position: Expanding working after retirement provisions to allow retirees to work without a reduction will increase PERA’s liabilities. As fiduciaries, pursuant to its funding policy, the PERA Board opposes legislation that increases liabilities or reduces contributions until PERA is fully funded.

HB22-1087

Special District Director Retirement Benefits

Bill summary: Special district board members are considered employees of the special district, and under current law their compensation is subject to PERA contributions as PERA members (if the special district is an employer affiliated with PERA). This bill would exclude special district board members who begin their service on or after July 1, 2022 from being eligible for membership in PERA for the service as directors.

Sponsor: Rep. Edie Hooton, Rep. Andres Pico

Bill status: Signed into law.

Position: The PERA Board does not have a position on this bill as it has no actuarial impact on the fund.

HB22-1101

Public Employees’ Retirement Association Service Retiree Employment in Rural Schools

Bill summary: This bill would expand provisions, currently scheduled to repeal on July 1, 2023, that allow PERA service retirees to work full-time as a teacher, school bus driver, or school food services cook, without a reduction in benefits, for a rural school district that has determined there is a critical shortage of qualified individuals for these positions. The bill eliminates the scheduled repeal date and adds school nurses and paraprofessionals to the list of eligible employees.

Sponsors: Rep. Barbara MacLachlan, Rep. Marc Catlin, Sen. Jerry Sonnenberg, Sen. Rachel Zenzinger

Bill status: Signed into law.

Position: Expanding working after retirement provisions to allow retirees to work without a reduction will increase PERA’s liabilities. As fiduciaries, pursuant to its funding policy, the PERA Board opposes legislation that increases liabilities or reduces contributions until PERA is fully funded.

PERA Launches Redesigned Website with Better Navigation, Other Improvements

Posted on by planeteria

­Every day, thousands of people visit Colorado PERA’s website to access their account or to find more information on PERA and its benefits. While the site has served that purpose well for years, some changes are needed for the site to continue being a useful tool into the future.

PERA staff embarked on a mission to envision a new website that better serves the needs of its many stakeholders and fulfills the Board’s vision of innovation in meeting the changing needs of PERA’s membership. For months, PERA has analyzed website usage data and collected input from users and staff to identify problem areas and opportunities for improvement. The result is a redesigned website that is easier to use, more mobile friendly, and better aligns with modern web standards.

“PERA’s website is an important tool for its many stakeholders — members, retirees, employers, policy makers and more,” said Patrick von Keyserling, Senior Director of Communications. “The needs of those groups were top of mind as staff across the organization worked together to build a new site that is more useful, helpful and adaptable for the future.”

Below is a summary of some of the most significant changes to the site.

Improved navigation

Much of the work on the new website has centered on addressing the most common complaint about PERA’s old website — that it was difficult for members and others to find what they needed.

In addition to a reorganized menu bar, the homepage on copera.org features a new drop-down menu with common tasks like logging in, applying for retirement and getting in touch with PERA’s Customer Service team.

Informational pages on the site are organized by career stage, making it easier for members and retirees to find information and resources that are relevant to where they are in life, whether they’re new to PERA, in the middle of their career, ready to retire or already enjoying retirement. Each career stage is displayed prominently on the homepage for easy navigation.

Deciding when to retire is an important choice to make, and the “Ready to Retire” section features new pages that help members determine when they can retire and what steps they need to take along the way.

New forms and publications library

One of the most common reasons people visit PERA’s website is to download a form or informational booklet. On the new website, this process is easier and requires fewer clicks.

To find a form or publication, simply click on “Forms & Publications” in the navigation bar at the top of any page. This section of the site contains forms, booklets, fact sheets and reports sorted by category and topic.

Clicking the “+” icon on a category or topic will display a list of forms and publications that are available to view or download with a single click.

Frequently asked questions

Have a question about PERA benefits? The new frequently asked question (FAQ) section of copera.org features answers to many common questions. FAQs are organized by topic — such as member and retiree questions, PERACare questions, and investment-related questions. Some of the most commonly asked questions are listed on the homepage, making it easy to get answers as quickly as possible.

Continuing to improve

These changes are just the beginning. PERA will continue to incorporate additional content and features into the public-facing website as well as its secure portion, which houses member account dashboards and other account-related information, with the goal of improving the member experience.

Four Board Seats Up For Election in 2022

Posted on by planeteria

Each May, Colorado PERA holds an election for its Board of Trustees. This year, four seats will be up for election.

The Board of Trustees plays a vital role in PERA’s operations, overseeing the administration of all benefits and programs at PERA. The Board comprises 16 Trustees, and PERA members and retirees directly elect 12 of them. The governor appoints three (with approval by the Senate), and the State Treasurer serves as an ex officio member. Elected Board members serve without pay, but are reimbursed for necessary expenses.

Election details

The following seats are up for election this year:

  • School Division—4-year term (To be filled by an active employee of a public school, not including Denver Public Schools)
  • State Division (Higher Education)—4-year term (To be filled by an active employee from an Institution of Higher Education)
  • State Division/Special Election—2-year term (To be filled by an active employee at any employer assigned to the State Division, other than an Institution of Higher Education)
  • Local Government Division—4-year term (To be filled by an active employee at a Local Government Division employer)

Anyone interested in running for one of the open seats can request a candidacy packet between now and Feb. 28. Candidates must then gather 100 signatures from members of their division. All paperwork must be submitted by March 1.

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.

The Board will announce election results in June.

What to Expect in Colorado’s 2022 Legislative Session

Posted on by planeteria

When Colorado’s lawmakers convene at the State Capitol on Jan. 12, they’ll begin the 120-day process of proposing, debating, and deciding on bills that could change state law. With only about four months to decide on hundreds of bills, it’s a busy, fast-paced time at the Capitol.

It’s also a busy time for Michael Steppat, Colorado PERA’s Public & Government Affairs Manager. He tracks legislation affecting PERA, maintains relationships with legislators, oversees lobbying, and more.

PERA On The Issues sat down with Steppat to get his perspective on the upcoming legislative session and the issues lawmakers might decide to tackle this year.

Can you explain your role and the work you do on behalf of PERA and its stakeholders?

PERA Public & Government Affairs Manager Michael Steppat

The Colorado General Assembly is responsible for many aspects of PERA, including contribution rates and benefit levels, while the Board is responsible for overseeing PERA’s investments and the administration of benefits. PERA staff provide regular updates to the legislature so lawmakers can make informed decisions on issues that affect our members.

I represent PERA at the Capitol. I monitor and report on legislative activity, build and maintain relationships with legislators and other stakeholders, and oversee lobbying efforts. I also serve as the liaison for legislative committee staff.

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 — on the impact of proposed legislation to PERA’s active members and retirees.

Last year’s legislative session was an unusual one due to the COVID-19 pandemic. Will lawmakers be returning to a more “normal” session this year?

Last year, the General Assembly gaveled in to begin the session in January and then immediately hit “pause” on the session for several months due to COVID-19. We don’t expect the same thing to happen this year — all indications are that lawmakers will convene and begin the session as usual.

We know lawmakers plan to introduce a bill to make up the state’s missed $225M payment to PERA from 2020. What other issues do you anticipate seeing?

It’s possible we’ll see legislation pertaining to working after retirement laws, especially given the pandemic-related shortages of qualified teachers and other staff in rural school districts. There will likely be a fossil fuel divestment-related bill, which was introduced last session as well.  

There are more than five hundred bills introduced every session on a variety of issues, but the bills we can expect to be at the top of most legislators’ to-do lists next year include many of the usual hot topics like the state budget, health care and education.

Our members and retirees often ask if anything is being done about the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). Is there anything the state legislature can do about those provisions?

The WEP and GPO are two separate provisions in federal law that are specific to Social Security. It would require Congress to pass legislation for there to be any changes to those provisions. Last year, two bills were introduced that would repeal or change the WEP and GPO, but there has been no further action on either from lawmakers in DC. The efforts to drive this change over the past few years have, unfortunately, proved fruitless and the cost of such proposals is often mentioned as the reason. It is important for members and retirees to contact their representative or senator to have their voice heard on federal issues like this one.

Does PERA take a position on proposed legislation?

Yes, the Board of Trustees determines PERA’s legislative agenda and positions on bills in accordance with Board policies.

How can PERA members and retirees stay up-to-date and get involved in the process?

PERA On The Issues is a good place to start — our biweekly newsletter will be up-to-date on any legislation that affects PERA. We also encourage people to follow the Colorado Retirement Action Center on Facebook.

In addition, the General Assembly website has lots of great information. You can listen to committee meetings, view calendars, review the status of a bill, and sign up to testify at committee meetings.

Most importantly, we encourage PERA members and retirees to contact their legislators about issues that are important to them.