Month: February 2022

PERA Offering New Lifetime Income Options to DC Plan Participants

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In 2019, Congress passed sweeping legislation known as the SECURE Act that ushered in some major changes in retirement plans. One of those changes was making it easier for employer-sponsored plans like 401(k)s to offer annuities to plan participants.

Since then, consumer interest in annuities has grown, and 2020 saw the highest annuity sales in over a decade, totaling nearly $255 billion.

PERA now has two annuity products to offer participants in the PERAPlus 401(k), 457 and DC plans.

What is an annuity?

Simply put, an annuity is a financial product that provides guaranteed, regular payments — either for a fixed amount of time or for a person’s life. PERA’s Defined Benefit (DB) plan and Social Security are both annuities that provide a lifetime retirement benefit.

While PERA’s DB plan offers lifetime income in retirement, workers who save on their own in a defined contribution plan like a 401(k) risk running out of savings in retirement. Annuities, which are usually available for purchase through insurance companies, can help offset this risk by converting all or a portion of a person’s account balance into regular income. Like a pension, annuities collect or “pool” assets from a large number of individuals in order to provide each person with guaranteed payments.

There are many types of annuities with a variety of features, but PERA, through its partner Empower, is able to offer two types of annuities for participants in the PERAPlus 401(k), 457 and DC plans: A single premium fixed immediate annuity and Qualified Longevity Annuity Contracts (QLACs).

Single premium fixed immediate annuity

Empower’s parent company Great-West Life & and Annuity Insurance Company offers a single premium fixed immediate annuity through the PERAdvantage Capital Preservation Fund within the PERAPlus 401(k)/457 and DC plans. This allows participants to use all or a portion of their account balance to make a one-time purchase that immediately converts to guaranteed payments. The participant can choose the frequency of the payments as well as how long they’ll continue.

This annuity can be a good option for plan participants who are entering retirement and are ready to start receiving income right away.

QLAC marketplace

Plan participants who want to wait until later in retirement to begin collecting payments can take advantage of the Qualified Longevity Annuity Contract (QLAC) marketplace offered by Blueprint Income.

While an immediate annuity provides income right away, a QLAC is a deferred annuity that is designed to begin providing income after age 72, and as late as 85. QLACs are exempt from IRS required minimum distribution (RMD) rules, so they can be a good option for retirees who wish to reduce their RMDs and taxes between the ages of 72 and 85.

Blueprint Income facilitates the rollover of the purchase amount from the participant’s retirement account into the annuity option the participant chooses.

Both annuity options provide retirees the ability to turn their savings into reliable income, and both offer joint annuity options, which can provide income to a surviving spouse. While an annuity might not be the right fit for everyone, it can be a helpful tool in planning for one’s golden years.

For more information on these annuity options, visit coperaplus.org.

Give Yourself a Savings Checkup During America Saves Week

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The COVID-19 pandemic has had a profound impact on many people’s finances over the past two years – surveys show many people have been saving more money, and the percentage of Americans who say they have savings on hand to cover a $1,000 emergency expense is on the rise. However, that number is still less than 50 percent.

The last full week of the month, Feb. 22 to 25, is America Saves Week, an annual effort by financial institutions across the country to raise awareness of the importance of saving for the future. It’s a good time for a financial “checkup” of sorts – to look at one’s budget and overall finances, and make a plan to save more, if possible.

Saving money is easier said than done, and there’s no one right way to do it. Finding small ways to save here and there can make a huge difference in a person’s financial situation. Each day of America Saves Week highlights a particular savings strategy or theme:

  • Monday | Save Automatically: One of the easiest ways to save money is to do it automatically — that could mean a regularly scheduled bank transfer, payroll deduction like a 401(k), or using an app to round up debit card purchases and put the spare change in a savings account.
  • Tuesday | Save for the Unexpected: “Unexpected” doesn’t have to mean “emergency.” Establishing a fund for unexpected expenses can mean you’ll have money on hand for special occasions, trips, gifts, etc.
  • Wednesday | Save to Retire: It’s never too early to start thinking about retirement and your various options for saving money for your golden years.
  • Thursday | Save by Reducing Debt: Paying off debit might not be the first thing that comes to mind when thinking about savings, but reducing debt can help in a number of ways, including raising your credit score and reducing the amount of interest and fees you pay each year.
  • Friday | Save as a Family: Having conversations with your kids about money and the importance of saving from an early age can help set them up for financial success later in life.

How PERA helps its members save for the future

Saving automatically and saving for retirement are what PERA has been doing for Colorado’s public employees since 1931. Every member of Colorado PERA, whether they’re enrolled in the Defined Benefit (DB) Plan or the Defined Contribution (DC) Plan, saves for retirement automatically with each paycheck.

In 2020, PERA paid more than $4.2 billion in benefits to more than 107,000 DB plan retirees living in Colorado, with an average monthly benefit of $3,204.

PERA also offers the optional PERAPlus 401(k) and 457 plans, which allow members to set aside an additional pre-tax portion of each paycheck. And with new lifetime income options in the PERAPlus and DC plans, members have even more options to help make their savings go further in retirement.

When PERA On The Issues asked PERA members about the most useful piece of advice they’d like to pass on to others, several of them mentioned saving in a PERAPlus 401(k) or 457 account in addition to the DB Plan.

“Enroll in the PERA Defined Benefit Plan and start saving in a 401(k) or 457 plan the first month of your employment,” said Rob W., a retiree from Salida.

“If you are a working PERA member, stay in PERA if you are in a job you enjoy doing,” said Mike M., a retiree from Westminster. “A retirement plan such as PERA can provide you with retirement security at a time when you need it in later years.”

PERA will be sharing savings tips on social media throughout America Saves Week, so give us a follow on Facebook, Twitter, and Instagram to join the conversation.

Board Discusses PERA-Related Bills at January Meeting

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For its first meeting of 2022, the PERA Board of Trustees returned to an all-remote format due to the ongoing COVID-19 pandemic. Trustees met virtually on January 21.

Board members heard a number of updates from PERA staff, highlighting work that was done in 2021 and projects that will take place in 2022:

The Board also heard from PERA’s public and government affairs manager and discussed four PERA-related bills that have so far been introduced at the Colorado General Assembly:

  • HB22-1029 calls for the state to make up its missed $225 million payment to PERA from 2020, plus estimated investment gains had that money been invested. The Board voiced its support for the bill.
  • HB22-1087 would exclude special district board members from being eligible for membership in PERA for their service as directors. The Board did not take a stance on the bill, as it is not expected to have a significant financial impact on PERA.
  • HB22-1057 and HB22-1101 would change some of the rules for working after retirement for PERA retirees working for school districts. While the PERA Board is sensitive to the needs of school districts facing staffing shortages, expanding working after retirement provisions to allow retirees to work without a reduction in their benefits 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 On The Issues will continue to track the status of each PERA-related bill and will provide updates as available.

The PERA Board’s next meeting is scheduled for March 18.

We Heard You: Responding to Member Feedback

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In today’s ever-changing world, the ability to adapt is an important ingredient for success. At Colorado PERA, adaptability is key to making sure the Association can continue to meet the changing needs of its diverse membership.

Over the past several years, PERA’s Communications Division has been using data from a survey of members and retirees to identify segments of PERA membership whose needs weren’t being adequately met and to pinpoint other opportunities for improvement.

The survey is a vital tool for PERA to ensure its communications are member-focused and fulfill the Board’s strategic goals, which include elevating PERA’s identity among stakeholders to that of a partner, and improving retirement security outcomes through best-fit products, services and education.

Changes resulting from 2019 survey

The member satisfaction survey, conducted in 2019, aimed to assign PERA a rating that would approximate a Net Promoter Score (NPS). An NPS is a simple way of gauging the likelihood of a company’s customers recommending that company to friends and colleagues, with scores ranging from -100 (unlikely) to +100 (likely). The survey responses of nearly 18,000 members established PERA’s NPS as 5, and while that’s a positive score consistent with other member-based financial services organizations, it revealed several important opportunities for improvement.

More personalized, tailored content

A major takeaway from the survey results was that PERA has too often taken a one-size-fits-all approach to communications, rather than tailoring content to fit different members’ and retirees’ needs. As a result, PERA’s communications team has been focused on segmenting its website content, emails and other communications by life and career stage — new to PERA, mid-career, ready to retire, retired — as well as creating more content specifically for those audiences.

Simpler language

Similarly, PERA members and retirees have expressed a need for simpler, more accessible language from PERA. Much of the terminology around retirement benefits — and finance in general — can be complex and difficult to understand. PERA staff regularly review and update publications, website content and other communications, and part of that review now includes identifying language that can be made more approachable.

This is an ongoing effort and PERA staff will continue to look for opportunities to simplify the language it uses to explain PERA benefits and services.

Expanded use of social media

In an effort to meet more PERA members where they are, PERA has been working to expand its presence on social media to complement its other communications channels. That includes launching Facebook and Instagram profiles and using those platforms to engage more directly with PERA members and retirees.

Website updates

PERA’s website is a vital tool for its members, retirees, and other stakeholders, and it was a clear area of opportunity to make some improvements. PERA staff used feedback from the survey to build a redesigned website that’s more user-friendly, including an updated account dashboard that displays a member’s account balance, estimated monthly benefit, and more. The new site launched in mid-January.

Preparing for the next survey

A key step in assuring PERA meets its member expectations is to measure the effectiveness of the various changes and initiatives that have taken place since the first survey.

Planning is underway for a follow-up NPS survey, which will take place this spring. From that survey, PERA will be able to formulate an updated score and determine not only whether those changes are working, but also identify areas where staff should continue to focus their efforts in the future.

“We hope everyone who receives the survey will participate, so we can get an accurate measure of how we’re doing and whether we’re meeting member expectations,” said PERA Senior Director of Communications Patrick von Keyserling. “We look forward to seeing the results and continuing to evolve based on your feedback.”