Month: February 2023

News You Should Know: Alaska Reconsidering Pension Plan to Fill Public Worker Shortage

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Alaska Public Worker Shortage Fuels Renewed Interest in Pension Plan | Alaska Journal of Commerce

Defined benefit pension plans can be a valuable tool in recruiting and retaining public employees like teachers and public safety officers. Recognizing that, lawmakers in Alaska this year are continuing their efforts to re-establish a pension plan similar to the one the state closed in 2006. They hope to stop a worsening trend of public workers leaving Alaska for jobs in other states that offer better benefits.

401(k) and IRA Balances Plunged Over 20% in 2022 | Investopedia

2022 was a tough year in the markets, and workers’ retirement accounts were not immune. According to data from Fidelity, the average 401(k) balance was down more than 20 percent for the year, while the average IRA balance dropped by about 23 percent. The good news is that long-term, account balances are still showing good growth, with both 401(k) and IRAs up more than 30 percent over the past decade.

Americans Fairly Satisfied With Social Security System | Gallup

Recent polling finds that Americans are split on their feelings about Social Security and Medicare. Forty-five percent of Americans told Gallup they’re satisfied with the programs and 45 percent said they’re dissatisfied. The survey found the groups that are most likely to utilize Social Security and Medicare — those who are older and who make less money — are also the most likely to be satisfied with them.

Key Facts About Life-Plan Communities | Next Avenue

If you’re planning what you want your later years to look like, or you’re helping a relative find long-term care, you may consider a continuing care retirement community, or life-plan community. These types of communities provide a wide variety of care and support services as you age, from independent living to memory care. Here are some factors to consider when making a decision.

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

Quiz: Test Your Knowledge of PERA Benefits

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How well do you know the PERA benefits that Colorado PERA provides?

Whether you’re new to PERA, or you’ve been working for a PERA employer for 20 years, it’s important to know how a monthly benefit is calculated, benefit options and other basics.

The quiz below takes just a few minutes to complete and includes links to helpful information on PERA’s website.

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Resources for learning more about PERA benefits:

Bill to Repeal WEP/GPO Reintroduced in Congress

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Editor’s note (June 7, 2023) : Since we published this article, more legislation has been introduced in Congress. Click here for the latest.

Federal lawmakers seeking to repeal Social Security’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) are giving it another try this year.

U.S. Representatives Abigail Spanberger (D-VA) and Garrett Graves (R-LA) reintroduced the Social Security Fairness Act of 2023 (H.R. 82) in January. A similar bill received widespread bipartisan support in 2022 but never made it to a floor vote. Bills that don’t pass expire at the conclusion of each Congress.

The WEP and GPO, which are part of federal law, can reduce Social Security benefits for recipients of public pensions like Colorado PERA that serve as a substitute for Social Security. It’s important to note that a person’s PERA benefit is never reduced due to Social Security or other benefits.

While some bills in recent years have aimed to modify one or both the WEP and GPO, H.R. 82 seeks to fully repeal both provisions. As of early February, the bill had nearly 150 cosponsors, two of whom are from Colorado: Rep. Joe Neguse (D-CO-2) and Rep. Jason Crow (D-CO-6). The previous version of the bill received over 300 cosponsors, including four from Colorado.

Why hasn’t Congress taken any substantial action on WEP/GPO despite strong support? Essentially, it comes down to cost. Eliminating or changing the WEP/GPO provisions of Social Security would mean providing larger checks to benefit recipients, costing the system more money. Recent projections show the Social Security trust funds are expected to be depleted in about a decade, so it’s a tough sell.

Since major changes may be needed to shore up Social Security’s financial footing, it’s possible changes to WEP/GPO could be included in a larger reform package. But it’s not clear when or if that might happen.

What’s Colorado PERA doing about it? Since this is a federal issue to be determined by Congress, we encourage members and retirees to contact their members of Congress to share their opinion about these provisions and how they affect them. PERA will continue to work with the Colorado General Assembly to ensure PERA is on-track to meet its funding goal in order to continue to provide current and future retirees with monthly income in retirement that cannot be outlived.

PERA On The Issues will continue to track any legislative action on WEP/GPO throughout the year. Subscribe to our biweekly newsletter for updates on this bill and other news related to public employee retirement.

Do You Have a Savings Plan for 2023?

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The last week of February is America Saves Week. From Feb. 27 to March 2, financial institutions across the country will aim to raise awareness about the importance of saving money and share tips for saving more.

The week comprises five themes:

  • Monday: Saving automatically
  • Tuesday: Saving for the unexpected
  • Wednesday: Saving for major milestones
  • Thursday: Paying down debt is saving
  • Friday: Saving at any age

Whatever the goal, setting money aside for the future is vital to financial security, and recent polling shows it’s something that many Americans continue to struggle with.

The state of savings in 2023

Bankrate has been polling Americans about their emergency savings since 2014. This year’s survey, which was conducted in December, found less than half of respondents could pay for an emergency expense from their savings, and reliance on credit cards is at an all-time high.

If faced with a $1,000 expense for an emergency room visit or a car repair, 43 percent of people told Bankrate that they would use their savings to pay the expense. Twenty-five percent of people said they would use a credit card, which is the highest percentage since the survey began in 2014.

The Bankrate survey also found that people across generations are concerned about their level of emergency savings — particularly younger generations. Bankrate said 85 percent of Generation Z and 79 percent of Millennials are worried about having enough savings to cover a month’s worth of living expenses, compared to 69 percent of Generation X and 53 percent of Baby Boomers.

When it comes to retirement savings, Americans express similar sentiments. According to the most recent survey from the Federal Reserve, less than half of respondents nearing retirement age said they felt like they were on track. That survey also found that a quarter of all non-retirees had no retirement savings at all.

PERA offers built-in options for additional savings

Colorado PERA members are already saving automatically for retirement with every paycheck. PERA also offers several options for members who want to set aside even more money.

All PERA members have access to the optional PERAPlus 401(k) to set aside extra pre-tax money each month. Some employers also offer the PERAPlus 457 plan. Both plans feature a variety of investment choices as well as lifetime income options to make savings go further in retirement.

America Saves Week is a great opportunity to take stock of your savings and make a plan for saving more. If you’re already enrolled in a PERAPlus plan, log in today to check your balance, and consider increasing your contributions if you’re not on track to meet your goals.

Follow Colorado PERA on Facebook, Twitter and Instagram for more tips during America Saves Week.

Recap of PERA Board’s January 2023 Meeting

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The PERA Board of Trustees met in Denver on Jan. 20 for its first meeting of 2023.

Trustees discussed the 2023 PERA-related legislative landscape, continued work on the Board’s strategic vision for the future, and heard updates from PERA staff.

Legislative update

The 2023 legislative session kicked off earlier this month, and the Board’s agenda included discussing recently introduced legislation pertaining to PERA.

One such bill, SB23-056, would require the state to make an additional payment of $35,050,000 to PERA. That amount, in addition to the amount included in HB22-1029 from last year, is meant to fully recompense PERA for the state’s direct distribution payment of $225 million, missed in 2020. The Trustees support efforts to increase funding to PERA.

Two other bills concern PERA’s investments: SB23-016 would require the PERA Board to adopt a proxy voting policy that ensures any voting decisions align with the state’s greenhouse gas emission reduction goals, as well as require PERA to include in its annual Investment Stewardship Report a description of climate-related investment risks, impacts and strategies. HB23-1092 would require PERA staff to make investment decisions solely on financial factors and would prohibit consideration of social, political, or ideological interests. The PERA Board opposes efforts to restrict PERA’s investment options or compel PERA to invest in a way that prioritizes a policy outcome over fiduciary duties.

Click here for a regularly updated list of PERA-related bills and their status.

Strategic planning

The Board continued its yearlong process of developing a new strategic plan that will guide the work of the PERA Board and staff for the next half-decade. The plan’s goals will build on PERA’s mission and vision statements: To provide retirement security for our members while ensuring the sustainability of the fund, and to innovate and build on a tradition of service by being a trusted partner in order to meet the changing needs of our diverse membership.

The Board will continue working on a draft plan throughout the year, with the goal of adopting a new strategic plan for 2024 through 2029 by the end of the year.

Market and portfolio update

Chief Investment Officer/ Chief Operating Officer Amy C. McGarrity provided the Board with a market and portfolio update, in which she presented details on economic conditions and PERA’s investments.

While McGarrity did not have final details on PERA’s investment performance in 2022, she noted that markets had a rough year in 2022, ending the year with broadly negative returns.

As an investor in most markets, PERA can expect it is not immune from market downturns. As a long-term, perpetual investor, PERA remains strategically invested in the markets with the goal of earning a return over decades, McGarrity said. In fact, PERA’s most recent 30-year rate of return (through Dec. 31, 2021), which reflects many market ups and downs, is 9.0% (annualized, gross-of-fees).

RELATED: Staying the Course: PERA’s Approach to Market Volatility

Full audited details on PERA’s investment performance for the year will be available with PERA’s Annual Comprehensive Financial Report, released in June.

Chair/vice chair election

The Board concluded its meeting by voting on Board officers.  Current Chair Marcus Pennell and Vice Chair Suzanne Kubec were both re-elected to new two-year terms.

Four positions on the Board are up for election this year, and candidacy is now open for those seats.

The next scheduled meeting of the Board of Trustees will take place on March 24, 2023.

News You Should Know: Colorado SecureSavings Plan Up and Running

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Colorado Retirement Plan Launches for Those Without One | The Colorado Sun

The Colorado SecureSavings plan is now officially up and running. The program, which covers private-sector workers who do not have access to a retirement plan through their employer, sets up a Roth IRA that employees can take with them when they move jobs.

Debt Ceiling: 3 Ways Your Finances Could be Affected | CBS News

Earlier this month, the federal government hit its debt limit of $31.4 trillion. The U.S. Treasury is taking steps to avoid defaulting on its debt while Congress decides on action. While a default is unlikely, it could have wide-reaching effects on the economy and Americans’ finances.

Tax Season 2023: Tax Day, Key Changes, and Smaller Refunds? | Kiplinger

The Internal Revenue Service is now accepting tax returns for tax year 2022. For most people, the filing deadline this year is Tuesday, April 18. Here are other key details to know before filing.

Generation X Carries the Most Credit Card Debt, Study Shows | CNBC

Americans’ credit card debt is on the rise — totaling $930 billion in the third quarter of 2022 — but it appears Generation X may be carrying more of that burden than other generations. According to a new survey, Gen Xers owe an average of $7,004 on their credit cards. Compare that with $6,785 for Baby Boomers, $5,928 for Millennials, and $2,876 for Generation Z.

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

U.S. Pension Benefits Played Important Economic Role in First Year of Pandemic

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A new report highlights how spending by public sector retirees across the United States helped support jobs and local economies during the tumultuous first year of the COVID-19 pandemic.

In Pensionomics 2023, researchers from the National Institute on Retirement Security (NIRS) state public and private pension plans paid out nearly $613 billion in retirement benefits in 2020, resulting in $1.3 trillion in total economic output as retirees turned around and spent those dollars. Retirees also paid taxes on those benefits, paying nearly $158 billion to federal, state and local governments. In total, NIRS estimates retiree spending supported nearly 6.8 million U.S. jobs in 2020.

Pension benefits from state and local plans made up more than half of the pension benefits paid that year, totaling more than $334 billion, according to NIRS. In Colorado alone, public sector retirees received $5.5 billion in pension benefits in 2020, translating to $7.9 billion in total economic output and supporting 45,267 jobs. Those jobs represented 1.5 percent of the state’s total workforce.

Colorado PERA’s economic impact

PERA is the largest retirement plan serving public employees in Colorado with nearly 650,000 members.

More recently, in 2021, PERA paid $4.35 billion in retirement benefits to more than 110,000 Colorado retirees. That resulted in $6.8 billion in total economic output and supported 31,449 jobs statewide, according to a report by Pacey Economics. In addition, retirees paid $382.2 million in state and local taxes on those PERA benefits.

READ MORE: PERA Benefits Contribute Billions of Dollars to State Economy, Support Thousands of Jobs

The steady stream of income that defined benefit pensions provide is an important economic driver, providing a measure of stability when it’s needed the most.

“Every month, PERA pays out hundreds of millions of dollars to retired public employees and their beneficiaries across Colorado, and those dollars are spent in their local communities,” said PERA Executive Director Ron Baker. “Retiree and beneficiary spending is a vital part of Colorado’s economy, and the stabilizing effect of that spending has been evident amid the economic uncertainty we’ve experienced in recent years.”

News You Should Know: IRS Won’t Tax Colorado TABOR Refunds

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IRS Won’t Tax Most Relief Payments Made by Colorado, Other States Last Year | The Colorado Sun

Colorado residents who are getting ready to file their tax returns will not have to report last year’s $750 Taxpayer’s Bill of Rights refund checks as income. The IRS announced that taxpayers in Colorado and a slew of other states will not owe federal tax on payments from the state that were related to general welfare and disaster.

Millions Could Lose Medicaid by April as Pandemic Rules Ease | U.S. News

Pandemic-related rules that allowed millions of people to sign up for Medicaid coverage are expiring, meaning many people could lose that health coverage. Loss of Medicaid coverage is a qualifying event to enroll in individual coverage through Connect For Health Colorado or healthcare.gov, or for PERA retirees to enroll in a PERACare plan.

Fed Raises Rates By Quarter Point, Signals More Increase Likely | Bankrate

The Federal Reserve continues to raise its key interest rate in an effort to rein in inflation. The most recent increase amounts to a quarter of a percentage point, which is smaller than other recent rate hikes. While more rate hikes could happen this year, they’re likely to be less aggressive as inflation shows signs of cooling down.

Age of AI: ChatGPT, Bard and How Money Advice Might Evolve | NerdWallet

The field of artificial intelligence (AI) is rapidly advancing, with big implications for many industries, including finance. In this article, a financial planner discusses some of the shortcomings of current AI offerings and what the future might hold for AI-generated financial advice.

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