Rep. Richard Neal (D-MA) is among the members of Congress who are renewing efforts to modify or repeal Social Security’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). Neal’s bill, the Public Servants Protection and Fairness Act of 2023, would update the WEP to create a new, proportional formula for calculating a pensioner’s Social Security benefit.
The U.S. Food and Drug Administration gave its full approval to the new Alzheimer’s drug Leqembi, meaning the agency believes the medication is safe and effective. Full approval means Medicare will cover the drug, despite earlier concerns about its cost and the effects on Medicare’s finances.
An event known as the Great Wealth Transfer — when Baby Boomers will hand down an estimated $84 trillion to their children and others — is expected to take place over the next several decades. Many of the beneficiaries of that transfer are members of Generation X, and they may find themselves with newfound money or other assets they’re not sure how to manage.
When a loved one suddenly falls ill or otherwise loses the ability to care for themselves, a spouse or relative often ends up in the role of caretaker. It’s a role that brings its own share of challenges, and it’s important to make sure the caregiver is also getting the care they need.
News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.
In June, PERA released its 2022 Annual Comprehensive Financial Report (ACFR), which contains detailed information on PERA’s finances, investment performance, and funded status for the year ended Dec. 31, 2022.
The ACFR is a lengthy report with a large amount of information. To make it easier to digest, we’re highlighting some key facts and figures from the report to help those who want to know more about PERA’s finances.
This information is also available in an interactive format at copera.org/snapshot.
Plan assets and funding
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As of the end of 2022, PERA manages an investment portfolio of $55.9 billion for the defined benefit plans and $5.1 billion for the defined contribution plans. The defined benefit assets are split between the five division trust funds from which PERA pays benefits: State, Local Government, School, Denver Public Schools, and Judicial.
Last year, 206,646 members across 410 employers were actively contributing to their PERA accounts. Member and employer contributions to PERA totaled approximately $3.4 billion.
Fifty-nine percent of PERA’s investment assets are managed in-house by PERA staff, at an annual savings of $60 million compared to external management. Those assets are spread across six asset classes: Global Equity, Fixed Income, Real Estate, Private Equity, Alternatives, and Cash.
PERA’s funded status at the end of the year was 69.9%, up from 67.8% at the end of 2021. According to state law, PERA must reach 100% funded by 2048.
Benefits paid
PERA paid a total of $5.2 billion in pension benefits to 135,485 retirees and beneficiaries in 2022, for an average monthly benefit of $3,238. The average age at retirement was 59.1 with 22.6 years of service credit.
PERA provides benefits to nearly 1 out of every 10 Coloradans who are current and former teachers, state troopers, snowplow drivers, corrections officers, and other public employees who provide valuable services to all of Colorado. Of the $5.2 billion paid last year, $4.5 billion went to 112,509 PERA retirees living in Colorado. That steady stream of income flows to every county in the state, providing stability to state, regional, and local economies.
Visit copera.org/snapshot for more details, including a county-by-county breakdown of benefits paid.
Higher-than-expected tax revenues mean Coloradans will receive TABOR refund checks again next year. The payments, which will go out after taxpayers file their 2023 tax returns, will likely be even higher than the $750 per person the state sent out in 2022.
Manufacturers of prescription drugs are filing lawsuits aiming to stop Medicare from implementing its new drug price negotiation program. The government argues that directly negotiating prices will lower costs for Medicare enrollees, while the drug makers say the program will cut into their revenues and limit future drug development.
The median age in the United States—the age at which half the population is younger and half is older—reached a record high of 38.9 last year. Another milestone in America’s aging population is right around the corner: The point in time known as Peak 65, when more Americans turn 65 than any other point in history, is expected to happen in 2024.
Women have historically earned less than men in the workplace, and that gender gap continues into retirement. According to a recent report, men’s average 401(k) balance is about 50% higher than women’s. The report also finds that 52% of women participate in a 401(k) compared to 61% of men.
News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.
PERA leaders hosted two live Town Halls on Wednesday, July 12 to provide an update on PERA and answer questions from members and retirees.
Interim Executive Director and Chief Investment Officer Amy C. McGarrity was joined by Chief Benefits Officer Patrick Lane and Chief Administrative Officer Jeremy Hill for both meetings.
They answered questions on a number of important topics, including annual benefit increases, Social Security, and PERA’s investment portfolio. Responses to some of those questions are summarized below, and full recordings of each Town Hall are available at copera.org/townhall.
Why was the previous executive director’s employment contract terminated?
“The decision was at the discretion of the PERA Board,” McGarrity said. “To reiterate, there was no criminal wrongdoing and no impact to retiree benefits. We are in the process of selecting an executive director. The first step is to select an executive search firm to assist with the recruitment of that next leader for PERA, and the Board has formed an ad hoc committee. Those ad hoc committee meetings are posted on copera.org and they’re streamed live for anyone who wishes to follow the process.”
Why aren’t annual benefit increases for retirees keeping up with inflation?
“We recognize the challenges that this inflationary environment presents. We feel it as consumers but we know it is particularly important to our retired members,” Lane said. “As you know, the Annual Increase percentage is set in statute and it is not within the purview of the PERA Board or staff to make changes to the Annual Increase…the only way that could change is if the state legislature decided to change the law, which would in effect extend PERA’s 30-year window to full funding.”
Are PERA benefits in danger due to 2022’s negative investment returns?
No, PERA benefits are not in danger. The investment portfolio is well-diversified and contains a wide array of assets so the portfolio can withstand different market environments, McGarrity said. While we were subject to the market downturn in 2022, we are also subject to positive market swings and have been able to take advantage of those markets in prior years and so far in 2023, McGarrity said.
In 2022, PERA paid $5.2 billion in retirement benefits to retirees and benefit recipients, so you can continue to count on PERA to provide retirement income throughout your life.
What is PERA doing about Social Security’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO)?
“Social Security’s WEP and GPO are provisions within federal law and are therefore outside the scope of the PERA Board and staff to influence,” Lane said. “We encourage you to contact your members of the U.S. House and Senate to be heard on this issue.”
Bills to modify or repeal WEP and GPO are frequently introduced in Congress, and PERA On The Issues monitors and reports on those activities throughout the year. Click here for our latest article on WEP/GPO reform efforts.
What is PERA doing to improve wait times to talk to Customer Service on the phone?
“We have made a number of recent changes that have cut down on wait times in the call center,” Lane said. “We implemented a new caller verification process that makes the security process faster and shortens the length of calls. And we just migrated to a new phone system just within the last few weeks that allows us to better forecast call volumes throughout the day, throughout the month and throughout the year.”
He added: “We have seen service levels increase in recent months and we look forward to providing better service going forward.”
Does PERA inform its investments by accounting for social goals, such as diversity, equity and inclusion? If so, what does that look like?
McGarrity explained that PERA’s primary goal is achieving the best risk-adjusted returns for PERA members and therefore PERA does not have any mandates related to environmental, social, or governance (ESG) or diversity, equity, and inclusion (DEI) outcomes. However, PERA staff will consider any financially relevant factors when making investment decisions.
“To the extent that a company’s long-term expected return may be influenced somehow by one of those factors in a financially material way, certainly we will consider it in our underlying due diligence of that investment and/or underwriting of that investment,” McGarrity said. “However, unless they are financially material factors or drivers of the expectations for long-term returns, they are not rising to the top of our considerations. So we are really focused on the factors that have an influence on long-term shareholder returns.”
How can members be sure PERA will be there for them when they retire?
“I think the legislature has shown its commitment through the years to keeping PERA strong and enacting reforms several times in the past decade to ensure we are on a financially sustainable path. Most recently, Senate Bill 200 (enacted in 2018) puts us on a path to full funding by 2048,” McGarrity said. “The reforms are working and we’re committed to providing reliable income in retirement that our members cannot outlive.”
PERA mobile app
Hill also mentioned PERA’s new mobile app, which is now available in the App Store for iOS devices and Google Play Store for Android devices. The app is part of PERA’s long-term goal of modernizing and improving the way it serves its membership, and it makes it easy for members and retirees to access and manage their accounts wherever they are.
These annual town halls are an important opportunity to speak directly with Colorado’s current and former public employees and we’re grateful to all who participated.
