Month: August 2025

Study Confirms PERA a Valuable Tool for Recruiting, Retaining Public Workers

Posted on by Morgan

A new independent study found Colorado PERA continues to be a valuable tool for recruiting and retaining public employees by providing cost-effective retirement benefits.

As part of its regular review and oversight of PERA, the General Assembly approved the study with House Bill 1427 and directed the Office of the State Auditor to enlist an actuarial firm experienced with public pension plans to conduct the analysis. The State last performed a study like this one a decade ago.

Methodology

The study, conducted by Cheiron, compared PERA’s Hybrid Defined Benefit (DB) Plan to various theoretical alternative plan designs, compared the DB Plan to the PERA Defined Contribution (DC) Plan, and included results from a survey of current and former state employees on the importance of retirement benefits in their employment decisions.

The nine alternative plans included in the analysis incorporated a variety of benefit accrual and payment methods, from a combination of Social Security and a defined contribution plan like many employers in the private sector offer, to a cash balance plan in which a worker’s account balance is converted to an annuity at retirement.

The study primarily looked at the costs associated with each plan and potential income replacement ratios—or the percentage of pre-retirement pay a person can expect to receive in retirement—for both short- and long-term public employees.

PERA vs. other plans

While no single plan design offers the best possible benefits for every individual, the study found the PERA DB Plan provides higher income replacement than the alternatives for employees who spend the majority of their careers in public service.

Some of the alternative plan designs and the PERA DC Plan can provide higher income replacement for non-career employees, according to the study, because of the “front-loaded” nature of accruing savings in a defined contribution plan. Contributions an employee makes early in their career have a lot of time to grow, which is more beneficial for workers who switch jobs throughout their careers. By contrast, a defined benefit pension is “back-loaded” since a worker’s benefit is based on their highest earnings, which are usually toward the end of their career. This can encourage late-career workers to remain in their jobs, which benefits employers by retaining experienced employees and reducing costly turnover.

A line chart showing the different accrual patterns between defined benefit and defined contribution plans. The DB plan line slopes upward as years increase, while the DC plan line slopes downward.
The “back-loaded” accrual of benefits in a traditional defined benefit plan compared to the “front-loaded” nature of defined contribution plans. In a DC plan, a worker’s early-career contributions have more time to grow, while in a DB plan the worker’s contributions later in their career have a larger effect on the benefit. Source: Cheiron.

The study noted plans that tend to be more beneficial for non-career employees also come with trade-offs, such as higher costs and more risk placed on the employee. For example, plans that require the worker to manage their own retirement savings and investments also require that worker to manage the risks associated with overspending in retirement or outliving their savings.

It’s also important to note that in the PERA DB Plan, income replacement ratios are predictable—a member can use their highest average salary (HAS) table to estimate their benefit well before they retire. In a DC plan, on the other hand, retirement income depends significantly on investment returns, which are much less predictable.

The PERA DB Plan’s “hybrid” nature also carries features that make it attractive to members regardless of career tenure. Those include portability—members can take their contributions with them when they leave PERA employment—as well as compounding interest, an employer match, and a money purchase benefit calculation that can provide a higher benefit for some non-career employees.

Because every employee has different financial goals, PERA offers a choice between DB and DC plans for some public employees, and the PERA DB Plan remains a valuable and desirable benefit for career employees.

State employee survey results

An important part of any analysis of retirement benefits is the perspective of the workers receiving those benefits. For this study, Cheiron surveyed thousands of State employees who had the option to choose between the PERA DB Plan and the PERA DC Plan.

Of those surveyed, 81% said retirement benefits were a factor in their decision to work for the State of Colorado and 83% cited retirement benefits as a factor in their decision to remain in State employment.

When it came to choosing which plan to enroll in, the PERA DB Plan was the clear choice with 77% of those who gave it a great deal of thought choosing DB over DC, according to the survey.

Conclusions

While career patterns shift over time, the report makes it clear that providing a secure lifetime retirement benefit continues to draw people to careers in public service. This study confirms that as Colorado’s public workforce evolves, PERA is well-positioned to meet the changing needs of its diverse membership and provide retirement security for generations to come.

For more information, read the full report.

How PERA’s In-House Investment Experts Reduce Costs, Add Value

Posted on by Morgan

Colorado PERA manages a portfolio of $66.7 billion on behalf of more than 700,000 members and benefit recipients. It’s a big job that requires a high level of skill and expertise, and PERA’s in-house investment team has a wealth of experience that helps us save money while adding value for our members and retirees.

PERA’s approach to investment stewardship

At Colorado PERA, investment stewardship comprises four pillars that lay out our approach to managing plan assets:

  • Protect members’ interests by watching costs.
  • Integrate relevant factors into investment strategy.
  • Advocate for robust markets.
  • Evaluate exposures and recognize limitations.

We work every day to protect the retirement benefits our members have earned throughout their careers. One of the ways we do that is through low-cost, high-quality internal management of the majority of our investments.

Our team of more than 50 investment experts is highly skilled with extensive investment industry experience. That expertise reduces the need to use outside managers, minimizing plan expenses.

EXPLORE MORE: Investment Stewardship Digital Snapshot

Internal management reduces costs

Graphic explaining PERA's in-house investment expertise: 21 years average experience in investment management among internal investment experts; 61% of Total Fund managed in-house at a cost of ~0.05% of those assets; $70 million estimated annual savings due to internal investment management.
Click/tap to enlarge

As of the end of 2024, PERA managed 61% of all assets internally. By relying on our own staff, PERA maintains the flexibility to make investment decisions without paying high fees that often come with external management. PERA pays less than $4 for every $1,000 in the fund, saving an estimated $70 million annually in management fees that would have otherwise gone to outside experts.

“Internal management supports our ability to be agile in responding to market conditions while also saving PERA significant costs,” said Director of Fixed Income Keith Tayman.

Opportunities for cost savings can vary by asset class. For example, the team that manages the Global Equity portfolio—the largest of PERA’s asset classes—was an early leader in negotiating unbundled equity research and trading fees with broker-dealers. Strategies like that have helped PERA save 40% on annual spending with broker-dealers since 2011.

PERA’s investment team boasts an average of 21 years of experience. Such a high level of experience means staff can use their expertise and relationships with external managers to find additional opportunities for cost savings, such as negotiating lower fees.

“The long tenure of the Private Equity team positions PERA as a limited partner of choice,” said Private Equity Portfolio Manager Ryan Murphy. “Low turnover leads to stronger relationships with our partners. Stronger partnerships allow for preferred allocations and seats on advisory committees.”

PERA’s expertise in investment management is reflected in the inclusion of PERA staff in various industry organizations and advocacy groups. Our staff lend their knowledge and experience to groups such as the Council of Institutional Investors, Healthy Markets Association, the Public Company Accounting Oversight Board, and the Securities and Exchange Commission’s Investor Advisory Committee.

In addition to the PERA Defined Benefit (DB) Plan portfolio, investment staff also work to reduce costs in the PERA Defined Contribution (DC) Plan and the PERAPlus 401(k) and 457 Plans by increasing internal management of assets and negotiating lower fees with external managers. For example, since 2011, the all-in costs of the PERAPlus 401(k) Plan have decreased by 83%. Effective in 2025, participants pay a flat monthly fee of $1 per plan.

WATCH THE VIDEO: How Colorado PERA Invests for Long-Term Retirement Security

The value of a low-cost investment program

Investment income is the largest source of assets in the DB plan trust funds. Over the past 30 years, the portfolio has earned an annualized return of 8.4% and generated more than $88 billion for PERA members and retirees. Of every dollar a PERA retiree receives, 61 cents come from the investment income, while 39 cents come from contributions from members, employers, and the State.

A dollar bill showing the portion of PERA funding that comes from various sources: 61 cents from investment income, 23 cents from employer and non-employer contributions (including disaffiliations) and 16 cents from member contributions (including service purchases).
A visual representation of PERA funding sources.

As fiduciaries, every person on PERA’s investment staff is an expert committed to serving our members’ financial longevity. By working to reduce fees and other costs, the PERA investment team is able to keep more money available in the trust funds to invest on behalf of members. And that means a more secure, reliable retirement for Colorado’s public employees.

Learn more

News You Should Know: Colorado Releases 10-Year Plan on Aging

Posted on by Kurt Sevits

State Unveils 10-Year Plan to Address Colorado’s Growing Older Population | Denver7

The State of Colorado has released a strategic plan that aims to address the needs of older citizens over the next decade. The plan incorporates five goals to support the well-being of aging Coloradans, from improving access to health care and other services to boosting economic security.

Social Security Turns 90. Here’s What Could Happen to Future Benefits | CNBC

Ninety years ago this month, President Franklin D. Roosevelt signed the Social Security Act, creating the Social Security program that has become a vital source of income for many aging and disabled Americans. As the program hits a major milestone, there are multiple efforts underway to improve Social Security’s finances so it will remain secure going forward.

Trump Opens the Door for Private Equity and Crypto as 401(k) Options | AP News

President Trump signed an executive order that will allow employer-based retirement plans like 401(k)s to include private assets—such as private equity, cryptocurrency, or real estate—in their investment offerings. It’s not yet clear what those types of funds might look like, and experts say workers will want to carefully consider risks and costs associated with such assets.

Most Americans Know Having a Will is Important, Yet Less Than a Third Have One | Investopedia

A recent survey found the number of Americans who have created a will has declined, despite a majority of people understanding the importance of having one. Fewer than a quarter of people who responded to the Caring.com survey said they have a will, down from 33% in 2022.

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

What the One Big Beautiful Bill Act Means for Retiree Health Care

Posted on by Morgan

President Trump signed into law the “One Big Beautiful Bill Act,” a bill that makes changes to federal taxes and spending, some of which could affect older Americans receiving government assistance for food and health care.

The bill includes new tax provisions, such as a $6,000 tax deduction for seniors and expanded deductions for charitable giving. It also reduces government spending on programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP), as well as the individual insurance marketplace created by the Affordable Care Act.

Those changes could affect some people with disabilities, family caregivers, retirees who are not yet old enough to qualify for Medicare, and others who shop for health insurance on their own. The bill does not directly affect Medicare or Medicare Advantage plans like what PERACare offers.

Health and food assistance programs

According to AARP, more than 11 million Americans age 50 and older rely on SNAP benefits to afford their groceries and more than 17 million older adults use Medicaid for their health care. The One Big Beautiful Bill Act will make it harder to qualify for both programs and will require more paperwork for some enrollees to continue receiving their benefits.

To qualify for Medicaid, people under the age of 65 will need to show that they’re working or taking part in other job-related activities, such as job training or volunteering, at least 80 hours a month, unless they qualify for an exception. States also will be required to verify some enrollees’ eligibility more often—at least every six months.

The bill also expands work requirements for SNAP food assistance to include more older Americans. Able-bodied adults under the age of 65 will have to work at least 20 hours a week to receive benefits for more than three months, unless they qualify for an exception.

Medicaid work requirements are expected to take effect by early 2027, but it’s less clear when the new SNAP requirements will go into effect.

The individual insurance marketplace

The One Big Beautiful Bill Act adds new requirements for enrolling in health care coverage through insurance marketplaces like Connect for Health Colorado.

The bill eliminates automatic reenrollment in marketplace health care plans, meaning participants in those plans will need to manually enroll every year or face losing their coverage. It also shortens the annual open enrollment period and allows the expiration of enhanced tax credits that made plans more affordable.

Experts say premiums for marketplace insurance plans are likely to go up as a result of the changes, and insurers in Colorado have already proposed substantial increases for next year.

Coverage options under PERACare

PERA’s health benefits program, PERACare, includes pre-Medicare and Medicare Advantage plans, as well as combination coverage for retirees who want to cover both Medicare and non-Medicare eligible family members.

PERA provides a health care subsidy to help offset PERACare health care premiums. The subsidy amount is based upon a retiree’s years of service, for a maximum $115 monthly subsidy for Medicare-eligible retirees.

While the federal tax and spending bill does not include changes to Medicare, other regulatory changes (among other factors) are expected to influence plan premiums next year. PERA staff are still finalizing plan details, but we do expect PERACare premiums to rise for 2026.

PERACare open enrollment will take place between October 20 and November 20, 2025, and we will have plan information available by October 1.

For more information, visit copera.org/peracare.

News You Should Know: Colorado Facing Additional $1B in Budget Cuts

Posted on by Kurt Sevits

Colorado Lawmakers Must Cut $1 Billion from State’s Current Budget Because of GOP Federal Tax and Spending Bill | The Colorado Sun

The State of Colorado is once again facing the prospect of having to cut about $1 billion from the state budget. Lawmakers had to make a number of spending cuts during the annual budget-setting process, and now they’re looking at additional cuts due to reductions in federal spending. Gov. Jared Polis has called a special legislative session beginning Aug. 21 to tackle the issue.

Federal Reserve Leaves Key Interest Rate Unchanged for Fifth Straight Meeting | Fox Business

The Federal Reserve has again opted to keep interest rates steady for now. Despite pressure from President Trump to lower rates, the central bank said the economy remains on solid footing and therefore changes in its key rate are not necessary at this time. The Fed’s next meeting to discuss interest rates will be in September.

New Rules for How Much You Can Deduct in Charitable Contributions | CNN Business

Taxpayers who take the standard deduction were allowed to deduct a portion of charitable donations from their taxes during a temporary pandemic-era policy that has since expired. That deduction is returning in 2026, with taxpayers being allowed to deduct up to $1,000 ($2,000 for joint filers) in cash donations.

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

Study: Public Pensions Provide Economic Benefits for All

Posted on by Morgan

A recent study by the National Conference on Public Employee Retirement Systems (NCPERS) found that public pensions like Colorado PERA generate local and state tax revenue that far exceed taxpayer contributions to those plans.

The study, “Unintended Consequences: How Scaling Back Public Pensions Puts Government Revenues at Risk,” takes an in-depth look at the costs associated with public pensions, the economic activity they generate, and the implications of shifting workers to other types of retirement plans.

Background

Conversations around the value of public pension plans often focus on the cost of providing a lifetime retirement benefit. Several states have cited potential cost savings in closing or freezing their public pensions in the past, and those states have since faced challenges recruiting and retaining public employees.

The study authors argue that while public pensions can seem like a financial liability when viewed up close, a more comprehensive analysis of their financial impact shows they are in fact significant drivers of economic activity that more than make up for their cost.

How pensions drive economic activity

The NCPERS study highlights two primary ways pensions drive economic activity:

  • Investments: Public pensions invest their funds in businesses and the financial markets, which in turn create jobs and stimulate economic growth. For every $1,000 invested by a pension fund, NCPERS estimates the economy grows by approximately $2,360. In total, pension investments added an estimated $1.9 trillion to state economies in 2023 and generated approximately $453 billion in state and local tax revenue, according to NCPERS.
  • Retiree spending: Retirees spend their retirement income on goods and services, and businesses and their employees then turn around and spend that money as well, keeping it circulating and growing throughout the community. NCPERS calculates that retiree spending contributed $980.7 billion to the U.S. economy and generated approximately $208.9 billion in state and local tax revenue in 2023.

Combining the effects of both investments and retiree spending, NCPERS estimates that every dollar taxpayers contribute to public pensions generates $13.41 in economic activity. That means $216.7 billion in taxpayer contributions to pension plans nationwide in 2023 created $661.9 billion in tax revenue and $2.9 trillion in total economic impact, according to NCPERS.

The impact of public pensions in Colorado

Here in Colorado, NCPERS estimates pension assets (including Colorado PERA and others) totaled approximately $70.3 billion in 2023 with about $7 billion in benefit payments throughout the year. Those investments and benefit payments resulted in approximately $25.8 billion in total economic output and generated more than $4.6 billion in state and local tax revenue. NCPERS estimates Colorado’s total net revenue gain from public pensions at $1.78 billion.

As the state’s largest public retirement plan, PERA alone has a significant impact. In 2023, PERA paid $4.56 billion in benefits to 114,432 retirees living in Colorado, resulting in $7.1 billion of the state’s total economic output. Those PERA retirees paid nearly $382 million in state and local taxes on their benefits, supporting schools, roads, and other vital services.

READ MORE: Measuring the Impact of $4.5B+ in Annual Retirement Benefits in Colorado

Who benefits from pensions?

As the NCPERS study concludes, reducing benefits or closing pension plans may yield short-term savings, but those actions carry unintended consequences: less money for state and local governments, higher turnover in the public sector, and a less secure retirement for state workers in the long run.

“If there were no public pensions, taxpayers would have to pay more to receive the same level of services,” the NCPERS study authors stated. “Dismantling public pensions would not reduce costs; it would impose new ones.”

At Colorado PERA, we not only provide retirement security to 1 in 10 Coloradans, but contribute to the economic wellbeing of the whole state. Policymakers and stakeholders should view pensions as vital economic engines that benefit everyone by contributing to prosperity at the local, state and federal levels.