Inside Colorado PERA Archives

Recap of PERA Board’s January 2025 Meeting

Posted on January 22, 2025January 22, 2025 by Kurt Sevits

The PERA Board of Trustees gathered at PERA’s offices in Denver on Friday, January 17 for its first regularly scheduled meeting of 2025.

The meeting consisted of important updates and discussions about legislation, strategic planning, actuarial assumptions, and more.

Legislative update

Director of Public & Government Affairs Michael Steppat and CEO/Executive Director Andrew Roth led the Board in a discussion about the legislative session and PERA-related bills, including two that have been introduced so far.

The first, House Bill 1052, is identical to a bill from last session that would provide a temporary tax credit for PERA retirees to reduce the impact of inflation. The second, Senate Bill 28, would codify into state law certain reporting practices the PERA Board already performs on a regular basis and would modify the cadence of those reports.

Steppat also addressed Governor Jared Polis’ proposed “conversion” of Pinnacol Assurance, which is currently the State’s workers’ compensation insurer. That conversion would carry implications for PERA, since Pinnacol employees are currently PERA members and Pinnacol would have to disaffiliate from PERA if it were to become a private entity. The Governor’s proposal also calls for using proceeds from the conversion to offset the State’s annual $225 million direct distribution to PERA.

PERA CEO/Executive Director Andrew Roth concluded by providing an update on the Social Security Fairness Act, which President Joe Biden recently signed into law. The bill repeals Social Security’s Windfall Elimination Provision and Government Pension Offset, two provisions that reduced Social Security benefits for some PERA members. Roth said he expects it will take some time for the Social Security Administration to release details about how the bill will be implemented. Visit ssa.gov for the latest information.

Rules hearing

PERA’s legal team joined the Board to conduct a hearing on proposed changes to rules that govern some PERA benefit provisions. The Board and staff periodically review those rules to ensure they’re up to date, clarifying processes and procedures and updating language to reflect legislative changes.

Changes approved in this rule hearing included:

Removing the list of PERA-affiliated employers from PERA Rules, as this list is posted and regularly updated online.
Clarifying that designations of beneficiaries, cobeneficiaries and coannuitants can be made electronically.
Updating rules for working after retirement to align with recently passed legislation.

The full text of proposed changes is available online.

Strategic plan update

The Board continues to work on drafting PERA’s next strategic plan. During the meeting, Trustees reviewed the draft plan and provided feedback.

Incorporating feedback from previous discussions and work sessions, the draft plan sorts PERA’s strategic objectives into three main goals:

Financial stability: Strengthening PERA’s long-term financial health
Customer/stakeholder experience: Serving as a trusted partner to members and stakeholders
Organizational excellence and modernization: Creating value through high performance and strong governance

The Board is expected to sign off on the final version of the plan at its March meeting, after which PERA staff will begin the work of implementing and executing the plan.

Actuarial experience study results

For several months the Board’s actuarial consultant, Segal, has been conducting what’s known as an experience study. That analysis involves comparing current actuarial assumptions—factors such as expected investment returns, price inflation, payroll growth, and life expectancy—to the economic outcomes and member behaviors experienced over the past several years. That process, which takes place every few years, ensures PERA has an accurate picture of its financial health.

As a result of the study, Segal recommended adjustments to some demographic assumptions and the Board voted to adopt those recommendations for the 2024 Annual Comprehensive Financial Report, which will be released in June.

Update on legacy modernization initiative

One of the final agenda items was an update from CEO/Executive Director Andrew Roth. Roth discussed the long-term initiative to modernize the core technology systems used to administer benefits—a major project that is expected to take multiple years to complete.

Roth said the project is still in the beginning stages with staff conducting preparatory work, including data cleanup, staff development, and business process improvements. Roth will continue to provide the Board with updates on this major initiative as it moves forward in the coming months and years.

The Board’s next scheduled meeting is set for March 14.

Learn more at copera.org/board-and-leadership.

Actuarial Experience Study: Refining the Financial View of the Future

Posted on January 22, 2025January 22, 2025 by Kurt Sevits

The Colorado PERA Board of Trustees has wrapped up work on an important periodic study that helps ensure better accuracy of PERA’s financial calculations.

Known as an actuarial experience study, the analysis gives retirement plans like PERA a periodic refinement or more accurate picture of their financial health and future obligations.

Planning for the future

PERA is in the business of providing retirement benefits for as long as a person lives, and that presents a unique challenge: Making sure we have an accurate sense of how much it will cost to pay those benefits over several decades and beyond.

Because a retiree’s benefit in the PERA Defined Benefit Plan is based on their age, years of service, and salary history, we need to be able to predict how certain factors will change over time, such as:

Expected lifespan of the retiree population
Expected pay increase patterns over the career of active members
Typical ages at which active members retire
Expected annual investment return, in the long-term
Expected change in the value of a dollar (rate of inflation)

Those factors are referred to as actuarial assumptions, and they’re grouped into either economic assumptions (inflation and investment returns) or demographic assumptions (rates of mortality and retirement). Together, the assumptions play a key role in the calculations PERA conducts every year as reported in its actuarial valuations and Annual Comprehensive Financial Report.

The process of reviewing and refining actuarial assumptions is known as an experience study, so called because it involves comparing the assumptions with what actually happened over a set period of time. For example, if wage growth is much different than expected during the period of study, some adjustments to that assumption are likely needed going forward.

PERA typically conducts an actuarial experience study every four years. This year’s experience study offered additional challenges because the period studied, from January 1, 2020, to December 31, 2023, encompassed effects of the COVID-19 pandemic. Special consideration was needed to ensure the higher mortality and greater number of unreduced retirements were not inappropriately reflected within the revised assumptions.

Experience study results

The PERA Board’s actuarial consultant, Segal, conducted the experience study and provided the Board with recommendations for adjustments to various assumptions as a result.

Segal recommended the following adjustments to demographic assumptions:

Salary scale assumptions were altered to better reflect actual recent experience.
Assumed rates of termination, retirement, and disability were revised to more closely reflect actual experience.
Mortality base tables were retained with revised adjustments for credibility and gender, where applicable, and the applied generational projection scale was updated for all groups.
Administrative expense load was increased from 0.40% to 0.45%, as a percentage of covered payroll.
Assumed annual membership growth (for projection purposes only) was decreased for the School, Local Government, and DPS Divisions.
Assumed rates of PERACare participation for both Health Care Trust Funds were reduced to better reflect actual recent experience.

Segal recommended retention of the current economic assumptions, including the long-term expected rate of return (7.25%), price inflation (2.3%), and wage inflation (3.0%).

The Board voted unanimously to adopt all recommendations for the five Division Trust Funds and the two Health Care Trust Funds.

What the changes mean

First and foremost, changes in PERA’s actuarial assumptions do not affect the payment of retirement benefits. If you’re a PERA retiree, you’ll continue to receive your monthly benefit payments as expected, and working members can count on PERA providing benefits when they retire.

The main impact of the experience study is on PERA’s current and projected liabilities—which help determine how much money PERA will need to have on hand to pay benefits for its members.

The recent experience review noted over the period studied, that certain assumptions resulted in liability gains while others resulted in liability losses. However, the net result was an actuarial loss overall—meaning, the revised assumptions will likely result in a negative effect on PERA’s funding status.

The exact impact of the updated assumptions won’t be clear until the release of the Annual Comprehensive Financial Report (ACFR), as that will be the first time the revised assumptions are incorporated into PERA’s annual valuation process—assessing plan liabilities and other important actuarial metrics.

The 2024 ACFR will be available following the PERA Board’s June 27, 2025, meeting.

Meet the New Vice Chair of the PERA Board

Posted on December 17, 2024December 17, 2024 by Kurt Sevits

In November, the PERA Board of Trustees voted to elect new officers. Taylor McLemore was elected to serve as Chair and the Hon. Rebecca R. Freyre was elected Vice Chair. They’ll begin two-year terms in January.

Freyre is a judge with the Colorado Court of Appeals, and she has been on the PERA Board since 2019. Freyre has been Chair of the Board’s Investment Committee since 2021.

We recently connected with Freyre to learn more about her experience and perspective as she prepares to take on a new role on the Board.

Tell us a little about yourself and the experience you bring to the Board.

I grew up in Kansas but had family in Colorado and knew this was where I wanted to live. I moved here in 1982 and worked in the financial services industry for the next six years. Finding corporate work unfulfilling, I attended law school in the evenings and decided to devote my career to public service. I was a public defender for 25 years and have served as a judicial officer for the last nine years.

How has your career in the justice system informed your work as a Trustee?

My work as a Trustee is a natural extension of my public service work in the justice system, where I must remain focused on following the law in a fair and impartial manner. PERA is subject to statute, so implementing the legislature’s fiduciary mandate of all Trustees feels very familiar. As a judicial officer, I can’t please everyone—every case has a winner and a loser. Similarly, Trustees must make decisions as fiduciaries that ensure PERA’s long-term stability and viability, and those decisions rarely make everyone happy.

What are you most looking forward to as you prepare to take on the role of Vice Chair?

I most look forward to working with my amazing fellow Trustees and assisting the new Board Chair in supporting PERA’s movement toward full funding. PERA has a thoughtful group of highly qualified Trustees, and I am confident that this team can fulfill its fiduciary duty to PERA’s members in a transparent manner as PERA faces the challenges that lie ahead.

What does effective Board leadership look like to you?

Effective Board leadership starts at the top, and our new Board chair demonstrated that leadership when he chaired our ad hoc hiring committee that selected PERA’s new CEO. Effective leadership is professional, transparent, and focused on the Board’s governance and fiduciary mandate. It must also be collaborative with PERA staff to serve the needs of all PERA members.

There will be elections for five seats on the Board in 2025. Do you have any advice for someone interested in becoming a Trustee?

First, decide where your passion lies and whether being a fiduciary is right for you—it isn’t right for everyone. Being a fiduciary requires Trustees to remove their “division” hats and to make decisions that are in the best interests of all PERA members, not just those who elect you. It also requires the ability to view decisions in the long-term and to resist short-term reactions. Being a Trustee is exceptionally fulfilling, but it is also hard work and requires making tough decisions. If your passion is to advocate specifically for your division, then you may wish to become involved in organizations that directly interact with the legislature.

Meet the New Chair of the PERA Board

Posted on December 3, 2024December 3, 2024 by Kurt Sevits

McLemore is a Governor-appointed Trustee and has been on the Board since 2021. Prior to his election as Chair, McLemore served as Chair of the Board’s Ad Hoc Executive Director Search Committee and Vice Chair of the Governance and Executive Committees.

We recently connected with McLemore to learn more about his experience and perspective as he prepares to take on a new role on the Board.

Why don’t you start by telling us a little bit about yourself?

I grew up in Colorado and I care deeply about this state as a community. I have been an entrepreneur, technology executive, and community builder across my career. I was enthusiastic about the opportunity to support and serve PERA—the mission is near and dear to my heart because of all the people who work so hard to make our state a great state, and what PERA is committed to providing them in terms of their retirement stability and other benefits.

What are some of the things you’re thinking about as you get ready to take on the role of Board Chair?

I’m excited to lead the Board of Trustees to support the next stage of PERA’s journey toward stability and full funding. I believe we have a very thoughtful group of Trustees who bring diverse perspectives. Together, we can solve any challenges that lie ahead.

My role as Chair is mostly focused on how we tap into the intelligence, lived experience and diversity of those Trustees to be a well-functioning governance body. Specifically, in my role as Chair, I care a lot about our ability to be transparent to our stakeholders while fulfilling our fiduciary duty. And I think that we have started to make meaningful progress on transparency and want to continue that pathway to do even more.

What does effective Board leadership look like to you?

First, I believe in always focusing on our governance and fiduciary mandates. Second, creating a productive environment for intellectually honest debate where we can understand the challenges that PERA faces. The Board has to work on solutions in collaboration with PERA executives and staff, and I think we should be creative in thinking about how we build a PERA that is stable and productive for our members into the very far future.

The Board is getting closer to finalizing its next multi-year strategic plan. Can you talk about some of the priorities that are informing that work?

The strategic plan is working hard to balance what we need in the near, medium, and long terms. This touches everything, including our current level of funding and what the implications of that are for our members, employers and our state legislative stakeholders. What we are looking at specifically, is how our investing and operational strategies will achieve those goals.

On the operational side, we are very focused on our technology infrastructure. Our pension administration technology is some of the oldest that is currently being used in the pension space. This creates risk for our ability to maintain it and ensure that it is performing for our members. All of this leads us to the conclusion that we need to invest significantly to have modern technology that will be stable long-term to support our operations and what our members appropriately expect from us.

What’s something you wish more people knew about PERA and/or the Board?

I wish more people knew about the diversity and impressive lived experience and expertise across the Board. Our Board has elected representatives from our membership and Governor-appointed members who include teachers, state employees, HR leaders, business leaders, and much more. We combine all of this experience to work on our understanding of the challenges and opportunities ahead of PERA.

PERA Board Approves Budget, Member Interest Rate and More at November 2024 Meeting

Posted on November 19, 2024November 19, 2024 by Kurt Sevits

The Colorado PERA Board of Trustees convened for its final regular meeting of 2024 on Friday, November 15.

Below are summaries of some of the key actions the Board took during the meeting. You may also view a recorded livestream of the meeting.

PERA operating budget

Following a budget workshop during which PERA executives briefed the Board on the need for a larger budget to cover important technology upgrades, the Board approved PERA’s 2025 operating budget of $132 million. The 19.6% increase over 2024’s budget includes costs associated with a multi-year project to modernize the core technology systems necessary to administer benefits as well as other critical needs.

Strategic planning update

For months now, the Board, PERA staff, and consultants have been working together to develop PERA’s next three-year strategic plan. That process has involved stakeholder research, identifying areas of strength and opportunity, and solidifying long-term priorities and goals for the organization.

From here, work will continue on crafting the plan, with a draft expected to be ready for Board review in January. Once approved, it will be up to staff to begin implementing the plan and fulfilling its strategic vision.

Member contribution interest rate

Every PERA Defined Benefit Plan account accrues interest, compounded annually. If a PERA member leaves PERA-covered employment and requests a refund of their account, they receive their contributions, the interest earned on that balance, and any applicable employer match. If that member keeps their account with PERA, the balance will continue to accrue interest and the member has multiple options upon reaching retirement eligibility, including choosing a lifetime monthly benefit.

The Board is responsible for setting the interest rate every year; it currently stands at 3 percent. The Board’s policy evaluates the interest rate as a component of members’ overall retirement benefit. After discussing the issue, Trustees voted to keep the interest rate at 3 percent for 2025.

Trustee appointment and Board officer election

The Board held elections to name a new Chair and Vice Chair, as terms for current Chair Marcus Pennell and Vice Chair Taylor McLemore are set to expire. Current Vice Chair Taylor McLemore was elected Chair, and the Hon. Rebecca R. Freyre was elected Vice Chair. Outgoing Chair Marcus Pennell served the limit of two terms as Chair and was ineligible for reelection.

Both McLemore and Freyre will serve two-year terms.

In addition to electing new officers, the Board appointed Dr. Louis Fletcher to fill a School Division seat vacated by Trustee Scott Smith in September. Fletcher had the second-highest number of votes in the 2024 election for that seat, and will serve until the next election in 2025.

Denver Public Schools “true-up” discussion

When legislation was passed to merge Denver Public Schools Retirement System into Colorado PERA in 2010, it included a provision that aims to equalize the ratio of unfunded actuarial accrued liability over payroll of the DPS Division and the School Division in 30 years. Every five years, PERA conducts an analysis of those ratios and whether adjustments to the DPS Division employer contribution rate would be needed to stay on track.

The results show that a reduction in the DPS Division’s employer contribution rate would be necessary to equalize this ratio in 2039, but the PERA Board has previously taken a formal stance in opposition to the defunding provisions—such as the 5-year “true-up”—that were included in the merger legislation, and more recently has opposed any legislation seeking to reduce contributions pursuant to the Board’s funding policy.

Additionally, a reduction in employer contributions from the DPS Division could increase the possibility of triggering the Automatic Adjustment Provision in future years, which could increase contributions in other divisions and further decrease the Annual Increase retirees receive on their retirement benefit.

Upcoming legislative session

Director of Public & Government Affairs Michael Steppat and Chief Executive Officer/Executive Director Andrew Roth provided the Trustees with an update on interim legislative activity and PERA-related bills that could be introduced in the upcoming 2025 legislative session.

The Pension Review Commission, which is responsible for recommending legislation pertaining to PERA and the Fire and Police Pension Association of Colorado, drafted two bills for the 2025 session.

The first, known as Bill A, is similar to a bill from last session that would provide a temporary tax credit for PERA retirees to reduce the impact of inflation. The second draft, Bill B, pertains to PERA studies and reporting and aims to lay out in statute some of the work the PERA Board already does on a regular basis and modify the cadence of those reports.

Actuarial experience study

In order to accurately estimate PERA’s financial status and how much money is needed to provide benefits now and into the future, we use a set of predictions, known as actuarial assumptions, that undergo regular review and updates as needed. Those assumptions include economic factors like inflation, investment returns and payroll growth, as well as demographic assumptions such as when people retire and how long they’ll live.

The process of reviewing those assumptions is known as an actuarial experience study, so called because the study involves comparing PERA’s assumptions with the actual experience over a set time period. The last experience study took place in 2020. While nobody can predict the future perfectly, regularly performing experience studies ensures our estimates of current and future benefit obligations are as accurate as possible.

The current experience study will look at the period between January 1, 2020 and December 31, 2023. This is an important period because it will show the effects of the COVID-19 pandemic, such as higher mortality and earlier retirements.

Over the coming months, PERA staff will continue working with actuarial consultants to conduct the study, after which the consultants may recommend changes to some assumptions. If the Board adopts any recommended changes, we’ll be sure to provide an update on what that might mean for PERA’s finances.

2025 Board election

The Board’s final action item was approving the calendar for next year’s Board election.

There will be five seats up for election in 2025: Three active member seats in the School Division, one active member seat in the State Division (excluding higher-education employers), and one retiree seat (School, Local Government, and Judicial Divisions only). Candidacy will open in early January, with the election taking place in May.

New in 2025, members and retirees will have the added option of being able to cast their votes via the Colorado PERA mobile app or on copera.org, in addition to the option to vote by mail.

The Board’s next regularly scheduled meeting will take place on January 17, 2025.

PERA CIO/COO Amy C. McGarrity Named to SEC Advisory Committee

Posted on October 23, 2024October 23, 2024 by Kurt Sevits

Advocating for fair and transparent markets is one of the cornerstones of Colorado PERA’s approach to investment stewardship, and Chief Investment Officer/Chief Operating Officer Amy C. McGarrity has taken on a new role to help further that mission at the federal level.

The Securities and Exchange Commission (SEC) announced in September that McGarrity is one of six new members selected to join the SEC’s Investor Advisory Committee.

The committee was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and its members include professionals and public officials with a range of experience and expertise in finance, investing and law. Members are tasked with advising the SEC and making recommendations on matters such as effective regulation, promoting market integrity, and protecting investor interests. Past recommendations have covered topics such as climate-related disclosures, investor education, and the rules governing financial account statements.

In addition to the SEC Investor Advisory Committee, PERA staff have been active in a number of industry organizations and advisory boards, such as the Council of Institutional Investors, Healthy Markets Association, and the Public Company Accounting Oversight Board, advocating for practices that benefit our members.

“At Colorado PERA, we firmly believe in using our influence as an institutional investor to advocate for strong and fair markets on behalf of the nearly 700,000 members we’re investing for,” McGarrity said. “I’m honored to be selected to serve on the Investor Advisory Committee and I look forward to working with my fellow committee members on some meaningful recommendations in the years ahead.”

McGarrity and the other members of the committee will serve four-year terms.

PERA’s Proxy Voting Policy Receives an Update

Posted on October 8, 2024October 8, 2024 by Kurt Sevits

Every year—often in the spring—publicly traded companies hold shareholder meetings and ask their investors to weigh in on issues such as corporate leadership and policies. It’s an important process, and one Colorado PERA takes seriously as an institutional investor.

At its September 20 meeting, the PERA Board of Trustees voted to approve updates to its Proxy Voting Policy, which guides staff in exercising PERA’s shareholder voting rights.

What is proxy voting?

Simply put, proxy voting is the process that allows shareholders—individuals who own stock in a company, as well as institutional investors like PERA—to provide their input on corporate management decisions without having to be present at shareholder meetings. Proxy voting matters can come from a company’s board or its shareholders, and they cover important decisions such as approving the members of the board, mergers, acquisitions, and the types of disclosures a company makes to its shareholders.

The PERA Board believes the shareholder right to vote is an asset of the plans to be managed under fiduciary care. Because PERA invests to provide retirement income for nearly 700,000 current and former public employees, our focus is on voting to encourage corporate behavior that can generate long-term financial value. Proxy voting is one way we practice investment stewardship for the benefit of our members.

In 2023, PERA cast votes on more than 68,000 proposals in more than 6,000 shareholder meetings. The overwhelming majority of those proposals—more than 99%—were related to corporate governance.

“Governance matters have always been our focus, and can include things like board elections and executive compensation,” said Senior Investment Stewardship Analyst Luz Rodriguez. “Those decisions can impact a company’s financial performance, which can, in turn, affect the investments we make on behalf of PERA members.”

Updating PERA’s policy

Over the course of several months, PERA staff have worked closely with the Board’s Investment Committee to review and update the Proxy Voting Policy. The full Board approved those changes in September, and they will go into effect in January 2025. The last update took place in 2021.

While some of the updates simply clean up or clarify language in the policy, others are more substantive and aim to provide additional information on PERA’s voting philosophy and processes. They include:

Clarifying PERA’s focus on governance matters. Not only are most proxy voting proposals related to corporate governance, but there’s a good body of research supporting the role of good governance in generating long-term value for shareholders.
Broadening the general scope of the policy to be more reflective of PERA’s global investments. For example, the updated policy refers to generally accepted accounting standards rather than U.S.-specific standards and expands language on greenhouse gas emission disclosures.
Clarifying which duties and responsibilities fall under the Board’s governance policy versus general practices. The Board is responsible for overseeing PERA’s investment program, including proxy voting. The Investment Committee is responsible for recommending changes to, and monitoring compliance with, governance and proxy voting policies, and staff is responsible for voting and reporting proxies.
Expanding on PERA’s approach to corporate board composition. The updated policy states that PERA will vote for proposals asking a company to provide a skills matrix that outlines the skills, experiences, background, and qualifications of board members, which can help give shareholders a better understanding of a board’s collective capabilities. The updated policy also states PERA will vote against certain director nominees if the company’s board does not provide this disclosure.

Through regular review and updates to the Proxy Voting Policy, the Board ensures that PERA’s policies effectively guide staff in engaging with the companies in which we invest in order to maximize risk-adjusted returns for our members.

“Our goal in voting proxies isn’t to dictate what companies do, but to encourage them to adopt sound governance practices that foster profitability and long-term shareholder value,” Rodriguez said. “As stewards of investments for nearly 700,000 current and former public employees, we take our shareholder responsibilities seriously.”

Take a deeper dive into proxy voting and PERA’s approach to investment stewardship by exploring the 2024 Investment Stewardship Report.

PERA Board Adopts New Strategic Asset Allocation Following Study

Posted on September 24, 2024September 24, 2024 by Kurt Sevits

The PERA Board of Trustees has adopted new asset allocation targets following a year-long study into PERA’s investment portfolio and strategy.

The new allocation includes tweaks to several asset classes in an effort to reduce volatility in the portfolio while providing the potential for higher returns in the future.

Background

Every four or five years, the PERA Board conducts what is known as an asset/liability study to examine the PERA Defined Benefit Plan portfolio and ensure the mix of stocks, bonds, and other investments aligns with PERA’s funding goals. That process last took place in 2019, after which the Board adopted the current strategic asset allocation.

The most recent asset/liability study began in September 2023, and over the past year, PERA’s investment staff have been working with the Board’s Defined Benefit investment consultant, Aon, to carry out the analysis. After examining various factors, such as the fund’s risk tolerance, market conditions, and projections for future returns, Aon presented its recommendations at the Board’s September meeting.

What’s changing

The new strategic asset allocation is expected to provide incrementally greater diversification in the portfolio by reducing the percentage allotted to Global Equity (i.e., stocks) and investing more in private asset classes such as Private Equity and Real Estate with the goal to slightly lower risk and add potential for higher returns over time for the entire investment portfolio.

The table below shows PERA’s current long-term target allocation and the new targets the Board adopted.

Asset Class	Current Target	New Target
Global Equity	54.0%	51.0%
Fixed Income	23.0%	23.0%
Private Equity	8.5%	10.0%
Real Estate	8.5%	10.0%
Alternatives	6.0%	6.0%

Within the Alternatives asset class, the new policy increases allocations to real assets and private debt while reducing allocations to hedge funds and opportunistic investments.

By making these changes, the Board is aiming to strengthen PERA’s investment portfolio and ensure PERA remains on track to meet its goal of full funding.

“Asset allocation is the single largest driver of investment returns, and I appreciate the attention and care the Board has given to analyzing and updating our strategic asset allocation,” said Chief Investment Officer/Chief Operating Officer Amy C. McGarrity. “These new long-term targets are expected to help reduce risk in the portfolio and ensure we can continue to provide the lifetime retirement income that so many of Colorado’s public employees rely on.”

The Board also reaffirmed its long-term expected rate of return of 7.25%.

Asset Classes Explained: Global Equity | Fixed Income | Private Equity | Real Estate | Alternatives

What’s next

With the Board’s adoption of a new strategic asset allocation, it’s up to PERA’s investment staff to begin the work of implementing the updated strategy. Aon expects the portfolio to reach its new long-term targets within two to three years.

PERA Board Discusses Strategic Plan, Investment Strategy and More at 2024 Planning Session

Posted on September 24, 2024September 24, 2024 by Kurt Sevits

The PERA Board of Trustees held its annual Planning Session September 18 to 20 in Colorado Springs.

Over the course of three days, Trustees participated in informational meetings, workshops, and took action on a number of important items, some of which are summarized below.

Strategic planning

An important part of the Board’s duties is laying out PERA’s strategic direction and priorities, and the Trustees have spent several meetings working on the organization’s next strategic plan.

During the most recent meeting, the Board reviewed the results of surveys sent to various stakeholders, including members, retirees, and employers. Through those surveys, the Trustees were able to identify some of PERA’s top strengths, weaknesses, opportunities, and threats, which will help lay out the organization’s goals for the next several years.

The Board expects to have a plan draft ready for Trustee review in January.

CEM Benchmarking report

Each year, the PERA Board receives a report from CEM Benchmarking that rates PERA on the various services it provides to members and the cost of providing those services, as well as comparing PERA to other similar public pensions.

This year’s CEM report gave PERA a service score of 85 compared to the peer average of 81. PERA earned particularly high scores on factors such as the average time a member spends waiting on the phone to talk to a customer service representative, the features and functionality of the secure online member portal, and participation in member education webinars.

CEM found PERA’s administrative costs amount to $58 per member, below the peer average of $67. Overall, the CEM report found PERA provides a higher level of service at a lower cost than the average public pension plan.

Pension Review Subcommittee’s review of assumptions

Every three years, the State Legislature’s Pension Review Subcommittee is tasked with commissioning a report from an independent firm that is meant to evaluate the various assumptions PERA uses to forecast its financial health, as well as determining whether PERA is on track to meet its goal of full funding and a handful of other assessments.

The Subcommittee began that process in January and chose Switzerland-based PNYX Group to conduct the analysis. PNYX then presented its findings and recommendations in July.

Using its own models and projections, PNYX opined that some of PERA’s key assumptions should be adjusted based on their own assumptions and methodologies, and stated the fund could be facing a significant shortfall in future years as a result. Therefore, PNYX recommended a handful of policy options, primarily related to increasing contributions—including $2 billion from the State—in order to improve the fund’s position. Members of the Pension Review Subcommittee and Pension Review Commission expressed doubts about the feasibility of such changes.

In discussing with the Board, PERA staff and the board’s consultants presented on some of the methods and findings of the report, and highlighted their own confidence in the assumptions, methodologies, and models that form the basis of their own recommendations to the PERA Board. Additionally, the review missed key elements that would have made the report more comprehensive and on point, they said. For example, the Board just concluded a study of PERA’s strategic asset allocation and is beginning a study comparing actual experience over the past four years to actuaries’ projections, both of which could help address some of the findings of the PNYX report.

PERA staff, along with the PERA Board’s actuarial and investment consultants, presented a formal response to the PNYX report on September 23 and may also address the report and its findings with the Pension Review Commission on September 27.

Asset/liability study

The Board concluded its yearlong asset/liability study and adopted new long-term asset allocation targets for the PERA Defined Benefit Plan portfolio. The changes aim to add diversification to the portfolio over time and enhance the potential for future returns.

2025 Board meeting dates

Finally, Trustees wrapped up the September Planning Session by approving the calendar for 2025 Board meetings, choosing the following five dates:

January 17
March 14
June 27
September 17-19 (Planning Session)
November 21

PERA Board meetings are streamed live on copera.org and include time for public comment. In response to a recommendation from the Pension Review Commission, meeting recordings will be available online following the Board’s November 15, 2024 meeting.

Investment Stewardship Report Highlights How PERA Manages Plan Assets

Posted on August 13, 2024August 13, 2024 by Kurt Sevits

We often receive questions from our members, lawmakers, and the general public who want to know: What does PERA invest in and how do staff manage the portfolio?

Every year since 2018, we’ve published the Investment Stewardship Report to answer those questions and provide transparency into why and how PERA invests on behalf of nearly 700,000 members.

PERA’s approach to stewardship is guided by four main practices:

We protect our members’ interests through cost-conscious investment management.
We integrate financially relevant factors into our investment decisions.
We advocate for robust capital markets and business practices.
We evaluate various exposures within our portfolios on an ongoing basis.

Protect

Each person on PERA’s investment staff is an expert committed to serving our members’ financial longevity. We leverage that expertise to reduce the need to use outside investment managers, which saves money while adding value for our members.

As of Dec. 31, 2023, we managed approximately 60% of PERA’s Defined Benefit Plan assets in-house at a cost of about 0.05% of those assets. In the same year, internal management saved an estimated $65 million compared to the cost of externally managing those assets.

The PERA Board and staff also work to lower fees in the PERAPlus 401(k)/457 and PERA Defined Contribution Plans. For example, since 2011, we’ve been able to reduce the all-in costs for members to participate in the 401(k) plan by 82%. Lower fees mean participating members can save more money toward their individual retirement goals.

RELATED: Asset Classes Explained

Integrate

We invest for one purpose: To provide retirement income for our members. To that end, we consider various economic and business factors in our investment decisions with a focus on long-term financial results.

PERA’s integrative approach considers many aspects of businesses and markets that can have a financial impact on our investments. Those aspects may include factors that can be labeled as environmental, social, or governance-related (ESG). However, PERA does not have any ESG-themed mandates, nor do we screen our investments on specific ESG criteria when deciding whether to include them in the portfolio.

In 2023, the Colorado General Assembly passed Senate Bill 016, which requires PERA to publicly report on how we consider climate-related risks in our investments and operations. In response, we’ve augmented the 2024 Investment Stewardship Report with new insights into how we consider both risks and opportunities related to climate change.

Advocate

We promote fair and transparent markets by contributing our expertise to regulators and financial industry advisory boards in advocacy of best practices that serve long-term investor interests.

By engaging with portfolio management partners, public companies, and policymakers, we can encourage practices that are expected to be profitable over the long run, and with more transparency in the market, we can make better investment decisions on behalf of our members.

Evaluate

The PERA Board and staff monitor the investment portfolio on an ongoing basis. Our priority remains financial performance and seeking the best long-term, risk-adjusted returns so we can provide retirement income for our members in perpetuity.

As of Dec. 31, 2023, the PERA Defined Benefit Plan portfolio earned a one-year return of 13.4%, and over the past 10 years, the portfolio has earned an annualized return of 7.8%. In the past three decades, the investments we have made on behalf of the PERA membership have earned $82 billion, strengthening the longevity of the Fund.

Chief Executive Officer/Executive Director Andrew Roth underscored the importance of investment stewardship in fulfilling PERA’s purpose: “By maintaining our commitment to sensible investment practices and long-term performance, we continue to work toward our mission of providing retirement security for our members while ensuring the financial sustainability of the fund,” Roth said.

Explore the Investment Stewardship Report Digital Snapshot or download the Investment Stewardship Report to learn more.