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PERA News Archives (former Latest News items for 2004)

December 21, 2004

Colorado PERA, with assets now in excess of $31 billion, is the nation’s 25th largest public pension fund. PERA, like other pension funds, has seen its funded status fall over the past three years due to an unprecedented decline in the financial markets. PERA’s funded status was also impacted by statutory changes in the benefit structure that encouraged members to retire earlier and at younger ages.

The PERA Board of Trustees has taken a number of steps to address the funding issues. The Board’s investment and asset allocation policies have been enhanced to lower the volatility of future investment returns, and significant limitations and cost increases have been imposed on those members purchasing service credit. Most recently, PERA joined with the Governor in sponsoring a comprehensive package of forward-looking changes to the plan that will significantly limit future liabilities and enhance revenues. The legislation passed in 2004 will have a very positive impact on PERA’s future funded status. PERA believes it is important to proceed with the implementation of the 2004 legislation, to carefully monitor and assess the impact of these changes, and, as future performance results may require, recommend necessary additional changes.

PERA continues to enjoy positive cash flow, paying out almost $2 billion in retirement benefits to over 67,000 retired Colorado public servants in the current year, while continuing to add to the value of its investment portfolio. PERA is currently positioned to pay anticipated benefits for decades to come.

PERA has a longstanding commitment to the timely, accurate, and honest disclosure of its operational, financial, and investment performance. Efforts will continue to communicate the facts about PERA’s funded status to PERA’s more than 350,000 members and benefit recipients, in addition to taxpayers and others with an interest in PERA. PERA welcomes opportunities to work with individuals and organizations interested in better understanding PERA issues.

Get PERA Information From PERA

Colorado PERA reminds members that the best source for information related to your PERA account is from PERA. While other vendors may claim to know about PERA, your best course of action is to call PERA’s Customer Service Center at 1-800-759-7372 or 303-832-9550.

Colorado PERA does not have any affiliation with, nor does it endorse, any financial planning services or other insurance agencies. This means if a financial planner or insurance agent wants to counsel you on your retirement benefits or says that they are hosting a meeting in conjunction with PERA—he or she is not representing PERA.

Recently, some PERA members have received e-mail solicitations stating that PERA's “pension benefit formula has substantially changed recently.” The e-mail encourages PERA members to send personal financial information by replying to the e-mail. This e-mail is an attempt to either gain access to personal information for identification theft or an attempt to sell members a financial service or product.

PERA does not contact members in this manner and would never ask for information that we already have secured in our member information files. Remember that you can always contact PERA for information on your account by e-mailing us through our Web site or by calling our Customer Service Center at 1-800-759-7372.

We encourage members to attend one of the official meetings sponsored by Colorado PERA that are held around the state to learn more about your PERA retirement plan. PERA staff can give you information specific to your individual situation. We are the experts on your future benefits, and we charge no fees or commissions.

Colorado PERA Names David Williamson to Vacant Board Seat

At its September meeting, the Colorado PERA Board of Trustees voted to appoint David Williamson, the chief information officer for Boulder Valley School District, to the vacant Board seat in the School Category.

Williamson has worked for the Boulder Valley School District since 2001. Prior to that he was a technical services manager at the Poudre School District from 1993 to 2001. He served as an adjunct professor at Colorado State University from 1996 to 2000 and has worked as a consultant for several Colorado and Wyoming school districts, city governments, and banking institutions.

In 1982, Williamson earned his bachelor’s degree in mathematics, with a concentration in computer science, from Colorado State University. He earned his master’s degree in computer information systems from Colorado State University in 1994.

“I’m excited about the opportunity to serve on the PERA Board of Trustees. It’s an honor to work with the other board members and PERA’s excellent staff as we keep PERA one of the top public retirement systems in the nation. I look forward to the challenges and successes this year brings to PERA and the board,” said Williamson.

Williamson replaces Sandi Mills who resigned from the Board in September. Williamson received the next highest number of votes behind Mills in the latest election. His term will end June 30, 2005.

Colorado PERA's Position on Socially Responsible Investing

We often receive calls, letters, and e-mail from our members and benefit recipients requesting that PERA not invest in a particular company because that company may not be a good corporate citizen. Members and benefit recipients ask that PERA use the power of its large portfolio to impact social change. In the past, the PERA Board of Trustees has been asked to direct investments away from companies that produce tobacco products, companies that conduct business in South Africa, or those that might be buying goods from countries that have questionable labor practices.

Investing in socially responsible companies is an issue that the PERA Board of Trustees examines periodically, but has chosen not to pursue at this time. Here’s why: The Board of Trustees directs PERA staff to consider investment risk and to optimize return when investing the PERA trust funds. Other considerations such as statutory limits and portfolio diversification are also used when the PERA Board and investment staff determine what investments will be made. Additional parameters for investing at PERA include the fact that a majority of the equity portfolio is passively managed. In a passive strategy, investment professionals are not actively selecting what stocks to buy or sell. A portfolio's contents closely mirror an index such as the Wilshire 5000 in a passive strategy.

The definition of what is socially responsible is often open to interpretation. What is socially responsible to one person may not be perceived as such to another person. Further, restricting the investment universe through social investment policies could have a negative impact on the investment returns for PERA. The Board of Trustees and investment staff have a fiduciary responsibility to ensure that the PERA trust funds are invested for the benefit of all PERA members and benefit recipients.

Members and benefit recipients always have the option to avoid buying those products made by companies they feel use questionable business practices and to direct their voluntary investments to stocks of companies that meet their personal investment standards.

For more information on what Colorado PERA is doing related to investments, please see the article on corporate governance “Working for You” on page 3 of the September 2004 Member Report.

Colorado PERA: Cost Effective and Valuable Recruitment Tool

In the State of Colorado’s Fiscal Year 2005-2006 Annual Compensation Survey Report (available online at www.colorado.gov/dpa/dhr/comp/docs/survey.pdf), Colorado PERA benefits were rated as the most effective element of the State’s benefit package.

The State’s Division of Human Resources (DHR) conducted the electronic survey of State managers, supervisors, and human resources administrators. The 537 respondents evaluated the effectiveness of the state’s total compensation package on recruiting and retaining qualified workers.

PERA provides these valued retirement benefits to public employees at a cost lower than many of its peers. Current PERA-affiliated employer contribution rates are below the regional average for both public and private sector retirement plans according to rates surveyed by PERA and the United States Chamber of Commerce (see charts below). Colorado PERA’s state and school employers currently contribute 10.15 percent of their employees’ salary. The employer contribution rate was as low as 9.9 percent in 2001, down from 11.4 percent in 2000. These reduced employer contribution rates have saved Colorado’s public employers and taxpayers more than $250 million over the past four years.

PERA members contribute a fixed rate of 8 percent of salary (state troopers contribute 10 percent of salary).

The statutes that govern Colorado PERA allow the amount the employer pays toward accrued benefit liabilities to float based on the funded status of the pension plan as projected by actuaries. As a result of investment losses suffered in 2000, 2001, and 2002, PERA’s actuaries recommended increasing employer contribution rates. A phased-in approach to increasing employer contributions will begin with an increase of 0.5 percent of salary in January 2006, to reach a total of a 3 percent increase by 2012. The new contribution rates will be comparable with other similar pension plans and still below the rates of neighboring states.

The higher employer contribution rate is one of several changes made by the Legislature this year at PERA’s request. The PERA Board of Trustees and staff continue to monitor the funded status of the system, and will request legislative changes as necessary over time.

PERA, the state’s largest retirement system, has a membership of over 350,000 Colorado public employees. In 2003, 64,000 retirees were paid $1.6 billion in benefits. Nearly 90 percent of PERA’s benefit recipients call Colorado home, so these benefit payments represent a substantial positive impact on the state’s economy.

PERA is a defined benefit plan that requires member and employer contributions that are invested and paid to members at retirement for their lifetime. The majority of PERA members do not contribute to Social Security, so for many, PERA is the only retirement benefit they will receive. The average PERA member retires with 22 years of service and is 58 years old. The average monthly benefit in 2003 was $2,143, for an annual benefit of $25,716.

Colorado PERA Terminates Relationship with External Manager and Hires External Manager

Colorado PERA has terminated an external money manager. Bank of Ireland Asset Management (BIAM) was notified last week that they would no longer be managing an international equity account with assets of $495 million, or about 10 percent of PERA’s total international equity portfolio. This decision was related to concerns regarding investment performance and the recent departure of several members of the BIAM investment team. The assets from this termination are currently being managed by Barclays Global Investors.

Colorado PERA hired Barclays Global Investors to manage a passive fixed income portfolio benchmarked to the Lehman Aggregate Index. $200 million in cash was used to initially fund this passive portfolio.

Colorado PERA’s investment professionals manage nearly two-thirds of PERA’s $29 billion portfolio internally, and periodically review the performance of external managers. Ennis Knupp, the Board’s Investment Consultant, provided advice on the changes.

Board Action Regarding Service Purchase Costs

The Board of Trustees voted at its September 17, 2004, meeting to increase the rate for service credit purchases. For all purchases of non-covered employment on or after November 1, 2005, the cost will be the full actuarial cost on an attained age basis, but not less than the sum of the member and employer contributions in effect at the time of the purchase. Members may use the Purchase Service Credit cost calculator to determine their actuarial rate.

Actuarial rates are based on the cost of the benefit which results from the service credit purchased.

All required documentation must be received at PERA by 4:30 p.m. on October 31, 2005. A postmark of October 31 is not sufficient.

PERA's Funded Status

Why is Colorado PERA in the news so much lately?

Pension funds have been in the media spotlight the past several months, and Colorado PERA’s defined benefit plan that covers over 350,000 of Colorado’s public employees has not been excluded from this coverage. Pension funds invest in the financial markets and have been seriously impacted, as all investors have, after three of the worst performance years in market history.

The primary measure of a pension fund’s health is its funded status that compares what assets are available to what benefits must be paid. It must be remembered that all benefits are not due and payable immediately. (Even if they were, PERA could pay benefits for many years, without changes in contributions or reductions in benefits.)

Public pension plans are long-term investors and have many decades to invest before all benefits become payable. It is prudent to make incremental adjustments to the many factors actuaries use to determine a plan’s funded status, and not rush to propose simple, short-sighted solutions to complex issues.

How does PERA’s current funded status compare to past funded levels?

At the end of 2003, PERA’s funded level (assets compared to benefits due now and in the future) was 76 percent. PERA’s funded level was below 60 percent in 1970, and there was not a perceived crisis in PERA’s financial health. When PERA’s funded status topped 100 percent, the current State administration promoted a plan that was adopted to make sure taxpayers, through employer contribution reductions, shared in PERA’s success with consistently favorable investment markets. Colorado taxpayers saved $250 million in employer contribution rate reductions alone since 2000.

How will investment performance in 2004 and the future impact PERA?

PERA uses a “smoothing” method that evens out the highs and lows of investment returns over a four-year period. This is done so that a better long-term picture (since pension plans are long-term investors) can be seen. Pointing to a six-month return as an example to base policy decisions on is unsound and irresponsible given the nature of pension funding.

What steps has PERA’s Board of Trustees taken to improve the funded status?

The PERA Board sought legislation in 2003 to discontinue MatchMaker and increase the employer contribution rate. This legislation, although passed by a majority of the Legislature, was vetoed by the Governor. Also in 2003, the Board increased the cost at which members could purchase service credit. This year, the Board secured legislation to increase the employer contribution rate, increase the age at which new members (hired on or after July 1, 2005) will be allowed to retire with an unreduced benefit, reduce the annual increase in retirement benefits for this same group, lower the interest paid to all member contribution accounts, and end MatchMaker until PERA is better funded.

What’s the bottom line?

PERA will continue to pay benefits to current and future retirees. Changes to pension policy take many years to be fully realized. What matters is that appropriate steps have been taken to begin addressing the funded status of PERA. The Board and PERA staff will continue to monitor and report on the funded status and, as appropriate, recommend additional action.

Life Insurance Enhancements in 2005; No Fall Open Enrollment

PERA’s Board of Trustees has selected a new vendor for PERA’s life insurance program, UnumProvident, and has approved consolidation of the benefits currently being offered through Anthem Life and Prudential into one program with UnumProvident. PERA staff is working with UnumProvident on program development and transition planning. The transition is being targeted for April 2005.

In preparation for the upcoming changes, PERA will not be conducting life insurance open enrollment this fall. Instead, life insurance open enrollment will move to a spring timeframe in 2005 and future years.

If you are enrolled in PERA’s life insurance program with either Anthem or Prudential, you will be automatically transitioned to the program with UnumProvident. If you are an active member who is not enrolled in either of these plans, you will have the opportunity to enroll with UnumProvident during next spring’s open enrollment period. Detailed information about the new plan will be available on PERA’s Web site and will be sent to all PERA members during the first quarter of 2005.

Between now and the next open enrollment period, the current PERA-sponsored life insurance through Anthem Life and Prudential insurance companies will still be available to members. Members can apply for insurance at any time and do not need to wait for open enrollment.

You may view the current Anthem Life and Prudential brochures and print the enrollment form for each of the plans.

Colorado PERA's 401(k) Plan and the Dodge & Cox Balanced Fund

Dodge & Cox recently announced that it would close its Balanced Fund to new investors beginning September 10, 2004. This will not affect PERA's 401(k) Plan. The Dodge & Cox Balanced Fund will remain open to all current and future PERA 401(k) Plan participants.

Colorado PERA Hires New Director of Investment Operations

PERA's Investments and Terrorism

Colorado PERA does not knowingly or intentionally make investments in companies that support terrorism or that are considered by the government of the United States of America to be national security risks. Only the federal government can identify such companies. PERA's investment processes are designed to identify and manage investment risks. PERA's fiduciary responsibility strictly limits PERA's investment decisions and mandates that investments be made in the sole interest of the members and beneficiaries of the retirement plan and for the exclusive purpose of providing retirement benefits to them.

Colorado PERA is a member of several organizations that are active in policy issues that impact public pension funds. As a member of the National Association of State Retirement Administrators (NASRA), PERA, along with other public pension plans, has sought the help of the federal government in identifying companies that conduct business in countries that support terrorism. In recent letters to Secretary Tom Ridge, Department of Homeland Security (DHS), and Chairman William H. Donaldson, Securities and Exchange Commission (SEC), NASRA member funds have sought the federal government's guidance in identifying companies that support terrorism or that constitute national security risks. While DHS has not replied to the request for assistance, the SEC has responded indicating that "It would be inappropriate for [the SEC] to publish a list of companies whose securities might be deemed to involve terrorism-related investment risk without publishing corresponding lists for every other possible type of investment risk."

The Center for Security Policy's recent publication "Terrorism Investments of the 50 States," is of questionable objectivity. The report’s analysis was conducted by Conflict Securities Advisory Group (CSAG), a private company that sells software and services aimed at identifying companies that pose national security risks. PERA and NASRA question the objectivity of research conducted by the company most likely to benefit from a negative report. Of concern is the Center’s report and relationship with CSAG because they appear to be an effort to take advantage of our nation's fear of terrorism.

PERA, through NASRA and its member public pension systems, continues to seek the assistance of the federal government in identifying companies that pose national security risks. PERA is hopeful that these agencies of the federal government will make the national security decisions that public employee pension plans cannot.

Colorado PERA "Shareholder" Meetings Scheduled

As a Colorado PERA member—or “shareholder”—are you puzzled by what is in the news about PERA? Want to learn more about the 2004 legislation and what it means to PERA’s financial condition?  

Attend one of the 18 PERA Shareholder Meetings being held around the state to give you the opportunity to understand the issues facing PERA. Also, PERA is inviting candidates for the Colorado House and Senate legislative districts to the meetings to hear firsthand about PERA and to meet PERA members and retirees.

The meetings will involve a social/registration period starting at 6:30 p.m. so you can meet your local legislative candidates. A briefing about PERA will begin at 7:00 p.m. and will conclude with a question and answer period. The meetings are scheduled to end at 8:00 p.m.

PERA members and retirees are encouraged to attend (meetings schedule). Please check www.copera.org for any last minute changes/information about the meetings.

Information About Health Savings Accounts (HSAs) and PERACare

In May, Governor Owens signed Senate Bill 04-94, which conforms state law to the new federal law enacted last December that allows individuals under age 65 to contribute to an HSA if they are covered under a health plan with a high deductible. Under federal law, the minimum annual deductible for individual coverage under eligible plans is $1,000 and for family coverage, $2,000. Based upon current federal guidance, PERA has redesigned its PPO#2 plans in the PERACare Health Benefits Program to be “High Deductible Health Plans” for 2005. These PPO#2 plans will be available from PERA/Mutual of Omaha and Rocky Mountain Health Plans. If you are enrolled in one of these plans, you will be eligible to contribute to an HSA in 2005.

PERA has no authority to offer HSAs. Banks and other financial institutions that are qualified to offer IRAs are qualified to offer HSAs, so you may want to check with your local bank or credit union. Because this is a new type of plan and a complex one, most financial institutions have been slow to get into this business. They were awaiting the issuance of federal regulations to ensure that they were designing their plans to be in compliance with relevant laws and regulations. It is likely that these plans may start to become more available in late 2004 and early 2005.

Both Mutual of Omaha and Rocky Mountain Health Plans expect to have cooperative arrangements in place with HSA vendors for 2005. PERACare enrollees will be able to use those vendors if they choose.

Note that, because HSAs are individual, portable accounts much like IRAs, it is expected that there will be fees associated with HSA accounts. Preliminary estimates show annual fees in the range of $36-$60. If you are considering using an HSA arrangement, you will want to compare services, options, and fees, since they are likely to vary widely.

Colorado PERA Board Election Results Announced

Colorado PERA members elected incumbents Amy Nichols and Sandi Mills to the two School Category seats, and Tammy Long to the State Category seat of the 16-member Board of Trustees.

Nichols is a math teacher in the Aurora Public Schools. She has served on the Colorado PERA Board of Trustees since 2000.

“As a Trustee it has been a privilege to work on behalf of all PERA members and I look forward to continuing the work of the Board as we meet future challenges and needs of the pension plan,” said Nichols. “PERA seeks to be the plan of choice for all public employees. Through education and prudent decision making it is my goal to bring this vision to fruition.“

Mills is a fourth grade teacher in the Fort Morgan School District. She has served on the Board since 2003 when she was appointed to fill a vacant seat.

“It is truly an honor and privilege to continue as a PERA Board Trustee. Being a Trustee is an excellent opportunity to represent the views of educators while keeping PERA a sound, fiduciary entity,” said Mills.

Long is a Business Officer for the Colorado State Patrol in Grand Junction and is the current president of the Colorado State Patrol Family Foundation.

“It is truly a privilege to have been elected to the Board of Trustees. I am eager to take on the responsibility of doing all I possibly can do as a Board member to make PERA the plan of choice in Colorado public employment. I look forward to the challenges ahead as we continue to work toward PERA’s mission while dealing with the issues of the day and keeping members involved and informed,” said Long.

Nichols received 7,297 or 31.25 percent of the votes in the School Category. Mills had 5,204 or 22.29 percent of the votes. Nichols will serve a four-year term and Mills will serve for two years, finishing the term of a Trustee who left the Board. Long received 2,265 or 37.27 percent of votes in the State Category.

By state law, the management of the public employees’ retirement fund is vested in the Board of Trustees. The Board is composed of 16 Trustees, including the State Auditor and the State Treasurer as voting ex-officio members of the Board. Fourteen Trustees are elected by mail ballot by their respective Division/Category members and serve on the Board for four-year terms. Five members are elected from the School Category and four from the State Category in the State and School Division, two from the Municipal Division, and one from the Judicial Division. Two members are elected by retirees.

Response to July 5, 2004, Rocky Mountain News Editorial

The editorial states that the decision to terminate the merger between Colorado PERA and Denver Public Schools Retirement System (DPSRS) was made in the best interests of Colorado PERA members and that is a true statement. Details about the terms of the merger are not public, however, and cannot be disclosed. Discussions between PERA, DPSRS, and Denver Public Schools (DPS) continue and the hope is that legislation that would allow for a merger at a later date can be drafted for the next legislative session in January.

Stating that PERA is “vastly underfunded” and “on the path to insolvency” fails to take into account the following facts:

1. PERA uses an actuarial methodology that employs a “smoothed market value” for assets to determine funded status (assets to liabilities). This methodology is widely used for pension fund valuation because it avoids asset “snapshots” during potentially widely fluctuating short-term markets, recognizing that pension funds are long-term investors. PERA’s “smoothed market value” for 2003 recognizes three of the worst years in market history (2000, 2001 and 2002).

2. Members of PERA retired in record numbers in 2002 and 2003, and are on track to do so again this year. When that happens, PERA must pay benefits sooner than anticipated which increases the liability side of the equation.

3. The cost that members paid to purchase service credit and the employer contribution rates were decreased through legislative negotiations in 2000 when PERA was fully funded.

4. PERA’s funded level was below 60 percent in 1970, and there was not a perceived crisis in PERA’s financial health. When PERA’s funded status topped 100 percent, the current State administration promoted a plan that was adopted to make sure taxpayers, through employer contribution reductions, shared in PERA’s success with consistently favorable investment markets.

The editorial further states that the PERA Board should “listen” to those who want members to contribute more to stabilize the fund. The fact is that benefits guaranteed to PERA members are of a contractual nature, and that means that unless benefits are increased, contribution rates for members cannot be increased.

The truth is that the taxpayers of Colorado have gotten a bargain in their state retirement fund, PERA. Costs for managing the largest pension fund in Colorado are consistent with other public pension fund averages, and far less than the cost of most mutual funds.

The leadership and the Board of Trustees of Colorado PERA have been upfront and forthright with PERA members about PERA’s funded status. Information about PERA’s financial condition was mailed to all members and benefit recipients in the past week. (Comprehensive Annual Financial Report Summary) PERA regularly communicates details about the retirement plan to its members and the public.

The News editorial team clearly demonstrates its lack of understanding of the determination of the funded status of pension plans. Their analogy that PERA will only be able to meet 88 percent of its mortgage payment is false. PERA will be able to meet 100 percent of its mortgage payment in the future – it’s just that the “loan” will never be paid off under the current historically-low employer contribution rates, record number of retirements, and an actuarial methodology that takes into account the negative market performance of three recent consecutive years.

PERA is a $30 billion pension fund. It’s the largest pension plan in the state, public or private, and pension policy is not something that can be tinkered with without long-term impacts. The PERA Board has taken appropriate steps to ensure the funded status of the plan, through legislative and other means, and now the State of Colorado will perform its legal obligation to increase employer contribution rates to levels as they existed before the year 2000.

Board Action on DPSRS Merger

At their meeting on Tuesday, June 29, the PERA Board of Trustees determined that it was in the best interest of the PERA membership to terminate the Merger Agreement with DPSRS.

CitiStreet to Conduct 401(k) Plan Survey

CitiStreet, the service provider for Colorado PERA's 401(k) Plan, will be conducting a survey to gauge participant satisfaction with the 401(k) Plan. Beginning in late June, you may be contacted by TNS Intersearch, an independent research firm, hired to collect and measure feedback regarding your satisfaction with the services provided by CitiStreet. The phone interviews will be brief and calls will be directed to your home phone number, occurring in the evening or on Saturday. CitiStreet values your feedback and encourages you to respond to this confidential and important survey.

If you have any questions about the survey or your 401(k) account, please contact CitiStreet by calling 1-800-759-7372 and selecting the 401(k) option.

Employer Contribution Increase and Expanded Defined Contribution Bill Passed

Senate Bill 257, a bill concerning public employee retirement plans, was passed by the Legislature on May 5. This bill is sponsored by Sen. Dave Owen (Greeley) and Rep. Brad Young (Lamar) and contains provisions to increase the employer contribution rate to Colorado PERA and to expand the defined contribution plan option for state employees hired on or after January 1, 2006.

The PERA Board of Trustees and the Governor support this bill, which was the product of meetings between PERA, representatives of the Governor’s Office, and defined contribution plan providers.

The bill:

	Increases employer contributions to PERA by 0.5 percent of salary each year beginning January 1, 2006, to reach a total of 3.0 percent of salary in 2012 and thereafter.
	Separates the State and School Division into two divisions with distinct trust funds.
	Increases the employer contribution rate in the School Division by an additional 0.4 percent of salary beginning in 2013, to reflect this Division’s higher cost.
	Establishes a choice of a defined contribution (DC) plan for new state employees hired on or after January 1, 2006. State employees (excluding Higher Education) hired after January 1, 2006, would be able to select an expanded state defined contribution plan, a new defined contribution plan offered by PERA, or the existing PERA defined benefit plan. New hires would have 60 days to decide which plan to join. The default plan would be the PERA defined benefit plan.
	Requires employer contributions to be paid for a PERA retiree working for a PERA-affiliated employer, beginning July 1, 2005.
	Renames the Municipal Division the Local Government Division.

Together with SB 132, SB 257 is vital to maintaining the long-term actuarial soundness of PERA. SB 132, sponsored by Sen. Arnold (Westminster) and Rep. Young (Lamar), contains provisions to reduce PERA’s costs related to members and benefit recipients; SB 257 is designed to address PERA’s funded status from the employer’s perspective.

SB 257 was passed by both the House and Senate and has been sent to Gov. Owens.

Election Ballots Mailed

Ballots for this year's Board election were mailed this week. Active PERA members will elect three Trustees to the PERA Board of Trustees. Terms expire on June 30, 2004, for School Category Trustee Sandra Mills (appointed to fill a vacant seat in 2003); School Category Amy Nichols; and State Category Trustee Terry Campbell.

Upon receiving your ballot, take a moment to read the enclosed biographies of the candidates, and then select the candidates of your choice. Ballots must be postmarked by May 31. Election results will be announced in late June.

Governor Signs Senate Bill 132

Governor Owens signed Senate Bill 04-132 into law on Friday, April 30. This bill was sponsored by Senator Ken Arnold (Westminster) and Representative Brad Young (Lamar).

Provisions of SB 132 include:

	Suspending the MatchMaker program effective for payrolls in which the last day of the payroll period is on or after June 1, 2004.
	Reducing the interest paid to member accounts from the current rate tied to the actuarial assumed rate of the fund (currently 6.8 percent) to an amount not greater than 5 percent to be determined annually by the Board, effective July 1, 2004.
	Requiring employers to pay contributions to PERA within five days after members are paid effective July 1, 2004.
	Resuming the MatchMaker program when Division Trust Funds reach 110 percent funding levels.
	Changing service retirement eligibility for members hired on or after July 1, 2005, to age 55 with 30 years of service, or at any age with 35 years of service. Reduced retirement benefits for these new hires will be available at age 50 with 25 years of service.
	Reducing the annual post-retirement benefit increase for members hired on or after July 1, 2005, to 3 percent or the actual change in the Consumer Price Index, whichever is lower.
	Allocating a larger portion of the employer contribution to the PERA trust funds by reducing the amount contributed to the Health Care Trust Fund from 1.1 percent of salary to 1.02 percent of salary.

Colorado PERA's 401(k) Plan Surpasses $1 Billion in Assets

On April 9, 2004, assets in Colorado PERA’s 401(k) Plan surpassed $1 billion.

On April 1, 2004, Boulder County became the first county to affiliate with PERA. County employees transferred funds from their former retirement plan into PERA’s 401(k) Plan, pushing current Plan assets to nearly $1,020,000,000.

The Voluntary Investment Plan (which later became PERA’s 401(k) Plan) was established in 1985 as a voluntary investment plan for members who wish to supplement their PERA member contribution accounts. PERA’s 401(k) Plan had more than 72,300 enrollees, Boulder County brought an additional 1,745 enrollees.

“The amazing growth in the 19-year-old PERA 401(k) Plan came about because the voluntary plan has proven to be a very cost-effective vehicle for members to grow their own savings,” said Colorado PERA’s Executive Director Meredith Williams.

News Release (PDF)

Boulder County Affiliates with Colorado PERA

On April 1, 2004, Boulder County became the first county government to affiliate with Colorado PERA. The County’s 2,145 eligible permanent and temporary employees will represent nearly a 17 percent increase to the current 12,876 active members in the Municipal Division. Colorado PERA’s State and School Division has 161,686 active members and the Judicial Division has 274 active members.

As PERA members, employees of Boulder County will participate in PERA’s defined benefit retirement plan and have the option of joining PERA’s 401(k) Plan. The defined benefit plan provides guaranteed lifetime benefits and in-service death and disability benefits for those who qualify. PERA retirees receive annual benefit increases and have access to health care insurance through PERA.

“In addition to the financial benefits of PERA, our employees will enjoy one of the best retiree health benefits packages you can find,” said Boulder County Commission Chair Paul Danish. “As the budgetary environment in Washington, D.C., continues to prevent adequate funding of our Social Security system, PERA becomes increasingly attractive.”

Last year, the County initiated an employee opinion survey that indicated a high degree of interest in looking at PERA as an alternative to their current 401(k) plan. The County thoroughly reviewed PERA benefits and had an independent actuarial study conducted that determined PERA is currently financially sound. On December 18, 2003, the Boulder County Board of Commissioners passed a resolution to affiliate with Colorado PERA.

“The Boulder County Commissioners and staff should be congratulated for their thorough and professional approach to the affiliation process,” said Dennis Gatlin, PERA’s field education manager who works with employers on affiliations. “County employees were very enthusiastic about their opportunity to join Colorado PERA. I believe that Boulder County will be very pleased by the service and responsiveness of Colorado PERA for many years. I look forward to continuing to work with Boulder County.”

Boulder County provides a broad range of services to more than 280,500 citizens and employs 2,145 people.

Colorado PERA Executive Director Named Chair of Council of Institutional Investor Board

On March 25, Meredith Williams, Colorado PERA’s executive director, was elected chair of the Council of Institutional Investors, an association of more than 140 public, corporate, and union pension funds with assets in excess of $3 trillion.

The Council, created by pension fund leaders in 1985, focuses on issues that involve shareholder rights and is known as a leader and innovator in the corporate governance arena. Issues in which the Council has been involved include proxy voting reform, the establishment of best practices for director/shareholder communication, mutual fund disclosure of portfolio holdings and fund expenses, stock option expensing, offshore reincorporation, and other topics related to good corporate management.

Council members and staff meet with federal elected officials and their staffs, leaders in the business world, and the corporate governance community to promote shareholder rights. The Council also provides testimony at Congressional hearings, publishes articles on corporate governance topics, and often speaks at professional conferences as the leading authority on corporate governance issues.

Williams’ election to a leadership role in Council benefits Colorado PERA members because they will have representation in an organization that promotes practices that strengthen pension fund investments.

“These are exciting times for those devoted to increasing shareholder value through good corporate governance. I am honored to work with Council members and staff as we seek to effectively convey our message to Congress, regulators, the market, and corporate leaders,” said Williams.

Williams joined PERA as the executive director in March 2000. He started his professional career as a junior accountant with the Kansas Legislative Division of Post Audit, the audit arm of the Kansas government. He served as Kansas’ Legislative Post Auditor from 1983 until his 1991 appointment as executive secretary of the Kansas Public Employees Retirement System.

Williams is a graduate of the University of Kansas with a degree in business administration and economics. He received his law degree in 1975 from Washburn University School of Law, Topeka.

401(k) Fee Structure

Board of Trustees Approves May Board Election Slate

Colorado PERA’s Board of Trustees approved a slate of eight candidates running for seats in the May Board election. There are five candidates for the two positions in the School Category and three candidates for one position in the State Category.

School Category Candidates
Susan Beeman, Pueblo School District
Jim Farrell, Douglas County Schools
Sandra Mills, Fort Morgan School District (incumbent)
Amy Nichols, Aurora Public Schools (incumbent)
David Williamson, Boulder Valley School District

State Category Candidates
Tammy Long, Colorado State Patrol
Mike Serlet, Colorado Water Conservation Board
Brent Voge, Colorado Department of Revenue

PERA members of the State and School Division will be sent ballots and candidate biographies in early May to elect representatives in the above categories. School Category members (those employed by a School Category employer) will vote for two candidates in the School Category. State Category members (those employed by a State Category employer) will vote for one candidate in the State Category.

Terms expire on June 30, 2004, for School Category Trustee Sandra Mills (appointed to fill a vacant seat in 2003); School Category Trustee Amy Nichols; and State Category Trustee Terry Campbell.

Colorado PERA Recognized for Commitment to Accurate Financial Reporting

The Colorado Public Employees’ Retirement Association (Colorado PERA) has been awarded the Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association of the United States and Canada (GFOA). This is the 18th straight year PERA has won the award. The Certificate of Achievement is the highest form of recognition in the area of public employee retirement system accounting and financial reporting.

Meredith Williams, Colorado PERA’s executive director who accepted the award, said “The Certificate of Achievement is an endorsement of PERA’s mission to promote long-term financial security for our membership. It reinforces the organization’s unwavering commitment to accountability in all aspects.”

In order to win this award, PERA’s 2002 comprehensive annual financial report (CAFR) was judged by an impartial panel and found to meet the high standards of the program including demonstrating a constructive “spirit of full disclosure” to clearly communicate its financial story and motivate potential users and user groups to read the CAFR.

PERA also received the GFOA Award for Outstanding Achievement in Popular Annual Financial Reporting for its 2002 popular annual financial report (PAFR). In order to receive this award, the content of the PAFR had to meet program standards of creativity, presentation, understandability, and reader appeal.

The GFOA is a nonprofit professional association serving approximately 14,000 government finance professionals with offices in Chicago and Washington, D.C.

News Release (PDF)

Colorado PERA's Benefit Outflows vs. Investment Income

In a Rocky Mountain News article on January 30, 2004, State Treasurer Mike Coffman stated that “PERA pays out more in benefits than it takes in from contributions and investment income.”

The following table outlines Colorado PERA’s benefit and investment flows since 1999, and it shows there were no years in which PERA paid more in benefits than was taken in from contributions and investment income.

As disclosed in the most recent Comprehensive Annual Financial Report (as of December 31, 2002), PERA does have a $4 billion unfunded liability, which was also stated by the Treasurer in this article. Regarding disclosure of this unfunded liability, PERA’s actuaries wrote the following in their actuarial valuation report to the PERA Board of Trustees: “It is our opinion that PERA continues to have a relatively good funded ratio of 88% (based on the actuarial value of assets). However, the contribution rates are not currently sufficient to support the current benefit structures of the System. If there is not a significant recovery in the investment markets in the near future, the long term ability of the System to support the benefits will be challenged in the absence of a significant increase in the contribution rates.” – Gabriel, Roeder, Smith & Co.

The PERA Board, seeing the need to improve the stability of the fund, has proposed a solution through a comprehensive legislative package for 2004. The proposed changes will equitably affect PERA constituent groups and will stabilize funding for both the near and long term if the legislative package is approved by the General Assembly and signed by the Governor.

Net Benefit Outflows vs. Investment Income
(Does not include the 401(k) Plan)

For Periods Ending December 31
(In Thousands of Dollars)