Glossary
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
A
Active member
A person who is currently working for a PERA-covered employer and making monthly contributions in their PERA DB Plan account toward retirement.
Actuary
A professional skilled in mathematics and statistics who helps pension plans, insurance companies, and other financial institutions assess and manage risk and plan for the future based on historical and projected outcomes. PERA employs actuaries who review and oversee the services and work product of the PERA Board of Trustees’ external actuarial consultant.
Actuarial assumption
Best estimates of uncertain future demographic variables such as assumed rates of retirement, termination, and mortality rates, as well as economic variables such as inflation and the plan’s assumed investment returns. These assumptions are used to estimate future liabilities and assets of a defined benefit plan.
Actuarial determined contribution (ADC)
An annual calculation to determine the amount of money that needs to be contributed to a plan to ensure the plan can meet its funding requirements.
Actuarial valuation
An annual analytical assessment of a pension plan’s finances, funding metrics and membership.
Alternatives
A broad asset class or category of investments that don’t fit into traditional categories like stocks and bonds.
Amortization period
Also referred to as “funding period,” this is the amount of time it takes to pay down debt or liabilities through regular payments.
Amortization Equalization Disbursement (AED)
An additional required contribution employers pay to PERA for each employee to help pay down the unfunded liability of the DB Plan.
Annual Increase
An adjustment to PERA retirees’ monthly benefit payments, paid in July each year. The Annual Increase amount is set in statute and can adjust up or down based on PERA’s funding progress. It is not directly tied to inflation.
Annuity
A type of financial contract in which a person pays a lump sum or a series of payments in exchange for a guaranteed stream of income for a defined period of time or the rest of their life.
Asset class
A category of similar investments. Common asset classes include global equity (such as publicly traded stocks), real estate, and cash.
Assets Under Management (AUM)
The value of an investor’s entire portfolio. PERA reports this number, which includes all assets in the PERA DB Plan division trust funds, every year in the Annual Comprehensive Financial Report (ACFR).
Assumed rate of return
The investment return a pension plan expects to achieve over the long term. This rate is key to estimating how much money the plan will have on hand to pay future benefits. Set by the PERA Board of Trustees, PERA’s current assumed rate of return is 7.25% per annum.
Automatic Adjustment Provision (AAP)
A provision of Colorado law that automatically adjusts PERA contribution rates (from employers, members, and the state) and annual benefit increases based on PERA’s funding progress.
B
Basis point
One hundredth of one percent. 100 basis points = 1%. Basis points help measure and communicate small variations in financial variables, and are preferred over percentages due to their precision, clarity, and standardization.
Benchmark
A tool used to measure performance. For example, an investor can use a stock index as a benchmark to measure investment performance compared to a specific investment, asset class, or the market as a whole.
Beneficiary
The person(s) or entity a PERA member designates to receive a lump sum payment if the member dies when survivor benefits are not payable, or if an account balance remains after the retiree and cobeneficiary (if applicable) die.
Benefit
Monthly payment to retired or disabled PERA DB Plan members, cobeneficiaries, or survivors.
Benefit options
When you apply for retirement under the PERA DB Plan, you’ll have three options for payment of your benefit (four options under the DPS benefit structure). These options allow you to determine how to distribute your benefit and possibly continue the benefit to a cobeneficary after your death.
Benefit recipient
A retiree, spouse, cobeneficiary, qualified child, or dependent parent receiving monthly service retirement, disability retirement, or survivor benefits.
C
Cobeneficiary
The person a PERA member designates to receive a continuing monthly benefit when the member dies, if electing a joint-life benefit at retirement (PERA benefit structure option 2 or 3 or DPS benefit structure option B, P2 or P3).
Critical shortage
Under State law, PERA retirees who return to work in an eligible role at an eligible school district can work beyond the current working after retirement limits without a reduction in their benefit, if the district determines there is a critical shortage of qualified people to fill those roles.
D
DC Supplement
An additional required contribution employers pay to PERA for members in the DC Plan, which represents employer contributions that would have otherwise gone to the DB Plan. The DC Supplement helps pay down the DB Plan’s unfunded liability.
Defined benefit (DB)
Also known as a pension, this is a type of pooled retirement plan in which the plan promises to pay a lifetime benefit to the employee at retirement. The plan manages assets and investments on behalf of members, and the retirement benefit is based on factors such as age, service, and salary history at retirement. Learn more about the PERA DB Plan.
Defined contribution (DC)
A type of individual retirement plan in which an employee deposits a portion of each paycheck (along with a potential employer match) into an individual account and invests that money. The employee’s retirement benefit is based on their account balance at retirement. A 401(k) is a type of DC plan. Certain PERA members can choose between the PERA DB Plan and the PERA DC Plan.
Direct distribution
An annual payment the State of Colorado makes directly to PERA to help pay down the PERA DB Plan’s unfunded liability.
Divestment
The act of selling one’s investments in a particular company or sector, often for philosophical or political reasons. View the PERA Board’s Statement on Divestment.
Domestic Relations Order (DRO)
A court order that approves an agreement between the parties to a divorce or legal separation concerning the division of PERA retirement benefits.
E
Effective Date of Retirement (EDR)
The date PERA considers a member to be officially retired. The effective date of retirement is the first day of the month following: the employee’s last day on the job, the last day of any leave used, or the date of termination from all PERA-covered employment (whichever is later).
Employer contributions
PERA employers contribute a percentage of member pay to help fund member benefits and pay down the PERA DB Plan’s unfunded liability. Employer contribution rates are established by state law. See also: AED/SAED and DC Supplement.
ESG
Acronym for environmental, social, and governance factors that can be used when making investment decisions.
F
Fiduciary
A person who manages money on someone else’s behalf and who has a sworn responsibility to manage those funds in the best interest of the client. PERA staff and members of the Board of Trustees are fiduciaries.
Fiduciary Net Position
An accounting figure that represents PERA’s total assets minus liabilities other than retirement benefits owed.
Fixed income
An asset class or category of investment that pays investors a fixed rate of interest over a set period of time. Bonds are a common type of fixed income investment.
Funded status
A comparison of the projected amount of money needed to pay benefits earned to date and the amount of money currently available to pay those benefits, expressed as a percentage.
H
Highest Average Salary (HAS)
An average of a PERA member’s highest years of earnings while working for a PERA employer. It is a monthly average, calculated using periods of 12 consecutive months during which the member contributed to PERA. At retirement, the member’s benefit will be calculated using their age, service credit, and HAS.
Hybrid defined benefit
PERA’s DB Plan is “hybrid” in that it combines features of a traditional DB plan with some of the features of DC plans, such as portability and annuitization at retirement of the member account, including employer matching dollars if eligible.
I
Inactive member
A person who has terminated PERA employment and is not making member contributions but who keeps their money in a member contribution account. Inactive members can apply for a monthly benefit when they reach retirement eligibility, or request a refund/rollover of their account balance.
Investment stewardship
The practice of overseeing and managing PERA’s investment portfolio. PERA’s approach to investment stewardship is focused on ensuring the financial sustainability of the fund that pays benefits to retirees and beneficiaries.
L
Liquidity
The ease with which an asset can be converted to cash without a significant loss of value.
M
Member contributions
PERA members contribute a percentage of each paycheck to help fund their benefits. Member contribution rates vary by division and can change annually under the Automatic Adjustment Provision. Visit the Member Contribution Rates page for details.
Money purchase
The process of converting one type of retirement account to another, such as converting an account balance to an annuity to receive regular lifetime monthly income. At retirement, a PERA member’s monthly benefit is determined using a money purchase calculation or a defined benefit calculation, whichever is greater.
O
Optional Retirement Plan (ORP)
A separate DC plan offered as an alternative to PERA for non-classified employees of certain institutions of higher education.
P
Pension
A type of retirement plan in which a retiree receives guaranteed monthly income for the rest of their life. The PERA DB Plan is a pension plan.
PERAChoice
Certain PERA employers offer a choice between the PERA DB Plan and the PERA DC Plan. Members with this choice who do not choose a plan within the first 60 days of employment are automatically enrolled in the PERA DB Plan.
PERAPlus 401(k) Plan
A voluntary retirement savings plan in which an employee (and potentially their employer) contributes a portion of each paycheck to an individual account and chooses how to invest the funds. The PERAPlus 401(k) Plan offers an additional way to save for retirement on top of the PERA DB or DC Plan.
PERAPlus 457 Plan
A voluntary type of DC retirement plan similar to a 401(k), typically offered to government employees. Unlike a 401(k), withdrawals from a 457 account are not subject to an early withdrawal penalty.
Portability
The ability to take dollars and/or benefits associated with an existing retirement plan with you when you change employers.
Private equity
An asset class or category of investments in which investors purchase shares of a company that is not traded on a public stock exchange.
Proxy voting
The process by which shareholders can vote on corporate proposals without being present at a shareholder meeting. The goal of PERA’s proxy voting activities is to exercise shareholder rights to encourage the alignment of corporate interests with long-term investor interests. The objectives of PERA’s proxy voting activities are aligned with PERA’s fiduciary duty and PERA’s investment objectives as defined in the Statement of Investment Policy.
Public equity
An asset class or category of investments in which investors purchase shares of a company that is traded on a public stock exchange.
R
Refund
A PERA member can choose to receive a lump- sum payment of the balance of their PERA DB Plan account upon leaving PERA-covered employment. The refund amount includes all member contributions, interest, any money paid to purchase service credit, and matching contributions, if applicable.
Retiree
A person who is receiving a service or disability retirement benefit.
Rollover
A PERA member can choose to transfer the balance of their PERA DB Plan account to another qualified account upon leaving PERA-covered employment. The rollover amount includes all member contributions, interest, any money paid to purchase service credit, and matching contributions, if applicable.
S
Safety Officer
For the purpose of PERA benefits, Safety Officers include many uniformed officers, such as peace officers, county sheriffs, corrections officers, firefighters, and wildlife officers, and are defined as “State Troopers” in state statute with respect to their PERA benefit and contribution structures. See PERA Overview for Safety Officers for details.
Service credit
The amount of time a member has been working for a PERA employer and making contributions to their account. In most cases, a member earns a month of service credit for each month of employment when their salary is at least 80 times the federal minimum wage. Members can also purchase service credit to retire earlier or receive a larger benefit.
Strategic asset allocation
An investor’s mix of stocks, bonds, and other investments. PERA’s strategic asset allocation is set by the PERA Board of Trustees.
Supplemental Amortization Equalization Disbursement (SAED)
An additional required contribution employers pay to Colorado PERA for each employee to help pay down the unfunded liability of the PERA DB plan. The SAED is to be funded by money otherwise available for employee wage increases.
T
Tax-deferred
Also known as “pre-tax,” this refers to funds that have not yet been subject to income tax. PERA contributions and accrued interest are tax-deferred, meaning members don’t pay income tax on those funds until they begin to receive retirement benefits.
Total fund
The combined assets of all PERA DB Plan trust funds (division trust funds, health care trust funds, and life insurance reserve) across all asset classes.
Trust fund
A fund in which money and/or other assets are held and managed by trustees on behalf of plan participants. PERA maintains trust funds for each of its PERA DB Plan divisions (State, School, Local Government, Judicial, and Denver Public Schools (DPS)), and two health care trust funds (HCTF and DPS HCTF).
U
Unfunded liability
The difference between the projected amount of money needed to pay benefits earned to date and the amount of money currently available to pay those benefits. Sometimes referred to as unfunded actuarial accrued liability, or UAAL.
V
Volatility
A state of unpredictable activity in financial markets during which prices can experience significant and/or unexpected swings in either direction.
W
Working retiree contributions
In most cases, if you work for a PERA employer after retirement, you are required to make contributions to PERA at the same rate as a regular working member. Working retiree contributions do not accrue an additional benefit and cannot be refunded.
